MARKETS UPDATE (8:30 pm EST)
As I have been suggesting over the last month or more, I believe the broad stock market is getting very close to the top of a longer-term cycle and is getting ready to take a VERY significant longer-term correction in which it could lose 30% - 50% of its value (or possibly more). This means that our major trading focus right now should be to sell short at this final top. But calling the top of a long-term cycle can be difficult. The easiest way to approach this is to realize that the top of a longer-term cycle will also be the top of the last shorter-term cycle within the longer cycle. In our current broad stock market analysis, we are following the medium-term cycles of the three major market indices: DOW, S&P 500, and NASDAQ. Because we are very close to a long-term top in equities, it is likely this will correlate with the final tops in our CURRENT medium-term cycles in these indices (or possibly the NEXT medium-term cycles that will follow our current ones - but no later than that). So let's look at the current medium-term cycles in the DOW, S&P 500 and NASDAQ.
Right now, it looks like the DOW started a new medium-term cycle with its low of 29.856 on Jan. 29 which means it is relatively young (only one month old - most cycles last 3-6 months). It seems we do have a fairly strong reversal zone for equities this month coming up this week and next (March 9 - 18). The DOW is making a new all-time high today with its strong rally, but the S&P 500 and NASDAQ are not. If this intermarket bearish divergence signal continues into this reversal zone and the DOW rallies some more, we may have a good signal to sell short. That may turn out to be the final long-term top for this index, but even if it's not, it could be a good short-term trade.
The S&P 500 medium-term cycle labeling has changed. It could be an older cycle that started with its low of 3,234 way back on Oct. 30. In that case, it topped out on Feb. 16 (3,950) and is now moving down to its final cycle bottom. But it's rallying today, and if it can rally above that 3,950 high, it could be a new and young medium-term cycle that started with last Thursday's low of 3,723. That, along with the young DOW cycle, would be a bullish sign and would suggest that a final top isn't here just yet. But if this index can't clear 3,950, it would be a bearish sign (bearish divergence with the DOW) and it might be a good short sell.
We have been waiting for the final bottom in an older medium-term cycle in the NASDAQ. That may have happened last week on Friday. But today, this index is falling again. If it falls below Friday's low (12,397) then it is still moving towards its final cycle bottom, maybe into this new reversal zone, and that could give us a good spot to buy. But if Friday's low holds and this index rallies, it too could be starting a bullish new medium-term cycle.
Are you confused yet? Yes, there is lots of ambiguity here. This is why we will remain on the sidelines for now and see how this market moves into this new reversal zone (March 9 - 18). Right now, it looks like we have a strong intermarket bearish divergence between the three indices for this week. While the S&P 500 could make a new high this week, the NASDAQ would have to rally like gangbusters to do the same. We are still on the sidelines of the broad stock market.
Crude oil has been very bullish over the last several months. Prices have broken through several resistance levels over the last few weeks. Nevertheless, it is very late in crude's medium-term cycle, and a top in the cycle is due soon. Our new reversal zone (March 9 -18) is applicable to crude as well as equities, so we could see a final cycle top in this time frame. We may consider selling short at this top, but since this market is so bullish, it might be better to just wait for a final corrective bottom and then buy the start of the next cycle. We are on the sidelines of crude for now.
The cycle structures in gold and silver are still a little unclear. It does appear that gold's medium-term cycle is fairly mature and may even be ready to make a final corrective low. Today gold made a new low at $1677. If it moves lower into our reversal zone this week, we may see a good buy spot, but there are some short-term technical signals that suggest a possible rally from today's low. Silver did not make a new weekly low today which gives us a bullish divergence signal (which will be negated if it breaks lower this week). Silver's medium-term cycle could be a relatively young cycle that started on Jan. 18 at $24.28. That could be bullish as long as prices don't drop below that $24.28 starting point. But silver could also be near the end of an older cycle with a bottom that could end up below $24. As with all the markets now (except, perhaps, crude oil), there are several possible ways to interpret the cycles. We will stay on the sidelines of the precious metals and watch how prices move into our new reversal zone. There is another reversal zone specifically for gold and silver coming up March 17 - 26, so that will be another time frame to look for a significant top or bottom.
As I have been suggesting over the last month or more, I believe the broad stock market is getting very close to the top of a longer-term cycle and is getting ready to take a VERY significant longer-term correction in which it could lose 30% - 50% of its value (or possibly more). This means that our major trading focus right now should be to sell short at this final top. But calling the top of a long-term cycle can be difficult. The easiest way to approach this is to realize that the top of a longer-term cycle will also be the top of the last shorter-term cycle within the longer cycle. In our current broad stock market analysis, we are following the medium-term cycles of the three major market indices: DOW, S&P 500, and NASDAQ. Because we are very close to a long-term top in equities, it is likely this will correlate with the final tops in our CURRENT medium-term cycles in these indices (or possibly the NEXT medium-term cycles that will follow our current ones - but no later than that). So let's look at the current medium-term cycles in the DOW, S&P 500 and NASDAQ.
Right now, it looks like the DOW started a new medium-term cycle with its low of 29.856 on Jan. 29 which means it is relatively young (only one month old - most cycles last 3-6 months). It seems we do have a fairly strong reversal zone for equities this month coming up this week and next (March 9 - 18). The DOW is making a new all-time high today with its strong rally, but the S&P 500 and NASDAQ are not. If this intermarket bearish divergence signal continues into this reversal zone and the DOW rallies some more, we may have a good signal to sell short. That may turn out to be the final long-term top for this index, but even if it's not, it could be a good short-term trade.
The S&P 500 medium-term cycle labeling has changed. It could be an older cycle that started with its low of 3,234 way back on Oct. 30. In that case, it topped out on Feb. 16 (3,950) and is now moving down to its final cycle bottom. But it's rallying today, and if it can rally above that 3,950 high, it could be a new and young medium-term cycle that started with last Thursday's low of 3,723. That, along with the young DOW cycle, would be a bullish sign and would suggest that a final top isn't here just yet. But if this index can't clear 3,950, it would be a bearish sign (bearish divergence with the DOW) and it might be a good short sell.
We have been waiting for the final bottom in an older medium-term cycle in the NASDAQ. That may have happened last week on Friday. But today, this index is falling again. If it falls below Friday's low (12,397) then it is still moving towards its final cycle bottom, maybe into this new reversal zone, and that could give us a good spot to buy. But if Friday's low holds and this index rallies, it too could be starting a bullish new medium-term cycle.
Are you confused yet? Yes, there is lots of ambiguity here. This is why we will remain on the sidelines for now and see how this market moves into this new reversal zone (March 9 - 18). Right now, it looks like we have a strong intermarket bearish divergence between the three indices for this week. While the S&P 500 could make a new high this week, the NASDAQ would have to rally like gangbusters to do the same. We are still on the sidelines of the broad stock market.
Crude oil has been very bullish over the last several months. Prices have broken through several resistance levels over the last few weeks. Nevertheless, it is very late in crude's medium-term cycle, and a top in the cycle is due soon. Our new reversal zone (March 9 -18) is applicable to crude as well as equities, so we could see a final cycle top in this time frame. We may consider selling short at this top, but since this market is so bullish, it might be better to just wait for a final corrective bottom and then buy the start of the next cycle. We are on the sidelines of crude for now.
The cycle structures in gold and silver are still a little unclear. It does appear that gold's medium-term cycle is fairly mature and may even be ready to make a final corrective low. Today gold made a new low at $1677. If it moves lower into our reversal zone this week, we may see a good buy spot, but there are some short-term technical signals that suggest a possible rally from today's low. Silver did not make a new weekly low today which gives us a bullish divergence signal (which will be negated if it breaks lower this week). Silver's medium-term cycle could be a relatively young cycle that started on Jan. 18 at $24.28. That could be bullish as long as prices don't drop below that $24.28 starting point. But silver could also be near the end of an older cycle with a bottom that could end up below $24. As with all the markets now (except, perhaps, crude oil), there are several possible ways to interpret the cycles. We will stay on the sidelines of the precious metals and watch how prices move into our new reversal zone. There is another reversal zone specifically for gold and silver coming up March 17 - 26, so that will be another time frame to look for a significant top or bottom.
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