We are now approaching the end of our current strong reversal zone (Oct. 7 - 16) and the broad stock market is clearly rising strongly into it. It should therefore correlate with a cycle top and not a bottom (unless we see a "break-out" instead of a top). It is still unclear if the DOW and/or S&P 500 are new medium-term cycles (probably) or older cycles. We are therefore going to focus mostly on the NASDAQ which appears to be a newer cycle that started with its low on Sept. 21. I am going to use the Dec. contract chart of the NASDAQ 100 (E-Mini) for our analysis of this market.
Even though this cycle in the NASDAQ is new and therefore at least short-term bullish, there is a possibility it will peak early and be followed by a long decline to the final cycle bottom well below 10,500. That peak might even be this week within our strong reversal zone. In this scenario, we would not expect this index to exceed its last peak at 12,449. If the DOW and/or the S&P 500 make new highs without the NASDAQ exceeding 12,449, it might be a good signal to sell short. A subsequent close below 11,000 would help confirm this bearish scenario. New highs in all three indices, however, would negate that bearish view and might have us looking to buy the bottom of a less serious corrective dip in the NASDAQ with that final top being many weeks away. Yes, this is a tricky market right now with several possibilities. We will stay on the sidelines for now until we see a good trading opportunity. That may come sometime this week.
The precious metal cycles are also very unclear at the moment. There are many mixed bullish and bearish technical signals currently at play which make this market very unpredictable. If prices are going to fall to a significant low in this current reversal zone, they will have to do so quickly (by the end of this week). On the other hand, any strong rally this week will be setting itself up for a significant top and subsequent fall. We would still like to see prices drop close to $1800 in gold and $20 in silver, but they might not go that far down. If gold or silver (not both) make a new monthly low this week without the other, it would give us a bullish divergence signal in a reversal zone, and that might be a good buy spot. Things are too unclear and uncertain at the moment to suggest any definitive trading strategy so we will remain on the sidelines for now.