MARKETS UPDATE (4:15 pm EDT)
We are now in the center of a strong reversal zone for equities (it ends on Wednesday) and all three major broad stock market indices (DOW, S&P 500, and NASDAQ) are edging higher. Today the NASDAQ exceeded last week's high while the DOW and S&P 500 did not (they are very close) so a bearish divergence signal is setting up here. Cycle timing is also suggesting a top now to be followed by a possibly substantial sub-cycle correction. We are on the sidelines of the broad stock market and will watch the next few days for a signal to possibly sell this market short.
Gold prices broke above a resistance line around $1277 late last Friday and pushed a bit higher into the week-end. Today gold made a new weekly high at $1282.98 and is closing around $1280. The overall technical picture for both gold and silver is starting to look very bullish; nevertheless, prices are rising into a strong reversal zone specifically for precious metals this week (the center point is Wednesday), and while gold made a new weekly high today, silver did not so we have an intermarket bearish divergence signal (until silver makes a new high). There is still time for both metals to push higher before reversing (the reversal zone extends through Friday), and gold may do that. If these metals start turning down now, however, we will look to buy gold again in the $1250 - $1260 area and silver around $16.50 - $16.75. It is too risky to try and short sell silver (or gold) now as there is a possibility of them bypassing this reversal and surging higher (this scenario has a low probability but is still possible based on some bullish technical signals). We are now on the sidelines of both metals and will wait for some sort of correction to give us another spot to buy.
Last Friday the U.S. Dollar Index made a new monthly low at 96.65. We are now in the center of a reversal zone specifically for currencies (it ends Thursday) so Friday's low could be a significant bottom or we could see a lower low this week. As I've stated recently in my blogs, the U.S. dollar seems to be in trouble. Directional momentum in the dollar chart is still nearly 100% bearish. This reversal zone could possibly be a turning point for the dollar to stage a rebound rally, but that rebound may be short-lived as other technical signals are suggesting the dollar could move quite a bit lower. If we do get a short-term dollar rally, that could be just the thing we need to push precious metal prices back down into the buying targets mentioned above.
In last Tuesday's blog on crude oil I wrote:
"...crude oil could reverse near June 2 or near June 7. Crude appears to be taking a sub-cycle correction from its $52 high on May 25 (July contract chart) and could easily complete that correction this week or next."
Crude made a low of $46.74 last Friday (June 2). That could be the end of the correction, but it could go lower into this week's reversal zone (specifically for crude) which is centered on Wednesday. We would like this correction to stay above $45. We especially don't want to see prices below $44 (the start of this medium-term cycle) as that would mean the cycle is turning bearish. Let's wait and see if prices make a new low this week.
On the sidelines of crude oil.
We are now in the center of a strong reversal zone for equities (it ends on Wednesday) and all three major broad stock market indices (DOW, S&P 500, and NASDAQ) are edging higher. Today the NASDAQ exceeded last week's high while the DOW and S&P 500 did not (they are very close) so a bearish divergence signal is setting up here. Cycle timing is also suggesting a top now to be followed by a possibly substantial sub-cycle correction. We are on the sidelines of the broad stock market and will watch the next few days for a signal to possibly sell this market short.
Gold prices broke above a resistance line around $1277 late last Friday and pushed a bit higher into the week-end. Today gold made a new weekly high at $1282.98 and is closing around $1280. The overall technical picture for both gold and silver is starting to look very bullish; nevertheless, prices are rising into a strong reversal zone specifically for precious metals this week (the center point is Wednesday), and while gold made a new weekly high today, silver did not so we have an intermarket bearish divergence signal (until silver makes a new high). There is still time for both metals to push higher before reversing (the reversal zone extends through Friday), and gold may do that. If these metals start turning down now, however, we will look to buy gold again in the $1250 - $1260 area and silver around $16.50 - $16.75. It is too risky to try and short sell silver (or gold) now as there is a possibility of them bypassing this reversal and surging higher (this scenario has a low probability but is still possible based on some bullish technical signals). We are now on the sidelines of both metals and will wait for some sort of correction to give us another spot to buy.
Last Friday the U.S. Dollar Index made a new monthly low at 96.65. We are now in the center of a reversal zone specifically for currencies (it ends Thursday) so Friday's low could be a significant bottom or we could see a lower low this week. As I've stated recently in my blogs, the U.S. dollar seems to be in trouble. Directional momentum in the dollar chart is still nearly 100% bearish. This reversal zone could possibly be a turning point for the dollar to stage a rebound rally, but that rebound may be short-lived as other technical signals are suggesting the dollar could move quite a bit lower. If we do get a short-term dollar rally, that could be just the thing we need to push precious metal prices back down into the buying targets mentioned above.
In last Tuesday's blog on crude oil I wrote:
"...crude oil could reverse near June 2 or near June 7. Crude appears to be taking a sub-cycle correction from its $52 high on May 25 (July contract chart) and could easily complete that correction this week or next."
Crude made a low of $46.74 last Friday (June 2). That could be the end of the correction, but it could go lower into this week's reversal zone (specifically for crude) which is centered on Wednesday. We would like this correction to stay above $45. We especially don't want to see prices below $44 (the start of this medium-term cycle) as that would mean the cycle is turning bearish. Let's wait and see if prices make a new low this week.
On the sidelines of crude oil.
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