MARKETS UPDATE (11:00 pm EDST)
For now, it looks like it was a good idea to cover our short position in the broad stock market last week (at least in the DOW and S&P 500), but there is still time for this market to turn down sharply and make us the victims of a "whipsaw" (unless, of course, we can sell short again before the fall - a possibility).
Today the DOW broke above its June 8th high of 27,580 (but it is still well below its all-time high of 29,568 from February), and the S&P 500 is getting VERY close to testing its February all-time high of 3,393. This market clearly has a lot of bullish energy. However, even if the S&P 500 succeeds in making a new all-time high, there will still be a strong intermarket BEARISH divergence signal as long as the DOW remains below its all-time high.
Our current cycle analysis is showing that the DOW and S&P 500 could be near the end of "old" medium-term cycles and ready to correct down sharply to the final bottoms in those cycles. But it is also possible that both these indices started new medium-term cycles from their mid-June lows and are therefore young and bullish. In that case, a correction is also due soon, but it would be a smaller sub-cycle correction. The NASDAQ is not showing this kind of ambiguity and is most likely an older medium-term cycle that is peaking and ready to take its final sharp correction down to its final bottom.
OK, so what does this all mean for our trading? Well, for now it means we remain on the sidelines.
We are currently in neutral territory BETWEEN two close reversal zones (July 28 - Aug. 4 and Aug. 12 - 19). Sometimes a reversal will happen in the center of this "neutral zone" (i.e. now). But this market seems very bullish and could easily rally to a peak in the second reversal period (which ends next week on Thursday).
If the DOW and/or S&P 500 are older cycles, they should peak this week or early next and then turn down for a sharp correction along with the NASDAQ (which may have peaked on Friday). If the DOW and S&P 500 are instead NEW cycles, they may take a small dip now but then push higher into September and also pull the NASDAQ up to new highs (and a very late final peak).
Bottom line: We are still aiming to sell short a final medium-tern cycle high in this market. Because the NASDAQ is most likely near its final peak, we will look to short sell an index fund or ETF tied to the NASDAQ if and when technical signals are appropriate (if the high didn't already happen last week on Friday).
The cycle patterns in gold and silver are also ambiguous at the moment, but regardless of cycle structure, some sort of correction is likely imminent in both metals. That could be starting now from Friday's highs, or if prices push higher this week it will start from a higher peak (especially if one metal makes a new high without the other - i.e. intermarket bearish divergence). It may be difficult to call the bottom of any correction, but for gold a range between $1850 - $1950 would be good. For silver, we would like to see a target between $20 - $25. If prices correct down to these areas, we may look to buy. Currently on the sidelines of gold and silver.
Crude oil's medium-term cycle is also in its late stage so we are now watching for its final peak before a sharp correction down to the final bottom. That peak could have been last week's high at $43.52 (Sept. contract chart), but it could also push higher into this week's reversal zone. If it does that, we may consider selling short. Otherwise, we will wait for the final correction down and perhaps buy the low. A good target for that low now would be around $33, but it could go lower. On the sidelines of crude oil for now.
For now, it looks like it was a good idea to cover our short position in the broad stock market last week (at least in the DOW and S&P 500), but there is still time for this market to turn down sharply and make us the victims of a "whipsaw" (unless, of course, we can sell short again before the fall - a possibility).
Today the DOW broke above its June 8th high of 27,580 (but it is still well below its all-time high of 29,568 from February), and the S&P 500 is getting VERY close to testing its February all-time high of 3,393. This market clearly has a lot of bullish energy. However, even if the S&P 500 succeeds in making a new all-time high, there will still be a strong intermarket BEARISH divergence signal as long as the DOW remains below its all-time high.
Our current cycle analysis is showing that the DOW and S&P 500 could be near the end of "old" medium-term cycles and ready to correct down sharply to the final bottoms in those cycles. But it is also possible that both these indices started new medium-term cycles from their mid-June lows and are therefore young and bullish. In that case, a correction is also due soon, but it would be a smaller sub-cycle correction. The NASDAQ is not showing this kind of ambiguity and is most likely an older medium-term cycle that is peaking and ready to take its final sharp correction down to its final bottom.
OK, so what does this all mean for our trading? Well, for now it means we remain on the sidelines.
We are currently in neutral territory BETWEEN two close reversal zones (July 28 - Aug. 4 and Aug. 12 - 19). Sometimes a reversal will happen in the center of this "neutral zone" (i.e. now). But this market seems very bullish and could easily rally to a peak in the second reversal period (which ends next week on Thursday).
If the DOW and/or S&P 500 are older cycles, they should peak this week or early next and then turn down for a sharp correction along with the NASDAQ (which may have peaked on Friday). If the DOW and S&P 500 are instead NEW cycles, they may take a small dip now but then push higher into September and also pull the NASDAQ up to new highs (and a very late final peak).
Bottom line: We are still aiming to sell short a final medium-tern cycle high in this market. Because the NASDAQ is most likely near its final peak, we will look to short sell an index fund or ETF tied to the NASDAQ if and when technical signals are appropriate (if the high didn't already happen last week on Friday).
The cycle patterns in gold and silver are also ambiguous at the moment, but regardless of cycle structure, some sort of correction is likely imminent in both metals. That could be starting now from Friday's highs, or if prices push higher this week it will start from a higher peak (especially if one metal makes a new high without the other - i.e. intermarket bearish divergence). It may be difficult to call the bottom of any correction, but for gold a range between $1850 - $1950 would be good. For silver, we would like to see a target between $20 - $25. If prices correct down to these areas, we may look to buy. Currently on the sidelines of gold and silver.
Crude oil's medium-term cycle is also in its late stage so we are now watching for its final peak before a sharp correction down to the final bottom. That peak could have been last week's high at $43.52 (Sept. contract chart), but it could also push higher into this week's reversal zone. If it does that, we may consider selling short. Otherwise, we will wait for the final correction down and perhaps buy the low. A good target for that low now would be around $33, but it could go lower. On the sidelines of crude oil for now.
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