All three broad stock market indices (DOW, S&P 500, NASDAQ) rallied today and approached their recent highs from earlier this month (DOW and S&P 500 from Dec. 4) and late last month (NASDAQ from Nov. 28). We are also now back up to our entry point for the short position we entered in this market on Dec. 4. The corrective decline from last Monday through Thursday was too short and small to be the end of the current medium-term cycle in the DOW and S&P 500 (but maybe not the NASDAQ) so we are still watching for a deeper correction to a final cycle bottom which is due any time over the next six weeks. We will need to watch these indices carefully over the next few days. If all three indices make new all-time highs (i.e. DOW above 24,534, S&P 500 above 2,666, and the NASDAQ above 6,915), then we will cover (unload) our short position and wait out a possible "Santa Claus" rally into the last week of December when we will likely sell short again. We are very close to these highs now so if this happens our loss will be minimal. On the other hand, if just two of these indices (or one) make new highs (not all three) then we will have another intermarket bearish divergence signal and a good chance for this market to continue down into a final medium-term cycle bottom near the Christmas and New Year's holidays. That bearish signal would be especially strong if it happens in the second half of this week or next week. Holding my short position in the broad stock market for now.
Gold and silver prices fell today, but both metals remain above their lows from last Thursday ($1244 in gold and $15.65 in silver). These metals are clearly falling to the final bottoms of their older medium-term cycles (i.e. they did not start new cycles on Oct. 6 as we had previously speculated). The final bottoms to these cycles are now due (in the case of silver, the bottom is overdue) so we should be watching for a low to buy any time now. That low may have been last week, but right now it looks like prices could fall lower (directional momentum in both gold and silver is 100% bearish). The second half of this week could be a pivot point for these metals. If gold or silver (not both) makes a new weekly low this week then we will have a bullish divergence signal and probably a good spot to buy. A good target price for a bottom in gold would be around $1220 and for silver around $15.50. Out of both gold and silver for now, but waiting to buy the bottom of the current medium-term cycle which is due (overdue).
Crude oil's medium-term cycle bottom is also overdue now. Last week's low at $55.82 (Jan. contract chart) on Thursday was barely within a reversal zone for crude and was not really low enough for a normal correction, but since we are late in this cycle it is possible that was it. If that was the end of the cycle (and the start of a new one) then crude could be bullish now and easily exceed its Nov. 27 high of $58.99. I am not convinced that last week's low was the cycle bottom, however, and it's still possible for crude to turn down and move towards a more "normal" corrective bottom below $55, perhaps into the next reversal zone in the last two weeks of December. Let's stay on the sidelines of crude for now until the cycle becomes more clear.