MARKETS UPDATE (3:00 pm EST)
In last Friday's update I pointed out a major bearish shift in the crude oil market and suggested that this could be foreshadowing similar bearishness in the broad stock market. This may be happening as several strong bearish signals appeared in the S&P 500 and NASDAQ charts today (but not the DOW chart). The holdout in the DOW may indicate this is a temporary situation, but it makes us even more cautious about going long in this market now. At the very least I want to wait for the DOW to get closer to the 15,000 level (and maybe even a bit lower) before considering a long position. Please note that I am trading short-term at the moment because there is still a good chance of a significant rally before a more major correction in the broad stock market takes place (probably later in the summer). Still on the sidelines of this market.
Crude oil prices were up strongly today, but all momentum indicators remain strongly bearish. If this market follows the same pattern as the broad stock market we may see prices drop a bit more (perhaps down to the strong support near $90) and then start a short-term rally before making a more significant correction. It is best to be out of crude oil for now (which we are) and watch the price behavior over the next week or two before committing to any trade. The strongly bearish momentum of this market now makes me reluctant to go long (even for a significant short-term rally). A better strategy (as long as bearish momentum persists) might be to sell short at the top of any rally. We will wait and see how the prices move from here. Out of this market for now.
It looks like we will also be doing some short-term trading in gold and silver until we can be reasonably confident that the final bottom of the major correction these metals have been undergoing is in. As discussed in the last blog, there are basically two possibilities here: 1) The crash bottoms are already in with gold around $1321 and silver around $20 and a long-term uptrend has begun; or 2) Gold and silver will drop again and make significantly lower lows before beginning a major long-term uptrend. It is important to note that the major price support levels that gold and silver broke down through when the crash began in mid April were around $1500-$1550 in gold and $26-27 in silver. These prices are now zones of strong resistance and breaking up through them would be a strong indication that the crash is over and the final bottoms are in. Our strategy at this point will be to go long now on any bullish momentum signals with the idea of stepping aside on any approach to those resistance zones but reentering if they are clearly broken through. We may also consider the possibility of selling short at those resistance levels should they hold and if momentum and other technical signals look bearish at that point. Today the gold and silver price charts have not yet given the bullish signals that I like to see before buying. Strong bullish momentum signals did, however, appear in many gold and silver mining company stock charts today, and since the mining companies often lead the price of the metals themselves, this is a sign we may see these bullish signals in the metals shortly (perhaps even tomorrow). Staying on the sidelines today but looking to go long soon (maybe tomorrow).
In last Friday's update I pointed out a major bearish shift in the crude oil market and suggested that this could be foreshadowing similar bearishness in the broad stock market. This may be happening as several strong bearish signals appeared in the S&P 500 and NASDAQ charts today (but not the DOW chart). The holdout in the DOW may indicate this is a temporary situation, but it makes us even more cautious about going long in this market now. At the very least I want to wait for the DOW to get closer to the 15,000 level (and maybe even a bit lower) before considering a long position. Please note that I am trading short-term at the moment because there is still a good chance of a significant rally before a more major correction in the broad stock market takes place (probably later in the summer). Still on the sidelines of this market.
Crude oil prices were up strongly today, but all momentum indicators remain strongly bearish. If this market follows the same pattern as the broad stock market we may see prices drop a bit more (perhaps down to the strong support near $90) and then start a short-term rally before making a more significant correction. It is best to be out of crude oil for now (which we are) and watch the price behavior over the next week or two before committing to any trade. The strongly bearish momentum of this market now makes me reluctant to go long (even for a significant short-term rally). A better strategy (as long as bearish momentum persists) might be to sell short at the top of any rally. We will wait and see how the prices move from here. Out of this market for now.
It looks like we will also be doing some short-term trading in gold and silver until we can be reasonably confident that the final bottom of the major correction these metals have been undergoing is in. As discussed in the last blog, there are basically two possibilities here: 1) The crash bottoms are already in with gold around $1321 and silver around $20 and a long-term uptrend has begun; or 2) Gold and silver will drop again and make significantly lower lows before beginning a major long-term uptrend. It is important to note that the major price support levels that gold and silver broke down through when the crash began in mid April were around $1500-$1550 in gold and $26-27 in silver. These prices are now zones of strong resistance and breaking up through them would be a strong indication that the crash is over and the final bottoms are in. Our strategy at this point will be to go long now on any bullish momentum signals with the idea of stepping aside on any approach to those resistance zones but reentering if they are clearly broken through. We may also consider the possibility of selling short at those resistance levels should they hold and if momentum and other technical signals look bearish at that point. Today the gold and silver price charts have not yet given the bullish signals that I like to see before buying. Strong bullish momentum signals did, however, appear in many gold and silver mining company stock charts today, and since the mining companies often lead the price of the metals themselves, this is a sign we may see these bullish signals in the metals shortly (perhaps even tomorrow). Staying on the sidelines today but looking to go long soon (maybe tomorrow).
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