MARKETS UPDATE (7:00 pm EDST)
It's still possible that the DOW's low of 29,653 on June 16 was the start of a new medium-term cycle, and it's also possible the S&P 500 and NASDAQ started new medium-term cycles on June 16 and June 17 (at 3,637 and 10,565, respectively). If this is the case, all three indices could rally strongly now (for at least a few more weeks - possibly longer). This week leads into the July 4th holiday this week-end in the U.S,, and equity markets tend to rally into holidays, But we are still in a reversal zone through July 5, so a peak and a reversal down could begin anytime over the next six trading days. That could put us back on track for a fall to the final bottoms of older medium-term cycles in these indices. Today's downturn in the broad stock market is supporting this view. We will just have to wait to see which trend - bullish or bearish - will take over.
If all three indices roll over now and break below their June 16 -17 lows, we can assume they are moving to the final bottoms of older cycles. Those final bottoms could be this week or early next week and could be a good place to go long. If one or two of these indices (but not all three) make a new low (below the July 16-17 lows), we could get a bullish divergence signal, which would be an even stronger signal to buy. On the other hand, if this market rallies this week and next and exceeds its early June highs (33,272 in the DOW, 4,177 in the S&P 500, and 12.293 in the NASDAQ), then we'll have to assume the new, younger cycles are in effect and will rally for at least several more weeks. We will remain on the sidelines for now as we watch which direction the market will take this week.
Lest we lose track of the "forest for the trees", I should mention here that our longer-term view of this market is still bearish, and it still looks like equities are in the first stage of a serious long-term correction and that they are headed lower for several more years (see "Crash Update" on the Home page). If the markets turn (short-term) bullish now, we could get some sort of relief rally before they turn down again and continue their plunge to a long-term cycle bottom that could see losses exceeding 50% from the all-time highs of late Nov. 2021 (NASDAQ) and early January 2022 (DOW and S&P 500). The only thing that would negate this idea now would be for all three market indices to make new all-time highs. That doesn't appear to be likely at this point, but of course, things can change, and it seems that anything is possible in the volatile and crazy political and economic times we find ourselves in these days. For now, we are long-term bearish and will be looking to sell short the top of any significant bounce that does not exceed those all-time highs.
The dilemma of newer cycle vs. older cycle is also presenting itself in the precious metals market. I am still favoring the idea that both gold and silver are bearish older cycles moving down to their final medium-term cycle bottoms. But they could also be newer cycles and at least short-term bullish and ready to rally back up again. This conflict should be resolved this week or early next week as we just entered a reversal zone specifically for gold and silver today (June 27 - July 5), and an imminent top or bottom should be forming and followed by a reversal (up or down). We are still holding short positions in both metals, so we are hoping the metals will fall some more and a bottom will form. A break below $1792 in gold would confirm the bearish view, and a break above $1877 would confirm the bullish view. In silver, a break below $20.52 is bearish, and a break above $22.49 is bullish. We will continue to use those upper limits in both metals as stop loss points for our short positions. If we get any new lows in this week's reversal zone, we will probably look to cover these positions. We will hold our short positions in gold and silver for now.
Crude oil prices have rallied smartly off of last Tuesday's low of $101.53 (Aug. contract chart), and that low was near the center of two reversal zones. This is good news for the long position we entered on Wednesday around $104. Prices closed just above $109 today. We can hold this long position now with a stop loss based on prices closing back below $102. If crude can now close back above $115, we could see a rally take prices as high as $145.
It's still possible that the DOW's low of 29,653 on June 16 was the start of a new medium-term cycle, and it's also possible the S&P 500 and NASDAQ started new medium-term cycles on June 16 and June 17 (at 3,637 and 10,565, respectively). If this is the case, all three indices could rally strongly now (for at least a few more weeks - possibly longer). This week leads into the July 4th holiday this week-end in the U.S,, and equity markets tend to rally into holidays, But we are still in a reversal zone through July 5, so a peak and a reversal down could begin anytime over the next six trading days. That could put us back on track for a fall to the final bottoms of older medium-term cycles in these indices. Today's downturn in the broad stock market is supporting this view. We will just have to wait to see which trend - bullish or bearish - will take over.
If all three indices roll over now and break below their June 16 -17 lows, we can assume they are moving to the final bottoms of older cycles. Those final bottoms could be this week or early next week and could be a good place to go long. If one or two of these indices (but not all three) make a new low (below the July 16-17 lows), we could get a bullish divergence signal, which would be an even stronger signal to buy. On the other hand, if this market rallies this week and next and exceeds its early June highs (33,272 in the DOW, 4,177 in the S&P 500, and 12.293 in the NASDAQ), then we'll have to assume the new, younger cycles are in effect and will rally for at least several more weeks. We will remain on the sidelines for now as we watch which direction the market will take this week.
Lest we lose track of the "forest for the trees", I should mention here that our longer-term view of this market is still bearish, and it still looks like equities are in the first stage of a serious long-term correction and that they are headed lower for several more years (see "Crash Update" on the Home page). If the markets turn (short-term) bullish now, we could get some sort of relief rally before they turn down again and continue their plunge to a long-term cycle bottom that could see losses exceeding 50% from the all-time highs of late Nov. 2021 (NASDAQ) and early January 2022 (DOW and S&P 500). The only thing that would negate this idea now would be for all three market indices to make new all-time highs. That doesn't appear to be likely at this point, but of course, things can change, and it seems that anything is possible in the volatile and crazy political and economic times we find ourselves in these days. For now, we are long-term bearish and will be looking to sell short the top of any significant bounce that does not exceed those all-time highs.
The dilemma of newer cycle vs. older cycle is also presenting itself in the precious metals market. I am still favoring the idea that both gold and silver are bearish older cycles moving down to their final medium-term cycle bottoms. But they could also be newer cycles and at least short-term bullish and ready to rally back up again. This conflict should be resolved this week or early next week as we just entered a reversal zone specifically for gold and silver today (June 27 - July 5), and an imminent top or bottom should be forming and followed by a reversal (up or down). We are still holding short positions in both metals, so we are hoping the metals will fall some more and a bottom will form. A break below $1792 in gold would confirm the bearish view, and a break above $1877 would confirm the bullish view. In silver, a break below $20.52 is bearish, and a break above $22.49 is bullish. We will continue to use those upper limits in both metals as stop loss points for our short positions. If we get any new lows in this week's reversal zone, we will probably look to cover these positions. We will hold our short positions in gold and silver for now.
Crude oil prices have rallied smartly off of last Tuesday's low of $101.53 (Aug. contract chart), and that low was near the center of two reversal zones. This is good news for the long position we entered on Wednesday around $104. Prices closed just above $109 today. We can hold this long position now with a stop loss based on prices closing back below $102. If crude can now close back above $115, we could see a rally take prices as high as $145.
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