MARKETS UPDATE (11:30 pm EST)
We are now entering another strong reversal zone for several markets that will last through the end of the month (about two weeks). The mid-point and most likely time for any market reversals would be the end of this week and early next week.
After rising sharply during election week, the broad stock market leveled off last week with the DOW maintaining its lofty new record highs just above 18,900. This Thursday is a holiday in the U.S. (Thanksgiving), and equity markets tend to rise into holiday week-ends so we may see more rallying into the end of the week. If that happens, we could easily see this market reverse and fall next week. Because the DOW and S&P 500 likely started new medium-term cycles on Nov. 4, their current trend is bullish (in fact, directional momentum in both charts is now 100% bullish) so any corrective reversal should not be serious and could give us a good entry point to go long. This could be around 18,500 in the DOW and 2,140 in the S&P 500. If equities fall this week, we could get an early correction and bottom into the end of the week or early next week which would also be a good spot to buy. A third alternative could see these markets "break out" and surge higher instead of reversing (this sometimes happens in a reversal zone but is not common). I am anticipating some sort of reversal and am going to wait for it. Staying on the sidelines for now.
Unlike equity markets, gold and silver prices have been falling. It is still not clear if these metals are falling into the final bottoms of their old medium-term cycles now or if both metals started new medium-term cycles in October. If these are new cycles then there is a good chance prices will continue lower at least into the end of December and possibly longer. But if we have older cycles bottoming now or next week, these metals could reverse and turn quite bullish. Ideally, we want to see gold move closer to $1,190 and silver closer to $16 later this week or early next week (the center of the reversal zone). If this happens, we will be looking to buy, especially if we see intermarket bullish divergence where one metal makes a new low while the other does not. Currently on the sidelines of both gold and silver.
The U.S. Dollar index managed to break through that 100 level resistance last week and remains above it for now. This week's reversal zone is also applicable to currencies so if the dollar pushes higher into the end of the week or early next week it may be setting the stage for a significant downturn. If that leads to a break back below 100, we could see the dollar falling again, and this could be the trigger for the possible bullish precious metals scenario mentioned above.
Crude oil has been rallying strongly from its Nov. 14th low of $42.20 (December contract chart). It's possible that was the bottom of the current medium-term cycle (it would be early), but a more likely scenario would have that cycle bottom still ahead. If crude prices push a bit higher into the end of this week (i.e. the center of the current reversal zone), we may have a good spot to sell short a correction down into the final cycle bottom (which could be in late December). If prices start to close above $48, however, we may have to abandon this (short-term) bearish view. On the sidelines of crude for now.
We are now entering another strong reversal zone for several markets that will last through the end of the month (about two weeks). The mid-point and most likely time for any market reversals would be the end of this week and early next week.
After rising sharply during election week, the broad stock market leveled off last week with the DOW maintaining its lofty new record highs just above 18,900. This Thursday is a holiday in the U.S. (Thanksgiving), and equity markets tend to rise into holiday week-ends so we may see more rallying into the end of the week. If that happens, we could easily see this market reverse and fall next week. Because the DOW and S&P 500 likely started new medium-term cycles on Nov. 4, their current trend is bullish (in fact, directional momentum in both charts is now 100% bullish) so any corrective reversal should not be serious and could give us a good entry point to go long. This could be around 18,500 in the DOW and 2,140 in the S&P 500. If equities fall this week, we could get an early correction and bottom into the end of the week or early next week which would also be a good spot to buy. A third alternative could see these markets "break out" and surge higher instead of reversing (this sometimes happens in a reversal zone but is not common). I am anticipating some sort of reversal and am going to wait for it. Staying on the sidelines for now.
Unlike equity markets, gold and silver prices have been falling. It is still not clear if these metals are falling into the final bottoms of their old medium-term cycles now or if both metals started new medium-term cycles in October. If these are new cycles then there is a good chance prices will continue lower at least into the end of December and possibly longer. But if we have older cycles bottoming now or next week, these metals could reverse and turn quite bullish. Ideally, we want to see gold move closer to $1,190 and silver closer to $16 later this week or early next week (the center of the reversal zone). If this happens, we will be looking to buy, especially if we see intermarket bullish divergence where one metal makes a new low while the other does not. Currently on the sidelines of both gold and silver.
The U.S. Dollar index managed to break through that 100 level resistance last week and remains above it for now. This week's reversal zone is also applicable to currencies so if the dollar pushes higher into the end of the week or early next week it may be setting the stage for a significant downturn. If that leads to a break back below 100, we could see the dollar falling again, and this could be the trigger for the possible bullish precious metals scenario mentioned above.
Crude oil has been rallying strongly from its Nov. 14th low of $42.20 (December contract chart). It's possible that was the bottom of the current medium-term cycle (it would be early), but a more likely scenario would have that cycle bottom still ahead. If crude prices push a bit higher into the end of this week (i.e. the center of the current reversal zone), we may have a good spot to sell short a correction down into the final cycle bottom (which could be in late December). If prices start to close above $48, however, we may have to abandon this (short-term) bearish view. On the sidelines of crude for now.
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