MARKETS UPDATE (4:45 pm EST)
On Friday the NASDAQ made a new yearly high and, so far, the DOW and S&P 500 have not (they are close).
A case of bearish intermarket divergence may be setting up here if the DOW and/or S&P 500 do not make new highs. It is a little early for a reversal in the broad stock market, and we want to wait at least until the end of this week before considering any short position. If all three indices make new highs, I will reconsider my shorting strategy (but not necessarily abandon it). Directional momentum in the NASDAQ has now turned 100% bullish, but the DOW and S&P 500 remain mixed bearish and bullish so this market is still giving us mixed signals. The first and second week of April is the timing window we want to focus on for a significant turning point. If the market does move down this week, it may be a small corrective dip (say, to the 17,800 - 18,000 area) from which the rally could resume into early April. We will watch for this or for new highs in the DOW and S&P 500 to help direct our trading strategy. The dovish tone of the Federal Reserve's statement and Janet Yellen's press conference last week has triggered a burst of enthusiastic buying on Wall Street. Some financial analysts are now wondering if the Fed will continue to delay a significant hike in interest rates indefinitely. If this is their plan, we could see equity markets go significantly higher this year. But even if this happens, these markets are due (overdue) for a significant correction, and we should guard against becoming too complacent with any long positions. Still on the sidelines.
Gold and silver have been looking very good since we bought gold early in the day on March 18. Both metals are rallying sharply, and it looks like they are both starting new medium-term cycles. Several short-term signals are now suggesting that the precious metals market could be turning bullish. But we are not out of the woods yet. There is some resistance for gold in the $1200 - $1250 range, and for the gold cycle to become truly bullish prices need to exceed the $1306 top from Jan. 22. (Silver needs to clear its Jan. 22 high of $18.48 to be bullish). Exceeding these highs is possible, but we want want to keep in mind the reversal zone coming up in early April. Prices could take a correction first. And if that correction gets serious, the precious metals may not turn bullish and instead plunge to new lows. For now, we will watch resistance areas for gold around $1200 and for silver around $17.50. If prices stall at those levels as we move into early April, a correction may follow. Holding my long position in gold and still on the sidelines of silver.
It looks like the U.S. Dollar Index is finally taking a long overdue correction (this is what kick-started the rally in gold). Of course, the dollar had been ridiculously overbought and was also pushing against a nice round number of "psychological" resistance at the 100 level, but it seems like it was the Fed and Janet Yellen's surprisingly dovish statements from last week's FOMC meeting that was the straw that finally broke the camel's (green) back. After hearing Ms.Yellen's double-talk rhetoric concerning the Fed's attitude about raising interest rates ( "just because we removed the word 'patient' doesn't mean we're going to be impatient ") global investors probably started to feel that the Fed, despite their efforts to appear fiscally responsible, may not be in such a hurry to hike rates after all. Delaying a rate hike is bearish for the dollar so unloading greenbacks at the 100 mark following last week's Fed meeting probably seemed like a good idea. The dollar is now below 97, and the U.S. Dollar Index chart shows it will likely move lower, at least short-term. Further declines in the dollar will support the gold and silver rally.
Crude oil prices are rising slowly from last week's low near $44. I am still looking to sell short in the $48 - $49 area, maybe later this week. If prices start to exceed $50, however, I may have to reconsider the labeling of the current crude cycle. It is possible that last week's low could be the start of the new cycle (instead of the Jan.29 low at $45). If this is the case, the market could start to turn bullish. Directional momentum, however, remains 100% bearish at the moment. Out of this market for now.
On Friday the NASDAQ made a new yearly high and, so far, the DOW and S&P 500 have not (they are close).
A case of bearish intermarket divergence may be setting up here if the DOW and/or S&P 500 do not make new highs. It is a little early for a reversal in the broad stock market, and we want to wait at least until the end of this week before considering any short position. If all three indices make new highs, I will reconsider my shorting strategy (but not necessarily abandon it). Directional momentum in the NASDAQ has now turned 100% bullish, but the DOW and S&P 500 remain mixed bearish and bullish so this market is still giving us mixed signals. The first and second week of April is the timing window we want to focus on for a significant turning point. If the market does move down this week, it may be a small corrective dip (say, to the 17,800 - 18,000 area) from which the rally could resume into early April. We will watch for this or for new highs in the DOW and S&P 500 to help direct our trading strategy. The dovish tone of the Federal Reserve's statement and Janet Yellen's press conference last week has triggered a burst of enthusiastic buying on Wall Street. Some financial analysts are now wondering if the Fed will continue to delay a significant hike in interest rates indefinitely. If this is their plan, we could see equity markets go significantly higher this year. But even if this happens, these markets are due (overdue) for a significant correction, and we should guard against becoming too complacent with any long positions. Still on the sidelines.
Gold and silver have been looking very good since we bought gold early in the day on March 18. Both metals are rallying sharply, and it looks like they are both starting new medium-term cycles. Several short-term signals are now suggesting that the precious metals market could be turning bullish. But we are not out of the woods yet. There is some resistance for gold in the $1200 - $1250 range, and for the gold cycle to become truly bullish prices need to exceed the $1306 top from Jan. 22. (Silver needs to clear its Jan. 22 high of $18.48 to be bullish). Exceeding these highs is possible, but we want want to keep in mind the reversal zone coming up in early April. Prices could take a correction first. And if that correction gets serious, the precious metals may not turn bullish and instead plunge to new lows. For now, we will watch resistance areas for gold around $1200 and for silver around $17.50. If prices stall at those levels as we move into early April, a correction may follow. Holding my long position in gold and still on the sidelines of silver.
It looks like the U.S. Dollar Index is finally taking a long overdue correction (this is what kick-started the rally in gold). Of course, the dollar had been ridiculously overbought and was also pushing against a nice round number of "psychological" resistance at the 100 level, but it seems like it was the Fed and Janet Yellen's surprisingly dovish statements from last week's FOMC meeting that was the straw that finally broke the camel's (green) back. After hearing Ms.Yellen's double-talk rhetoric concerning the Fed's attitude about raising interest rates ( "just because we removed the word 'patient' doesn't mean we're going to be impatient ") global investors probably started to feel that the Fed, despite their efforts to appear fiscally responsible, may not be in such a hurry to hike rates after all. Delaying a rate hike is bearish for the dollar so unloading greenbacks at the 100 mark following last week's Fed meeting probably seemed like a good idea. The dollar is now below 97, and the U.S. Dollar Index chart shows it will likely move lower, at least short-term. Further declines in the dollar will support the gold and silver rally.
Crude oil prices are rising slowly from last week's low near $44. I am still looking to sell short in the $48 - $49 area, maybe later this week. If prices start to exceed $50, however, I may have to reconsider the labeling of the current crude cycle. It is possible that last week's low could be the start of the new cycle (instead of the Jan.29 low at $45). If this is the case, the market could start to turn bullish. Directional momentum, however, remains 100% bearish at the moment. Out of this market for now.
RSS Feed