Last week Federal Reserve officials made comments in the news suggesting that there still could be two more interest rate hikes this year. This hawkish tone drove equity markets down into the end of the week with the DOW hitting a low of 18,335 and the S&P 500 touching 2,160 on Friday, the dead center of our current reversal zone. Could this be the end of the correction? Possibly, but this reversal zone extends into Thursday and the ideal targets for these two indices should be lower (perhaps closer to 18,100 for the DOW and 2,100 for the S&P 500). Let's wait and see if this correction can go deeper this week before adding any additional long positions. Still holding my long position in the broad stock market.
The Fed's hawkish comments last week may have frightened equity markets, but they gave a strong boost to the U.S. dollar. The U.S. Dollar Index surged up on Friday but is now pushing against resistance in the 95 -96 area so this rally may not go much further. Despite the dollar surge, gold and silver prices have remained stable which supports the idea of the precious metals being bullish and ready to rally now. Both metals are bottoming in the center of this current reversal zone and could (should) easily turn up now. We need to be cautiously bullish, though, as prices could still fall lower before Friday. Silver may have formed its final medium-term cycle bottom yesterday (Sunday) when prices hit $18.40, but it might still go lower. A close above $19 would make me more confident that the cycle bottom is in. I am going to hold off buying silver for now. We are already long in gold from last Thursday. Let's keep our stop loss on gold at $1,300. Holding my long position in gold but still on the sidelines of silver.