MARKETS UPDATE (4:45 pm EDT)
This week is important not only because it is the center point for likely reversals in several financial markets but also because Friday is the deadline for Greece's debt repayment. Talks between Greece and its creditors (the IMF and other eurozone states) during the weekend were unproductive so the question of whether or not a bailout agreement can be reached by Friday is still up in the air. If Greece defaults on its debt, it may have to leave the eurozone. This could have a strong impact on all financial markets.
The broad stock market has been falling into this current reversal zone, and the DOW's low so far was on Friday at 17,967. That is still above our target range for a bottom at 17,600 -17,800. Ideally, we want to see the DOW in that range this week so that we can go long for a strong rally into the end of the month. If instead the DOW rallies from here, we will look for a high to sell short, especially if that rally stalls in the 18,350 area. We will keep in mind over the next two weeks that a resolution of the Greek debt crisis would likely be a boost to stock markets, but a Greek default could send markets tumbling down. Still on the sidelines.
We have been anticipating the possibility of a strong short-term rally into this week by both gold and silver, but several bearish technical signals have made me hesitant to go long. Late this morning both precious metals surged up dramatically but then prices quickly fell back to their early morning levels. This is bearish behavior. Even if these metals rally some more, a top would be expected by the end of the week, and we would likely want to sell short from that top. We will look to do that if it happens, but I think there is a stronger chance that prices are headed lower, and if so, we want to look for a bottom to buy over the next week or two. If Greece defaults on its debt, this would likely give a boost to the U.S. dollar and send gold and silver prices down. On the sidelines of both gold and silver for now.
Speaking of the dollar, the U.S. Dollar Index has been rising and is again approaching resistance at the 98 level. Can the greenback break through this resistance and make another go for the 100 mark? It's possible, especially in the absence of a bailout agreement between Greece and its creditors. Last week a strong bullish momentum signal appeared in the U.S. Dollar Index chart which now makes directional momentum in the dollar mixed bearish and bullish (it had been 100% bearish). This is supporting the idea of a stronger dollar now.
We have been holding a short position in crude oil since May 1 in anticipation of a price correction into the $52 - $55 area. Last Thursday prices reached $56.51 intraday and then rose sharply on Friday. There is a possibility of that being the significant cycle bottom we've been waiting for, but in terms of timing, the deadline for a bottom extends to June 12 so there is still time for prices to enter our target range. Since we are back up to our buy price, some traders may wish to bail out now with no loss. I am going to remain short, however, with a close stop loss in the
$61 - $62 area. As is the case for gold and silver, a Greek debt default (or even fear of a default) could push oil prices lower. Holding my short position in crude oil for now.
This week is important not only because it is the center point for likely reversals in several financial markets but also because Friday is the deadline for Greece's debt repayment. Talks between Greece and its creditors (the IMF and other eurozone states) during the weekend were unproductive so the question of whether or not a bailout agreement can be reached by Friday is still up in the air. If Greece defaults on its debt, it may have to leave the eurozone. This could have a strong impact on all financial markets.
The broad stock market has been falling into this current reversal zone, and the DOW's low so far was on Friday at 17,967. That is still above our target range for a bottom at 17,600 -17,800. Ideally, we want to see the DOW in that range this week so that we can go long for a strong rally into the end of the month. If instead the DOW rallies from here, we will look for a high to sell short, especially if that rally stalls in the 18,350 area. We will keep in mind over the next two weeks that a resolution of the Greek debt crisis would likely be a boost to stock markets, but a Greek default could send markets tumbling down. Still on the sidelines.
We have been anticipating the possibility of a strong short-term rally into this week by both gold and silver, but several bearish technical signals have made me hesitant to go long. Late this morning both precious metals surged up dramatically but then prices quickly fell back to their early morning levels. This is bearish behavior. Even if these metals rally some more, a top would be expected by the end of the week, and we would likely want to sell short from that top. We will look to do that if it happens, but I think there is a stronger chance that prices are headed lower, and if so, we want to look for a bottom to buy over the next week or two. If Greece defaults on its debt, this would likely give a boost to the U.S. dollar and send gold and silver prices down. On the sidelines of both gold and silver for now.
Speaking of the dollar, the U.S. Dollar Index has been rising and is again approaching resistance at the 98 level. Can the greenback break through this resistance and make another go for the 100 mark? It's possible, especially in the absence of a bailout agreement between Greece and its creditors. Last week a strong bullish momentum signal appeared in the U.S. Dollar Index chart which now makes directional momentum in the dollar mixed bearish and bullish (it had been 100% bearish). This is supporting the idea of a stronger dollar now.
We have been holding a short position in crude oil since May 1 in anticipation of a price correction into the $52 - $55 area. Last Thursday prices reached $56.51 intraday and then rose sharply on Friday. There is a possibility of that being the significant cycle bottom we've been waiting for, but in terms of timing, the deadline for a bottom extends to June 12 so there is still time for prices to enter our target range. Since we are back up to our buy price, some traders may wish to bail out now with no loss. I am going to remain short, however, with a close stop loss in the
$61 - $62 area. As is the case for gold and silver, a Greek debt default (or even fear of a default) could push oil prices lower. Holding my short position in crude oil for now.
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