MARKETS UPDATE (11:30 pm EDST)
In last Thursday's blog on the broad stock market I wrote:
" I am going to allow this market two more trading days to form a possible bottom. If we get a bullish divergence signal on Monday (i.e. one or two - but not all three - of our market indices - DOW, S&P 500, NASDAQ - making a new low), that might signal the formation of a bottom. If equities continue to fall past Monday, however, we will have to assume that the market is bypassing a reversal and is breaking down.
Even if a sub-cycle bottom forms by Monday, I would not be enthusiastic about going long. This market is starting to look very bearish, and the chances of another rally to challenge the all-time highs are starting to look slim (but not impossible)."
Despite a hesitant start, the DOW and S&P 500 managed to push a little higher today, but then the rally seemed to loose steam at the end of the day. Unlike the DOW and S&P 500, the NASDAQ was not able to break above Friday's high, and so rather than a bullish divergence signal, we have a bearish divergence signal instead. Last Thursday's deep low in equities, however, could still be a significant bottom, as long as this market doesn't break below those lows over the next few days. But as I stated on Thursday, we do not want to chase any rallies right now as they may be short-lived. If we get a rally now that pushes higher into our next strong reversal zone (May 26 - June 3), that might be a good place to sell short.
Our medium-term cycle labeling of the DOW and S&P 500 is a little ambiguous at the moment (may be old or new cycle), but it is fairly clear that the NASDAQ is a fairly young cycle that started with the low of 12,555 on March 14. This cycle has already gone well below its starting point and is therefore bearish and should continue lower for at least 6 more weeks to the final cycle bottom (with brief relief rallies - possible shorting opportunities - on its way down).
Let's stay on the sidelines of the broad stock market for now as we watch for opportunities to sell short. Our main concern at this point is whether or not these three market indices can make new all-time highs. Right now that seems unlikely (but not impossible).
Gold made a new weekly low today (just below $1800) while silver did not, so we did get a bullish divergence signal in the precious metals market. Let's watch for a rally now in both metals and see how high they can go.
Any rally in gold shouldn't go very far because it looks like this is a fairly young medium-term cycle that started with the low of $1891 on March 29, and the cycle is bearish because prices have already gone well below that low. We should probably be looking to go short at the top of any corrective rally from here. A good target for that rally might be around $1900. There's a small chance that today's low could be the end of an older medium-term cycle in gold and the start of a new one. If that's the case, any rally might last a little longer and go higher, but more than likely it would peak early and still turn down soon as gold's trend seems to be turning bearish.
Silver is also most likely a young medium-term cycle that started with the low of $24.02 on March 29 and, like gold, is bearish because it has now fallen well below that low. Last Friday's low at $20.52 looks like a significant sub-cycle bottom as today prices rose steeply from there. A good target for a sub-cycle rally now could be around $23 - $24. As with gold, there's also a small chance Friday's low was the final bottom of an older cycle and the start of a new one. In that case, a rally might go higher. Next Monday could be a significant turning point for both gold and silver. If we see a top forming then, we will consider shorting both metals.
Let's stay on the sidelines of gold and silver for now.
The U.S. Dollar Index is VERY late in its medium-term cycle, so some sort of top is imminent. This index briefly touched 105 last Friday, which was the last day of a reversal zone specifically for currencies. That could have been the top. The greenback could fall now, and that could correlate with the rally we are expecting in the precious metals. As I've discussed in recent blogs, a clear break above 104 could mean that the U.S. dollar is breaking out, turning bullish and possibly aborting its normal 15-16 year cycle. We'll see if that's the case by watching how serious any correction goes now. If the dollar takes a steep dive and can't get back above 104, we'll assume the break above 104 was a "fake-out" (common during "Mercury retrograde" periods - we are in one now). That would put us back on track for a "normal' 15-16 year long-term cycle which is due to end over the next few years, possibly as low as 55. But if the greenback's imminent correction is modest and this index can climb back above 104, we may see the U.S. dollar soar to new heights for another two years or more.
Crude oil prices continue to rise, and they seem to be staying above a downward sloping trend line starting from the $116 top on March 7 (July contract chart). I continue to be reluctant to buy into this rally as the ongoing "wild card" factor of the Russia/Ukraine war makes this market potentially very volatile. May 19 - 27 is another reversal zone specifically for crude. If prices correct down again into this reversal zone and stay above that trend line (now around $96), I might be tempted to buy. On the other hand, if prices instead rise into this time zone, we may see a correction delayed by a top near resistance around $116 and then a correction back down. A break and close above $116 would be a bullish sign and could be followed by a rally that could get as high as $150. Let's stay on the sidelines of crude oil for now.
In last Thursday's blog on the broad stock market I wrote:
" I am going to allow this market two more trading days to form a possible bottom. If we get a bullish divergence signal on Monday (i.e. one or two - but not all three - of our market indices - DOW, S&P 500, NASDAQ - making a new low), that might signal the formation of a bottom. If equities continue to fall past Monday, however, we will have to assume that the market is bypassing a reversal and is breaking down.
Even if a sub-cycle bottom forms by Monday, I would not be enthusiastic about going long. This market is starting to look very bearish, and the chances of another rally to challenge the all-time highs are starting to look slim (but not impossible)."
Despite a hesitant start, the DOW and S&P 500 managed to push a little higher today, but then the rally seemed to loose steam at the end of the day. Unlike the DOW and S&P 500, the NASDAQ was not able to break above Friday's high, and so rather than a bullish divergence signal, we have a bearish divergence signal instead. Last Thursday's deep low in equities, however, could still be a significant bottom, as long as this market doesn't break below those lows over the next few days. But as I stated on Thursday, we do not want to chase any rallies right now as they may be short-lived. If we get a rally now that pushes higher into our next strong reversal zone (May 26 - June 3), that might be a good place to sell short.
Our medium-term cycle labeling of the DOW and S&P 500 is a little ambiguous at the moment (may be old or new cycle), but it is fairly clear that the NASDAQ is a fairly young cycle that started with the low of 12,555 on March 14. This cycle has already gone well below its starting point and is therefore bearish and should continue lower for at least 6 more weeks to the final cycle bottom (with brief relief rallies - possible shorting opportunities - on its way down).
Let's stay on the sidelines of the broad stock market for now as we watch for opportunities to sell short. Our main concern at this point is whether or not these three market indices can make new all-time highs. Right now that seems unlikely (but not impossible).
Gold made a new weekly low today (just below $1800) while silver did not, so we did get a bullish divergence signal in the precious metals market. Let's watch for a rally now in both metals and see how high they can go.
Any rally in gold shouldn't go very far because it looks like this is a fairly young medium-term cycle that started with the low of $1891 on March 29, and the cycle is bearish because prices have already gone well below that low. We should probably be looking to go short at the top of any corrective rally from here. A good target for that rally might be around $1900. There's a small chance that today's low could be the end of an older medium-term cycle in gold and the start of a new one. If that's the case, any rally might last a little longer and go higher, but more than likely it would peak early and still turn down soon as gold's trend seems to be turning bearish.
Silver is also most likely a young medium-term cycle that started with the low of $24.02 on March 29 and, like gold, is bearish because it has now fallen well below that low. Last Friday's low at $20.52 looks like a significant sub-cycle bottom as today prices rose steeply from there. A good target for a sub-cycle rally now could be around $23 - $24. As with gold, there's also a small chance Friday's low was the final bottom of an older cycle and the start of a new one. In that case, a rally might go higher. Next Monday could be a significant turning point for both gold and silver. If we see a top forming then, we will consider shorting both metals.
Let's stay on the sidelines of gold and silver for now.
The U.S. Dollar Index is VERY late in its medium-term cycle, so some sort of top is imminent. This index briefly touched 105 last Friday, which was the last day of a reversal zone specifically for currencies. That could have been the top. The greenback could fall now, and that could correlate with the rally we are expecting in the precious metals. As I've discussed in recent blogs, a clear break above 104 could mean that the U.S. dollar is breaking out, turning bullish and possibly aborting its normal 15-16 year cycle. We'll see if that's the case by watching how serious any correction goes now. If the dollar takes a steep dive and can't get back above 104, we'll assume the break above 104 was a "fake-out" (common during "Mercury retrograde" periods - we are in one now). That would put us back on track for a "normal' 15-16 year long-term cycle which is due to end over the next few years, possibly as low as 55. But if the greenback's imminent correction is modest and this index can climb back above 104, we may see the U.S. dollar soar to new heights for another two years or more.
Crude oil prices continue to rise, and they seem to be staying above a downward sloping trend line starting from the $116 top on March 7 (July contract chart). I continue to be reluctant to buy into this rally as the ongoing "wild card" factor of the Russia/Ukraine war makes this market potentially very volatile. May 19 - 27 is another reversal zone specifically for crude. If prices correct down again into this reversal zone and stay above that trend line (now around $96), I might be tempted to buy. On the other hand, if prices instead rise into this time zone, we may see a correction delayed by a top near resistance around $116 and then a correction back down. A break and close above $116 would be a bullish sign and could be followed by a rally that could get as high as $150. Let's stay on the sidelines of crude oil for now.
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