MARKETS UPDATE (11:30 pm EDT)
The DOW continues to edge up to new all-time highs as we near the end of the current reversal zone centered around Aug. 3, but the S&P 500 and NASDAQ are still below their all-time highs so we carry last week's intermarket bearish divergence signal into this week. We are very late in the medium-term cycles of these indices and the broad stock market is ripe for a top and correction now. Directional momentum in all three indices remains nearly 100% bullish, however, so they could still push higher. If that's going to happen, the S&P 500 and NASDAQ could soon break their all-time highs (that would be 2,484 in the S&P 500 and 6,461 in the NASDAQ). I am going to hold my short position here until we see those highs breached (that is still our stop loss condition for this trade). If our stop condition is triggered, we will look to the next reversal date (around Aug. 21) for a top and another opportunity to sell short. But let's not give up hope for a reversal this week. We still have intermarket bearish divergence, and the current rally appears to be slowing down. It could be ready to turn over.
Last Wednesday I wrote in my blog on gold:
"...short-term technical signals are suggesting that it (gold) is topping out. We could now see a sharp short-term correction that could take prices down to the $1240 - $1250 area (or possibly lower)......If we do get a correction to $1240 - $1250, we will look to buy again as the overall trend of this market is still potentially very bullish (assuming a new cycle started on July 10 at $1205)."
Gold (and silver) did correct sharply into Friday, but gold not yet to that $1240 - $1250 area. The next major reversal zone for gold and silver is Aug. 15 -23 which would be a good time for the bottom to this sub-cycle correction. In that scenario prices still have time to go lower before reversing back up. The precious metals still look potentially very bullish, but if gold prices break below $1240, we may have to change that view (and especially if prices break below $1205). Silver could drop to the $15.90 area or even lower as we approach the next reversal zone. Let's anticipate a bottom to buy sometime next week or early the following week in both metals. We are currently on the sidelines of both gold and silver.
In Wednesday's blog on crude oil I wrote:
"...a good target for a sub-cycle correction now would be in the $45 -$47 range."
So far the low in crude has been $48.37 from last Tuesday (Sept. contract chart). Let's see if prices can go lower into next week's reversal zone.
The DOW continues to edge up to new all-time highs as we near the end of the current reversal zone centered around Aug. 3, but the S&P 500 and NASDAQ are still below their all-time highs so we carry last week's intermarket bearish divergence signal into this week. We are very late in the medium-term cycles of these indices and the broad stock market is ripe for a top and correction now. Directional momentum in all three indices remains nearly 100% bullish, however, so they could still push higher. If that's going to happen, the S&P 500 and NASDAQ could soon break their all-time highs (that would be 2,484 in the S&P 500 and 6,461 in the NASDAQ). I am going to hold my short position here until we see those highs breached (that is still our stop loss condition for this trade). If our stop condition is triggered, we will look to the next reversal date (around Aug. 21) for a top and another opportunity to sell short. But let's not give up hope for a reversal this week. We still have intermarket bearish divergence, and the current rally appears to be slowing down. It could be ready to turn over.
Last Wednesday I wrote in my blog on gold:
"...short-term technical signals are suggesting that it (gold) is topping out. We could now see a sharp short-term correction that could take prices down to the $1240 - $1250 area (or possibly lower)......If we do get a correction to $1240 - $1250, we will look to buy again as the overall trend of this market is still potentially very bullish (assuming a new cycle started on July 10 at $1205)."
Gold (and silver) did correct sharply into Friday, but gold not yet to that $1240 - $1250 area. The next major reversal zone for gold and silver is Aug. 15 -23 which would be a good time for the bottom to this sub-cycle correction. In that scenario prices still have time to go lower before reversing back up. The precious metals still look potentially very bullish, but if gold prices break below $1240, we may have to change that view (and especially if prices break below $1205). Silver could drop to the $15.90 area or even lower as we approach the next reversal zone. Let's anticipate a bottom to buy sometime next week or early the following week in both metals. We are currently on the sidelines of both gold and silver.
In Wednesday's blog on crude oil I wrote:
"...a good target for a sub-cycle correction now would be in the $45 -$47 range."
So far the low in crude has been $48.37 from last Tuesday (Sept. contract chart). Let's see if prices can go lower into next week's reversal zone.
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