We are now fully clear of our last strong reversal zone (July 13 - 21). There is a very good chance that all three broad stock market indices (DOW, S&P 500, NASDAQ) made their final medium-term cycle tops in that time period and are now starting their sharp descent to their final medium-term cycle bottoms. Ideally, those bottoms would happen somewhere in the first three weeks of August. Our current short position is based on this scenario.
Of course, we don't always see our ideal scenario play out. There is a small chance the DOW and possibly the S&P 500 started their new medium-term cycles with their lows on June 26 and June 29 (respectively). If so, they could be bullish and ready to rally strongly. The NASDAQ, however, is most likely an older medium-term cycle ready to bottom soon, but it too could surge briefly up to a new all-time high before its sharp correction down. To protect our short positions, I suggested a stop loss on Thursday based on both the DOW and S&P 500 breaking above their recent highs (the DOW's 27,071 high from July 15 and the S&P 500's high of 3,280 from July 23). All three indices rallied a bit today but closed well below those highs. The high tech NASDAQ seems to be leading the broad stock market now. It is also the most oversold and most ripe for a sharp correction down. Let's hold our short positions in the broad stock market for now with a close eye on those stop loss lines.
We have been waiting patiently for some sort of corrective dip in gold and silver to buy, but unfortunately we haven't been getting it. Gold and silver are clearly in a "blow-off" mode as prices have been rising exponentially since last Monday. Today gold broke and closed above its all-time high of $1920 from 2011. In my Gold Market Update(s) from 9/2/19 and 3/26/20 (see Home tab above for the site's Home Page) I wrote:
"It looks like gold is nearing the end of a long-term 23 year cycle that began with a double bottom low in 1999 and 2001 (around $280) that soared to $1920 in 2011. From that high gold then fell to $1046 in late 2015....
The question now is whether or not that $1920 high in 2011 was the top of the cycle. If it was, this cycle is already in the process of correcting down to the final bottom expected in 2023 - 2024. But gold's recent bullish rallying is suggesting that the top may not be in yet, and the $1920 high may be challenged. If so, it is possible we could see a "blow-off" top to $2300 (or even higher) before the final corrective drop into 2023 - 2024.
"...gold prices could now rise to test the $1920 high of 2011 or go even higher. Although this is medium-term bullish, please note that a final top in the 23 year cycle can happen any time now and will be followed by a very severe correction to the final 23 year cycle bottom due around 2023 - 2024. Where that bottom price ends up depends on the height of the final top."
So that $1920 high has now been broken, and we could indeed see a "blow-off" in gold prices to $2300 or even higher. Needless to say, we want to get long soon in this market. This precious metals market "breakout" may be altering our previous labeling of gold and silver's medium-term cycles. But regardless of the cycle labeling, there is still a good possibility of a corrective dip soon. We enter a new general reversal zone AND a reversal zone specifically for the precious metals this week (BOTH from July 28 to August 4). That would be a good time for prices to top out and start a corrective move down. Let's watch for that and a buying opportunity.
Silver prices have also taken off as prices are now above $25 (although silver is well below its 2011 high of $49.70). As with gold, we should be seeing SOME sort of corrective dip soon. It may not go as low as we would like, but we will watch carefully for a potential buy spot. On the sidelines of both metals for now.
Not surprisingly, the U.S. Dollar Index has been falling, and this has boosted precious metal prices. The willingness of the Federal Reserve to print money endlessly out of thin air to keep equity markets from collapsing and "save" the economy is taking its toll on the greenback. Today the U.S. Dollar Index broke below an important support level at 94. Unless the dollar can snap quickly back above 94, it could drop to the next zone of support around 88 - 90. It now appears that the final top of a long-term 16.5 year cycle in the U.S. dollar (which began in 2008) was made in January 2017 at 103.82. The greenback is thus likely in decline to its final cycle bottom that should happen somewhere between late 2024 and early 2025 and could easily end up below 71 - its cycle low from 2008.