MARKETS UPDATE (10:45 pm EST)
After Friday's 396 point rally, the DOW was entitled to take a little breather. It did that today by spending most of the day in negative territory, rising slowly and briefly popping its head above water near the end of the day before going down again and closing the day with a 17 point loss. Unless the broad stock market continues down over the next day or two, it looks like we are on track for a rally into this week's reversal zone which starts on Wednesday and ends next Thursday (the ideal turning point would be Feb. 8). We will now watch for a top to sell short in this time frame for what could be a major correction in equity markets. A good target area for a top would be 16,650 - 16,750 in the DOW and around 1960 - 1980 in the S&P 500. We don't want to see the DOW close the week above 17,000 as this would have us reevaluate our bearish strategy (as would the S&P 500 closing above 2010). On the sidelines of the broad stock market but looking to sell short soon.
Gold and silver markets could be very volatile this week. Today gold prices surged and closed above last week's high while silver rallied but stayed well below its high from last week. This could be a case of intermarket bearish divergence and suggests an imminent correction. As I stated in last Friday's blog:
"...the current cycle structure indicates the possibility of a sharp, quick drop in precious metal prices right now. This means that our reversal zone (next Wednesday into the second week of February) could correspond to a low instead of a high. If so, we will look for a buy spot. Otherwise, we will watch for gold to push higher into that $1127 - $1147 range over the next week or two for a top to sell short."
We may see that sharp drop now in both metals for a low to buy around Feb. 8 (+/- a few trading days). If instead gold and silver continue to rally past Wednesday, we will look for a spot to sell short. Still on the sidelines of gold and silver.
Crude oil is backing down from a resistance area it encountered at $35. If prices continue to move lower into our Feb. 8 reversal date, we may get another chance to go long as we approach the cycle low from Jan. 20 ($27.56) for what could be a double bottom or even a new cycle low. We will watch this carefully as we could be starting a new long-term cycle in crude. Stay tuned. Out of crude for now.
After Friday's 396 point rally, the DOW was entitled to take a little breather. It did that today by spending most of the day in negative territory, rising slowly and briefly popping its head above water near the end of the day before going down again and closing the day with a 17 point loss. Unless the broad stock market continues down over the next day or two, it looks like we are on track for a rally into this week's reversal zone which starts on Wednesday and ends next Thursday (the ideal turning point would be Feb. 8). We will now watch for a top to sell short in this time frame for what could be a major correction in equity markets. A good target area for a top would be 16,650 - 16,750 in the DOW and around 1960 - 1980 in the S&P 500. We don't want to see the DOW close the week above 17,000 as this would have us reevaluate our bearish strategy (as would the S&P 500 closing above 2010). On the sidelines of the broad stock market but looking to sell short soon.
Gold and silver markets could be very volatile this week. Today gold prices surged and closed above last week's high while silver rallied but stayed well below its high from last week. This could be a case of intermarket bearish divergence and suggests an imminent correction. As I stated in last Friday's blog:
"...the current cycle structure indicates the possibility of a sharp, quick drop in precious metal prices right now. This means that our reversal zone (next Wednesday into the second week of February) could correspond to a low instead of a high. If so, we will look for a buy spot. Otherwise, we will watch for gold to push higher into that $1127 - $1147 range over the next week or two for a top to sell short."
We may see that sharp drop now in both metals for a low to buy around Feb. 8 (+/- a few trading days). If instead gold and silver continue to rally past Wednesday, we will look for a spot to sell short. Still on the sidelines of gold and silver.
Crude oil is backing down from a resistance area it encountered at $35. If prices continue to move lower into our Feb. 8 reversal date, we may get another chance to go long as we approach the cycle low from Jan. 20 ($27.56) for what could be a double bottom or even a new cycle low. We will watch this carefully as we could be starting a new long-term cycle in crude. Stay tuned. Out of crude for now.
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