The U.S. jobs report last week was very disappointing, and this has many analysts again worrying about the state of the economy. Jobs created in March were the fewest in 15 months (just 126,000, breaking a streak of 12 straight 200,000-plus gains). The unemployment rate was unchanged. Many economists that had been expecting growth to bounce back with the arrival of warmer spring weather are now questioning this optimistic view and wondering if a broader economic slowdown is underway. This sudden downturn in economic data is fueling much speculation on Wall Street that the Federal Reserve might further delay an interest rate hike, perhaps until the end of summer (instead of the June target that many had been expecting), and it also makes one wonder if the jobs data are being manipulated just for this purpose. (The Fed, despite its recent hawkish rhetoric, really does not want to raise rates as it knows that a near zero rate is the main thing keeping the stock market bullish.)
I will let conspiracy theorists debate that last point. Our main concern now is that a delayed rate hike (or talk of one) could help fuel more rallying in the broad stock market. In last Wednesday's blog I wrote: "There is another strong possibility now, and that would be a correction down to somewhere between 17,200 - 17,700 (we are in that range today) over the next seven trading days followed by another strong rally." Wednesday's low could have been it if the market continues to rise this week (the DOW is up 117 points today), and we could soon see a new yearly high or double top in this market. If that happens this week or early next week I will be looking to sell short, especially if one or two stock market indices (DOW, S&P 500 or NASDAQ) make(s) a new high, but not all three (intermarket bearish divergence). There is still time, however, for this market to move lower this week and for the DOW to make a bottom in the !7,200 - 17,700 range. Should that happen, I will look to buy (as long as the DOW does not break below 17,000). Yes, we are still on the sidelines, but it looks like we could be trading, one way or the other, by the end of this week.
Our gold and silver long positions are still looking good, but we are now in the center of a reversal zone for this market and we should be looking to at least take some profits and stand aside short-term to see if this correction will be serious. Today gold made a new monthly high above $1220 and this triggered a bullish momentum signal in the charts. This makes directional momentum in gold now mixed bullish and bearish (it had been 100% bearish) so this is a good sign for the precious metals. Silver continues to be 100% bullish. If we see gold and silver rise a bit more over the next 2-3 days, I will consider taking profits in both long positions. If prices instead fall slightly over the next few days, it may be a brief correction from which more rallying will follow. We will watch price movements carefully into the end of this week (and especially over the next 2 days). There is support now for gold at $1200 and for silver at $16.50. Holding long positions in both gold and silver for now.
The U.S. Dollar Index has been taking a long overdue correction over the last several weeks as it approaches the 96 level - down from its 100.42 peak on March 15. Last week a bearish momentum signal appeared in its chart and so the dollar's directional momentum is now mixed bullish and bearish (it had been 100% bullish since July 2014). This may be telling us that the correction will go lower (which would be bullish for most commodities including gold, silver, and crude oil). Short-term, however, there is support at 96, so we might see a brief bounce here which could coincide with a correction in gold and silver. If for some reason the dollar decides to really take off again, that could be very bearish for precious metals (although there are times when both the dollar and gold can rise together).
Crude oil prices have been rising since last Wednesday and are approaching the $52 level again. The timing window for a reversal in crude is a bit wider than for the other markets, and it could extend into the third week of April.
It is still not clear if the new crude cycle started in late January or more recently in mid-March. Any rally over the next three weeks that exceeds the $55 area would suggest a mid-March start to the cycle, and this could mean the market is turning bullish. A rally that stays under $55, however, could mean that the market is going to remain bearish and will make new lows below $45 over the next 5-12 weeks. We will remain on the sidelines until this picture is less ambiguous.