BROAD STOCK MARKET TRADE ALERT and GOLD TRADE ALERT (2:30 pm EST)
In last Thursday's blog on the broad stock market I wrote:
"...equity markets may shrug off their worries and rally into next week. This would be an ideal scenario if one or two (but not all three) indices make new highs early next week giving us an intermarket bearish divergence signal to sell short."
Today the S&P 500 and NASDAQ both made new weekly highs while the DOW did not, and all three indices are falling sharply. We are at the center of the current reversal zone for equities. This looks like the turning point and a good place to sell short. The DOW and S&P 500 are a bit ahead of the NASDAQ for a corrective dip so for traders using an index fund, it would probably be best to short the NASDAQ for the maximum potential profit on this trade. We will sell short now with a stop loss based on the DOW making a new weekly high - i.e. breaking above last week's high of 26,241 (which would negate our bearish divergence signal).
Gold and silver prices continue to fall, and gold is nearly touching our $1280 target for a cycle bottom. There is support at this level, and we are currently in the center of a reversal zone for the precious metals. This looks like a good spot to buy gold. Silver has not yet reached our target for a bottom ($14.75) so we will stay on the sidelines of this metal for now. Both metals are making new lows today so we don't have a bullish divergence signal this week, but we could get one next week (with silver closer to our target). That may be a better time for a bottom in silver to buy. Let's go long in gold today and stay on the sidelines of silver for now. We can set our stop loss for this trade on a close below $1265.
Crude oil prices did end up making a new high last week, but then fell sharply suggesting another top. If it doesn't push higher this week, we could see crude fall sharply into the upcoming reversal zone specifically for crude (March 5 - 14). Our target for this correction is still near $51. If prices get there, we will look to buy. Still on the sidelines of crude oil.
In last Thursday's blog on the broad stock market I wrote:
"...equity markets may shrug off their worries and rally into next week. This would be an ideal scenario if one or two (but not all three) indices make new highs early next week giving us an intermarket bearish divergence signal to sell short."
Today the S&P 500 and NASDAQ both made new weekly highs while the DOW did not, and all three indices are falling sharply. We are at the center of the current reversal zone for equities. This looks like the turning point and a good place to sell short. The DOW and S&P 500 are a bit ahead of the NASDAQ for a corrective dip so for traders using an index fund, it would probably be best to short the NASDAQ for the maximum potential profit on this trade. We will sell short now with a stop loss based on the DOW making a new weekly high - i.e. breaking above last week's high of 26,241 (which would negate our bearish divergence signal).
Gold and silver prices continue to fall, and gold is nearly touching our $1280 target for a cycle bottom. There is support at this level, and we are currently in the center of a reversal zone for the precious metals. This looks like a good spot to buy gold. Silver has not yet reached our target for a bottom ($14.75) so we will stay on the sidelines of this metal for now. Both metals are making new lows today so we don't have a bullish divergence signal this week, but we could get one next week (with silver closer to our target). That may be a better time for a bottom in silver to buy. Let's go long in gold today and stay on the sidelines of silver for now. We can set our stop loss for this trade on a close below $1265.
Crude oil prices did end up making a new high last week, but then fell sharply suggesting another top. If it doesn't push higher this week, we could see crude fall sharply into the upcoming reversal zone specifically for crude (March 5 - 14). Our target for this correction is still near $51. If prices get there, we will look to buy. Still on the sidelines of crude oil.
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