MARKETS UPDATE (5:00 pm EDST)
We have yet another FOMC meeting this week (Tuesday and Wednesday) with most investors and analysts expecting another 0.25% hike in interest rates. The big question is whether or not the Fed will signal it wants to pause rate increases after May. While some feel this would be a good idea to avoid a recession, others argue that the Fed needs to continue hiking to keep inflation down. The FOMC meeting concludes on Wednesday, and a statement will be released at 2pm (EDST) which should give us the answer to this question. If the Fed signals that it may pause its aggressive hiking policy, that could lift equity markets. But a more hawkish statement suggesting more rate hikes could trigger a sell-off. We will need to wait and see how this plays out.
All three of our broad stock market indices (DOW, S&P 500, NASDAQ) made new weekly highs today which means we will not see any bearish divergence signals this week. There are also no reversal zones for equity markets this week, so the "coast is clear" for more rallying, which is very likely as last week saw sub-cycle lows in all three indices. The current medium-term cycles in the DOW and S&P 500 are still young (they started in mid-March) and look bullish for now (yes, that could change). Their next challenge is to test the highs of their previous medium-term cycles (that would be 34.712 in the DOW and 4,195 in the S&P 500). The S&P 500 is doing this now (the DOW has to rise a bit more). If those highs are broken, it would be another bullish signal for this market (at least a short-term one). We note, however, that if the S&P 500 breaks its high without the DOW doing the same, we will have a bearish divergence signal. Let's hold our long position in this market for now as we wait for this week's Fed meeting and statement on Wednesday.
I should mention here that despite our short-term bullish stance in equities, we are anticipating a final top in our current medium-term cycles that could be the "last hurrah" before the broad stock market resumes a severe long-term correction (possible crash) down into next year. This final top could come any time now, and it should be below the all-time highs of all three indices (that would be 36,952 in the DOW, 4,819 in the S&P 500, and 16,212 in the NASDAQ). The only thing that would change this view would be for ALL THREE indices to break above those all-time highs. It may be possible for the DOW to do this over the next month or two, but it is very unlikely that the S&P 500 and especially the NASDAQ will bridge their very long distances from their highs at the same time. The bottom line here is that we are being very cautious with our current long position and will be looking to unload it and sell short if a significant cycle top seems imminent. Our next strong reversal zone for equities is coming up May 11 - 19. We could see a significant top in that time frame.
Gold prices are edging down a bit today but are remaining above the April 19 low of $1970. It looks like we could get a new sub-cycle low over the next few weeks (if prices break below $1970). That could still be a good place to go long (as long as prices don't go too low). Let's hold our long position here with our stop loss still based on any close below the 45-day moving average (now at $1953 and rising slowly).
Silver prices surged in early trading today but then fell sharply. This is bearish behavior. Both gold and silver seem to be having trouble breaking above their 15-day moving averages. A sub-cycle low is due (overdue) in silver this week, and we have some potential "pivot points" for both gold and silver today, tomorrow and Wednesday. As with gold, a new low might be another spot to go long, but we don't want prices to drop too much - especially if they continue lower into the end of the week. We will remain on the sidelines of silver for now.
As I've mentioned in recent blogs on gold, we are at a crossroads in gold's long-term cycle, and the current medium-term cycle may determine which way we are going. If gold can break above the recent high of the current medium-term cycle ($2047 on April 14), there's a good chance it will rally to challenge the all-time high of $2070. A clear break above $2070 would confirm that we are in a new long-term cycle, and gold prices would be bullish for many years. On the other hand, if prices cannot exceed $2047 fairly soon (and especially if they fall below $1800), we could be seeing the end of an old long-term cycle and a final steep correction towards $1000 by next year. One can see that there is a BIG difference between these two scenarios, and it shouldn't be long before we know which one is in place.
Crude oil may have formed a sub-cycle low last Friday at $73.93 (May contract chart), but we need to start seeing prices close above the 15-day moving average (now at $78.85 and rising) before we can confirm that. Today crude couldn't even close above the 45-day moving average. It's very possible that crude is falling to a deeper sub-cycle low over the next several weeks (if it doesn't rally from here) - maybe down to $70. That would still be a good spot to buy because there's a good chance we started a new 3-year cycle in crude with the low of $64.58 on March 20. If prices fall below $64.58, however, we would have to abandon that bullish idea. For now we will remain on the sidelines of crude.
We have yet another FOMC meeting this week (Tuesday and Wednesday) with most investors and analysts expecting another 0.25% hike in interest rates. The big question is whether or not the Fed will signal it wants to pause rate increases after May. While some feel this would be a good idea to avoid a recession, others argue that the Fed needs to continue hiking to keep inflation down. The FOMC meeting concludes on Wednesday, and a statement will be released at 2pm (EDST) which should give us the answer to this question. If the Fed signals that it may pause its aggressive hiking policy, that could lift equity markets. But a more hawkish statement suggesting more rate hikes could trigger a sell-off. We will need to wait and see how this plays out.
All three of our broad stock market indices (DOW, S&P 500, NASDAQ) made new weekly highs today which means we will not see any bearish divergence signals this week. There are also no reversal zones for equity markets this week, so the "coast is clear" for more rallying, which is very likely as last week saw sub-cycle lows in all three indices. The current medium-term cycles in the DOW and S&P 500 are still young (they started in mid-March) and look bullish for now (yes, that could change). Their next challenge is to test the highs of their previous medium-term cycles (that would be 34.712 in the DOW and 4,195 in the S&P 500). The S&P 500 is doing this now (the DOW has to rise a bit more). If those highs are broken, it would be another bullish signal for this market (at least a short-term one). We note, however, that if the S&P 500 breaks its high without the DOW doing the same, we will have a bearish divergence signal. Let's hold our long position in this market for now as we wait for this week's Fed meeting and statement on Wednesday.
I should mention here that despite our short-term bullish stance in equities, we are anticipating a final top in our current medium-term cycles that could be the "last hurrah" before the broad stock market resumes a severe long-term correction (possible crash) down into next year. This final top could come any time now, and it should be below the all-time highs of all three indices (that would be 36,952 in the DOW, 4,819 in the S&P 500, and 16,212 in the NASDAQ). The only thing that would change this view would be for ALL THREE indices to break above those all-time highs. It may be possible for the DOW to do this over the next month or two, but it is very unlikely that the S&P 500 and especially the NASDAQ will bridge their very long distances from their highs at the same time. The bottom line here is that we are being very cautious with our current long position and will be looking to unload it and sell short if a significant cycle top seems imminent. Our next strong reversal zone for equities is coming up May 11 - 19. We could see a significant top in that time frame.
Gold prices are edging down a bit today but are remaining above the April 19 low of $1970. It looks like we could get a new sub-cycle low over the next few weeks (if prices break below $1970). That could still be a good place to go long (as long as prices don't go too low). Let's hold our long position here with our stop loss still based on any close below the 45-day moving average (now at $1953 and rising slowly).
Silver prices surged in early trading today but then fell sharply. This is bearish behavior. Both gold and silver seem to be having trouble breaking above their 15-day moving averages. A sub-cycle low is due (overdue) in silver this week, and we have some potential "pivot points" for both gold and silver today, tomorrow and Wednesday. As with gold, a new low might be another spot to go long, but we don't want prices to drop too much - especially if they continue lower into the end of the week. We will remain on the sidelines of silver for now.
As I've mentioned in recent blogs on gold, we are at a crossroads in gold's long-term cycle, and the current medium-term cycle may determine which way we are going. If gold can break above the recent high of the current medium-term cycle ($2047 on April 14), there's a good chance it will rally to challenge the all-time high of $2070. A clear break above $2070 would confirm that we are in a new long-term cycle, and gold prices would be bullish for many years. On the other hand, if prices cannot exceed $2047 fairly soon (and especially if they fall below $1800), we could be seeing the end of an old long-term cycle and a final steep correction towards $1000 by next year. One can see that there is a BIG difference between these two scenarios, and it shouldn't be long before we know which one is in place.
Crude oil may have formed a sub-cycle low last Friday at $73.93 (May contract chart), but we need to start seeing prices close above the 15-day moving average (now at $78.85 and rising) before we can confirm that. Today crude couldn't even close above the 45-day moving average. It's very possible that crude is falling to a deeper sub-cycle low over the next several weeks (if it doesn't rally from here) - maybe down to $70. That would still be a good spot to buy because there's a good chance we started a new 3-year cycle in crude with the low of $64.58 on March 20. If prices fall below $64.58, however, we would have to abandon that bullish idea. For now we will remain on the sidelines of crude.
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