MARKETS UPDATE (11:30 pm EDT)
In last Thursday's blog (Dec. 2) I wrote:
"We are now near our first "pivot point" (Dec. 3) in our new moderately strong (but wide) reversal zone Nov. 30 - Dec. 15. (The other "pivot point" is Dec. 10). After yesterday's late day plunge, the broad stock market seems to be bouncing back today with a strong rally. This could be our pivot point reversal, especially since the S&P 500 has reached our downside target line near 4,500, and the NASDAQ is now well inside our downside target range of 15,000 - 15,500. The DOW has plunged through several target support zones, but may now be stabilizing just above 34,000....Let's see if today's bullish rise can pick up steam for a "Santa Claus" rally."
Well, the DOW edged up some more on Friday and took off strongly today, so it looks like Dec. 1 was a pivot point for this index. The S&P 500 and NASDAQ, however, made new lows on Friday but may be accommodating our Dec. 3 point precisely as they also pushed higher today. It's still too early to tell if we are going to get that "Santa Claus" rally, but if this market pushes higher into the end of the week, there's a good chance it could happen. Ideally, we would like to see a strong rally in all three indices into our next strong reversal zone coming up Dec. 21 - 31 with one or two, but not all three, making a new all-time high (bearish divergence). This would give us a strong signal to sell short.
We don't always get our ideal scenario, however, and there are some bearish hurdles that could turn this market south before Christmas. The DOW is now coming up to strong resistance where this index made a "gap down" the day after Thanksgiving (from 35,591 to 35,366). If the DOW can push through this gap (exceed 35,591), however, it could gain some steam. We also can't ignore our second "pivot point" coming up Dec. 10 (Friday). A strong rally into there could also lead to a top and reversal back down. There are a lot of reasons for this market to be jittery right now (QE tapering, impending interest rate hikes, rising inflation, COVID-19 worries, etc.), and any day could bring a news story that could trigger a sell-off. It is certainly an overbought market, and overbought markets are ripe for corrections. We need to watch this very carefully now. Let's stay on the sidelines and see if today's rally can gain some legs over the next several days.
Gold is in the process of making its final medium-term cycle bottom which is due anytime over the next two weeks. It's possible that bottom happened on last Thursday's low at $1762, but that was a little early for the low. Furthermore, we are going to enter a reversal zone specifically for precious metals next week (Dec. 14 - 22), and that would be an ideal time for the final cycle bottom. If gold can rally above its 15-day moving average (now around $1798 and falling), we may have to accept last week's low as the start of a new medium-term cycle and start looking to buy.
Silver may have formed a significant sub-cycle bottom last Friday at $22.09, but like gold, it could push lower this week to a deeper bottom. If prices go below $21.43, it would mean the cycle is tuning bearish. There aren't many technical signals suggesting a rally right now.
Let's stay on the sidelines of both metals for now as directional signals are not clear, and we are not in a strong reversal zone for metals until next week.
Crude oil's medium-term cycle is also approaching its end and final bottom, probably within the next 4 weeks. Last week's low at $62.43 was likely a sub-cycle low which means the final bottom is still to come after a brief bounce in prices. I am going to wait for that final bottom before attempting to go long in this commodity. We remain on the sidelines of crude.
In last Thursday's blog (Dec. 2) I wrote:
"We are now near our first "pivot point" (Dec. 3) in our new moderately strong (but wide) reversal zone Nov. 30 - Dec. 15. (The other "pivot point" is Dec. 10). After yesterday's late day plunge, the broad stock market seems to be bouncing back today with a strong rally. This could be our pivot point reversal, especially since the S&P 500 has reached our downside target line near 4,500, and the NASDAQ is now well inside our downside target range of 15,000 - 15,500. The DOW has plunged through several target support zones, but may now be stabilizing just above 34,000....Let's see if today's bullish rise can pick up steam for a "Santa Claus" rally."
Well, the DOW edged up some more on Friday and took off strongly today, so it looks like Dec. 1 was a pivot point for this index. The S&P 500 and NASDAQ, however, made new lows on Friday but may be accommodating our Dec. 3 point precisely as they also pushed higher today. It's still too early to tell if we are going to get that "Santa Claus" rally, but if this market pushes higher into the end of the week, there's a good chance it could happen. Ideally, we would like to see a strong rally in all three indices into our next strong reversal zone coming up Dec. 21 - 31 with one or two, but not all three, making a new all-time high (bearish divergence). This would give us a strong signal to sell short.
We don't always get our ideal scenario, however, and there are some bearish hurdles that could turn this market south before Christmas. The DOW is now coming up to strong resistance where this index made a "gap down" the day after Thanksgiving (from 35,591 to 35,366). If the DOW can push through this gap (exceed 35,591), however, it could gain some steam. We also can't ignore our second "pivot point" coming up Dec. 10 (Friday). A strong rally into there could also lead to a top and reversal back down. There are a lot of reasons for this market to be jittery right now (QE tapering, impending interest rate hikes, rising inflation, COVID-19 worries, etc.), and any day could bring a news story that could trigger a sell-off. It is certainly an overbought market, and overbought markets are ripe for corrections. We need to watch this very carefully now. Let's stay on the sidelines and see if today's rally can gain some legs over the next several days.
Gold is in the process of making its final medium-term cycle bottom which is due anytime over the next two weeks. It's possible that bottom happened on last Thursday's low at $1762, but that was a little early for the low. Furthermore, we are going to enter a reversal zone specifically for precious metals next week (Dec. 14 - 22), and that would be an ideal time for the final cycle bottom. If gold can rally above its 15-day moving average (now around $1798 and falling), we may have to accept last week's low as the start of a new medium-term cycle and start looking to buy.
Silver may have formed a significant sub-cycle bottom last Friday at $22.09, but like gold, it could push lower this week to a deeper bottom. If prices go below $21.43, it would mean the cycle is tuning bearish. There aren't many technical signals suggesting a rally right now.
Let's stay on the sidelines of both metals for now as directional signals are not clear, and we are not in a strong reversal zone for metals until next week.
Crude oil's medium-term cycle is also approaching its end and final bottom, probably within the next 4 weeks. Last week's low at $62.43 was likely a sub-cycle low which means the final bottom is still to come after a brief bounce in prices. I am going to wait for that final bottom before attempting to go long in this commodity. We remain on the sidelines of crude.
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