MARKETS UPDATE (6:45 pm EDT)
The DOW finally broke above its all-time high (18,288) today which negates its intermarket bearish divergence with the S&P 500 and NASDAQ (they both made new all-time highs in late April). This is a bullish signal for these markets. There is the possibility now of the DOW rallying towards the 19,000 level, but we are now entering a four week reversal period when all markets can make significant reversals. That reversal window is especially strong
May 25 - June 15 (i.e starting next week) and could turn down any rally. While it is tempting to go long now, there is still a short-term bearish divergence between the NASDAQ (which is below its April high of 5120) and the DOW and S&P 500 (which are both exceeding their April highs). Furthermore, there is now resistance for the DOW in the 18,400 area, and while it is possible for a rally to reach 19,000, a more likely target would be around 18,600. For all of these reasons, I am going to refrain from going long and will instead wait for the signs of a top to sell short. My rationale here is based on the fact that we are nearing the final peak of a major medium-term cycle in the broad stock market, and we are in a time frame (the next four weeks) when this is likely to happen. Yes, there is the possibility of a bullish surge to the final peak (even towards 19,000 in the DOW), but a smaller rally is more likely, and the corrective fall from the peak should be very significant. Likely turning points for reversals would be May 20-21, May 29 - June 1, and June 9-10. On the sidelines of the broad stock market market for now.
The situation now in gold and silver is similar to that of the broad stock market. In my blog last Thursday I wrote: "Today gold made a significant break above its April 6th high of $1224 but closed the day below (at $1222). This is a bullish sign and gold could rally higher now; however, we need to keep in mind that the next two weeks are a major reversal zone for gold. This means we should be watching for a top to sell short in that time frame. If gold can close above $1224, it may get to the $1230 - $1250 area (or even higher) before turning down." Well, today gold prices closed slightly above $1224 so we could be on our way to that $1230 - $1250 area. The end of this week, however, is an especially strong reversal period for gold (and silver), and there are also a few other short-term technical signals suggesting a significant reversal this week. I am therefore going to avoid going long now and wait for signs of a top and an imminent correction. On the sidelines of gold and silver.
The U.S. Dollar Index seems to be finding some support at the 93 level, and several short-term technical signals are suggesting a bounce here. The dollar rallied today so that bounce may be starting now. If the rally gains some legs, it could be the thing that triggers a significant correction in the precious metals. We will have to wait and see.
Crude oil continues to stay below its $62.58 high of May 6 and still appears to be headed to a low in the $52 - $55 area. This could happen over the next few weeks as we are now in a reversal zone for crude oil too. If this low is achieved (and stays above $52), we will be looking to cover our current short position (take profits) and buy as long as the overall directional momentum remains bullish. Holding my short position in crude oil for now.
The DOW finally broke above its all-time high (18,288) today which negates its intermarket bearish divergence with the S&P 500 and NASDAQ (they both made new all-time highs in late April). This is a bullish signal for these markets. There is the possibility now of the DOW rallying towards the 19,000 level, but we are now entering a four week reversal period when all markets can make significant reversals. That reversal window is especially strong
May 25 - June 15 (i.e starting next week) and could turn down any rally. While it is tempting to go long now, there is still a short-term bearish divergence between the NASDAQ (which is below its April high of 5120) and the DOW and S&P 500 (which are both exceeding their April highs). Furthermore, there is now resistance for the DOW in the 18,400 area, and while it is possible for a rally to reach 19,000, a more likely target would be around 18,600. For all of these reasons, I am going to refrain from going long and will instead wait for the signs of a top to sell short. My rationale here is based on the fact that we are nearing the final peak of a major medium-term cycle in the broad stock market, and we are in a time frame (the next four weeks) when this is likely to happen. Yes, there is the possibility of a bullish surge to the final peak (even towards 19,000 in the DOW), but a smaller rally is more likely, and the corrective fall from the peak should be very significant. Likely turning points for reversals would be May 20-21, May 29 - June 1, and June 9-10. On the sidelines of the broad stock market market for now.
The situation now in gold and silver is similar to that of the broad stock market. In my blog last Thursday I wrote: "Today gold made a significant break above its April 6th high of $1224 but closed the day below (at $1222). This is a bullish sign and gold could rally higher now; however, we need to keep in mind that the next two weeks are a major reversal zone for gold. This means we should be watching for a top to sell short in that time frame. If gold can close above $1224, it may get to the $1230 - $1250 area (or even higher) before turning down." Well, today gold prices closed slightly above $1224 so we could be on our way to that $1230 - $1250 area. The end of this week, however, is an especially strong reversal period for gold (and silver), and there are also a few other short-term technical signals suggesting a significant reversal this week. I am therefore going to avoid going long now and wait for signs of a top and an imminent correction. On the sidelines of gold and silver.
The U.S. Dollar Index seems to be finding some support at the 93 level, and several short-term technical signals are suggesting a bounce here. The dollar rallied today so that bounce may be starting now. If the rally gains some legs, it could be the thing that triggers a significant correction in the precious metals. We will have to wait and see.
Crude oil continues to stay below its $62.58 high of May 6 and still appears to be headed to a low in the $52 - $55 area. This could happen over the next few weeks as we are now in a reversal zone for crude oil too. If this low is achieved (and stays above $52), we will be looking to cover our current short position (take profits) and buy as long as the overall directional momentum remains bullish. Holding my short position in crude oil for now.
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