MARKETS UPDATE (11:30 pm EDST)
A disintegrating "trade deal" with China seems to be responsible for pushing the broad stock market off a cliff today with the DOW losing 767 points at the close of the day. We have been anticipating a possible sub-cycle bottom in this market. In last Thursday's blog I wrote:
"We will be in a reversal zone for all markets through Aug. 14 so there is plenty of time for a bottom to form."
Well, we are certainly seeing a move towards a bottom, but where will it stop? That is an important question because we are already well below our initial target for a low (26,600), and it is still early in the reversal zone (it ends Wednesday next week). If Wall Street's panic over "trade wars" subsides, we could see a bottom and a bounce back up, but if those fears persist, well, this market could be in trouble. A new target for a sub-cycle bottom could be around 24,900 - 26,200 (a wide range) in the DOW and 2,770 - 2,900 in the S&P 500 (we are in these ranges now). What we don't want to see is the DOW below 24,680 or the S&P 500 below 2,728 (the starting points of their current medium-term cycles) as that would be a sign the market is turning bearish. We will wait to see if markets stabilize or push lower over the next several days. Still on the sidelines.
Despite today's equity plunge, crude oil prices were remarkably stable. Again, crude dipped below our stop loss at $54 but then closed above it. This may be boding well for the broad stock market, but if equities continue to fall tomorrow, we could see crude follow suit. We are still long in crude but carefully watching for a breach (close) below that $54 level.
Gold and silver are still looking ambiguous, meaning they could make either new highs in this week's reversal zone or new lows. Right now it looks a bit more like new lows so we will watch for that. Gold is still making new highs while silver is not so our intermarket bearish divergence signal from last week is carrying over into this week (so far).
Still on the sidelines of gold and silver.
A disintegrating "trade deal" with China seems to be responsible for pushing the broad stock market off a cliff today with the DOW losing 767 points at the close of the day. We have been anticipating a possible sub-cycle bottom in this market. In last Thursday's blog I wrote:
"We will be in a reversal zone for all markets through Aug. 14 so there is plenty of time for a bottom to form."
Well, we are certainly seeing a move towards a bottom, but where will it stop? That is an important question because we are already well below our initial target for a low (26,600), and it is still early in the reversal zone (it ends Wednesday next week). If Wall Street's panic over "trade wars" subsides, we could see a bottom and a bounce back up, but if those fears persist, well, this market could be in trouble. A new target for a sub-cycle bottom could be around 24,900 - 26,200 (a wide range) in the DOW and 2,770 - 2,900 in the S&P 500 (we are in these ranges now). What we don't want to see is the DOW below 24,680 or the S&P 500 below 2,728 (the starting points of their current medium-term cycles) as that would be a sign the market is turning bearish. We will wait to see if markets stabilize or push lower over the next several days. Still on the sidelines.
Despite today's equity plunge, crude oil prices were remarkably stable. Again, crude dipped below our stop loss at $54 but then closed above it. This may be boding well for the broad stock market, but if equities continue to fall tomorrow, we could see crude follow suit. We are still long in crude but carefully watching for a breach (close) below that $54 level.
Gold and silver are still looking ambiguous, meaning they could make either new highs in this week's reversal zone or new lows. Right now it looks a bit more like new lows so we will watch for that. Gold is still making new highs while silver is not so our intermarket bearish divergence signal from last week is carrying over into this week (so far).
Still on the sidelines of gold and silver.
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