The broad stock market rallied strongly on Friday in response to a stronger than expected U.S. jobs report and also in response to the clear win in the UK elections by the Conservative Party (which led to Friday's surge in the London Financial Times Index). Despite the upbeat jobs data, many analysts are saying that it is coming too late to put a June interest rate hike back on the table (recall that last month's poor jobs data made a June hike seem unlikely), and most are now anticipating the first rate hike by the Fed in September (or even later). Although Friday's market surge made a new monthly high in the DOW (18,205), this index's all-time high of 18,288 still has not been broken. Thus our case of bearish intermarket divergence is still in place (the S&P 500 and NASDAQ have made new all-time highs in April). In terms of cycles, last week's low at 17,733 was a significant turning point, and this market could rally for another 2-3 weeks. If the DOW exceeds 18,288, we could see new highs into the end of the month. A more bearish scenario, however, could see the DOW unable to break above 18,288 and continuing down into the third or fourth week of this month. Directional momentum is still mixed bullish and bearish in all three stock indices so it is unclear at the moment how this will play out. The 18,288 line in the DOW is clearly the hurdle here so we will watch this carefully now to gauge our trading strategy. Still on the sidelines.
Crude oil is in the process of correcting down from a high of $62.58 on May 6. This correction could go as low as $52 so I am continuing to hold my short position here (entered on May 1). Unless the correction breaks below $52, it should be short-term, and I will be looking to cover and go long at a bottom within the next two or three weeks. Maintaining my short position in crude oil for now.
Gold and silver charts are still looking ambiguous. The current odd disparity in directional momentum between these metals (gold 100% bearish and silver 100% bullish) is persisting, but other technical signals are looking a little more bearish than bullish. The U.S. Dollar Index is predictably bouncing from strong support at 94 and may rally a bit before turning down again. This could put more downward pressure on the precious metals. To turn bullish now, gold needs to break above the $1224 high of April 6. If it can't do that soon, prices may be headed considerably lower over the next two or three months. Any break below $1143 would be very bearish for gold (and silver). In terms of timing, the next significant turning point in gold could be the middle of this week and/or the end of next week. We will watch carefully for any short-term trading opportunities until a longer term trend can be identified.. On the sidelines of the precious metals for now.