MARKETS UPDATE (11:30 pm EDT)
We are now at the center of another reversal zone for the broad stock market (which ends on Friday) and we are seeing contradictory signals coming from the three major market indices. The S&P 500 and NASDAQ are both rising and making new yearly highs while the DOW has been falling and today made a new weekly low. This is a case of intermarket bearish divergence and suggests that all three indices are headed lower, at least in the short-term. The S&P 500 and NASDAQ could reverse sometime this week or they might push higher into another stronger reversal zone coming up at the end of next week and then turn down. Either way, I don't think any correction will be serious and may even be seen as an opportunity to add to long positions for a rally that should continue higher for at least several more weeks (and possibly months). As I've stated in recent blogs, the broad stock market's current cycle structure supports this bullish view, and so does the idea of the U.S. political establishment manipulating markets now to avoid a serious downturn before the November presidential election. I've suggested a stop loss for our long position in this market to be around 17,400 in the DOW and 2,040 in the S&P 500. It would take a move below those levels to make me question my bullish view. There are also support lines around 18,000 in the DOW and 2,100 in the S&P 500 so these may be good target areas for any correction. Still holding my long position in the broad stock market.
In my blog last Monday on gold and silver I wrote:
"Besides the first week of August, there is also another reversal zone for the precious metals in the third week of August. We could see a correction move prices down into either one of those time windows or we may get a brief rise into the first one and then a downward correction into the second one. Our main strategy here should be to wait and buy the corrective bottom which could be around $18 in silver and anywhere from $1,230 to $1,300 in gold."
We are now in the first reversal zone and gold and silver prices are rising into it. Silver has still not made its final medium-term cycle correction, and that bottom is due within the next three weeks. We could see a reversal start now or we could see prices push higher this week before falling. An ideal signal to sell short would be to have one of these metals make a new yearly high while the other does not (intermarket bearish divergence). Both are close to new highs (gold needs to exceed $1,376 and silver needs to exceed $21.08) so we should watch for this divergence this week. If we miss our chance to sell short we will just wait and buy the final bottom of silver's cycle, probably in the $18 area. Gold started a new medium-term cycle on May 31st so its final cycle bottom is not due for at least a month; however, its cycle structure now indicates that it could take a steep subcycle correction any time over the next two weeks. If it does, it will most likely coincide with silver's final correction. Gold's correction could end up anywhere between $1,250 and $1,300. We will look to buy gold in that range if it gets there over the next week or two. On the sidelines of gold and silver for now.
Crude oil prices dropped sharply today and closed just slightly above $40 (September contract chart). We are now at the lowest part of our target range for crude's final medium-term cycle bottom ($40 -$45) and that cycle is now due (or even overdue) so we should be looking to buy. I am going to be cautious here, however, because today's price drop triggered a strong bearish momentum signal making directional momentum in crude now 100% bearish. The second half of August is a strong reversal zone specifically related to crude, and it is possible to see crude's final cycle bottom extend into that time frame, especially considering today's momentum change. Let's stay on the sidelines of crude for now. If prices break below $38 we will probably hold off buying at least until the third week of August.
We are now at the center of another reversal zone for the broad stock market (which ends on Friday) and we are seeing contradictory signals coming from the three major market indices. The S&P 500 and NASDAQ are both rising and making new yearly highs while the DOW has been falling and today made a new weekly low. This is a case of intermarket bearish divergence and suggests that all three indices are headed lower, at least in the short-term. The S&P 500 and NASDAQ could reverse sometime this week or they might push higher into another stronger reversal zone coming up at the end of next week and then turn down. Either way, I don't think any correction will be serious and may even be seen as an opportunity to add to long positions for a rally that should continue higher for at least several more weeks (and possibly months). As I've stated in recent blogs, the broad stock market's current cycle structure supports this bullish view, and so does the idea of the U.S. political establishment manipulating markets now to avoid a serious downturn before the November presidential election. I've suggested a stop loss for our long position in this market to be around 17,400 in the DOW and 2,040 in the S&P 500. It would take a move below those levels to make me question my bullish view. There are also support lines around 18,000 in the DOW and 2,100 in the S&P 500 so these may be good target areas for any correction. Still holding my long position in the broad stock market.
In my blog last Monday on gold and silver I wrote:
"Besides the first week of August, there is also another reversal zone for the precious metals in the third week of August. We could see a correction move prices down into either one of those time windows or we may get a brief rise into the first one and then a downward correction into the second one. Our main strategy here should be to wait and buy the corrective bottom which could be around $18 in silver and anywhere from $1,230 to $1,300 in gold."
We are now in the first reversal zone and gold and silver prices are rising into it. Silver has still not made its final medium-term cycle correction, and that bottom is due within the next three weeks. We could see a reversal start now or we could see prices push higher this week before falling. An ideal signal to sell short would be to have one of these metals make a new yearly high while the other does not (intermarket bearish divergence). Both are close to new highs (gold needs to exceed $1,376 and silver needs to exceed $21.08) so we should watch for this divergence this week. If we miss our chance to sell short we will just wait and buy the final bottom of silver's cycle, probably in the $18 area. Gold started a new medium-term cycle on May 31st so its final cycle bottom is not due for at least a month; however, its cycle structure now indicates that it could take a steep subcycle correction any time over the next two weeks. If it does, it will most likely coincide with silver's final correction. Gold's correction could end up anywhere between $1,250 and $1,300. We will look to buy gold in that range if it gets there over the next week or two. On the sidelines of gold and silver for now.
Crude oil prices dropped sharply today and closed just slightly above $40 (September contract chart). We are now at the lowest part of our target range for crude's final medium-term cycle bottom ($40 -$45) and that cycle is now due (or even overdue) so we should be looking to buy. I am going to be cautious here, however, because today's price drop triggered a strong bearish momentum signal making directional momentum in crude now 100% bearish. The second half of August is a strong reversal zone specifically related to crude, and it is possible to see crude's final cycle bottom extend into that time frame, especially considering today's momentum change. Let's stay on the sidelines of crude for now. If prices break below $38 we will probably hold off buying at least until the third week of August.
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