As we return to the workweek from the July 4th U.S. holiday weekend, equity markets are surging. The S&P 500 is rising through resistance at its "gap down" area (3,123 - 3,181), but the DOW, despite its 400 plus point surge, made little progress into its gap zone ((26,294 - 26,938). The NASDAQ closed its gap two weeks ago, and that index is also making a new all-time high today while the DOW and S&P 500 remain below their Feb. all-time highs. What all of this means is that we still have a strong bearish divergence signal and at least one index (the DOW) resisting its gap. We could therefore still be topping out here, but if rallying continues over the next several days, it is more likely we will see a top in our next reversal zone coming up July 13 -21 (next week). So we will just have to wait and see if next week brings us a major cycle top to possibly sell short or a significant cycle bottom to buy. Right now, it looks like it could go either way so we shall stay on the sidelines of the broad stock market.
Not surprisingly, crude oil is taking its bullish cues from the broad stock market and is rallying. Today crude attempted to push above its June 23 high of $42.26 (June contract chart) but failed. It could easily fall now into a significant sub-cycle bottom (around $37 or lower), but if it keeps rallying and can exceed that $42.26 high this week, we could see prices surge to the $50 mark or higher before it tops out. We'll watch for a sub-cycle correction to possibly buy, but if prices rally instead, we will have to wait longer before making a trade. As with the broad stock market, this market could go either way. Still on the sidelines of crude oil.
Gold and silver both may have made significant medium-term cycle highs last Wednesday. If so, they are now falling to their final corrective cycle bottoms (due over the next several weeks - possibly next week or the last week of July). We are still waiting for the final cycle bottoms to buy both gold and silver. A good target now for gold could be around $16.20. Silver could fall anywhere between $15 - $17. Still on the sidelines of the precious metals.