All three of our broad stock market indices (DOW, S&P 500, NASDAQ) are late in their medium-term cycles, and that means their final tops are imminent to be followed by a final correction down to their final cycle bottoms. All three cycles have been bullish so far, but only the S&P 500 and NASDAQ made new cycle highs last week. The DOW still has not exceeded the 34,712 high it made back on Dec. 13, so it could be turning bearish. This difference creates a bearish divergence signal for the market in general (i.e. for all three indices). It is possible that last week's highs in all three indices (in the center of a weak reversal zone) were final tops and the fall to their medium-term cycle bottoms has begun. But there is another weak reversal zone coming up next week (Feb. 13 - 20), and this market seems to have some buoyancy. We might see more rallying to new tops into next week's reversal window. If we get that with more bearish divergence signals, it might be a good spot to sell short. If the tops are already in, however, we will wait for the final cycle bottoms, and if they don't go too low, we will consider buying for another potentially strong rally. For now, we remain on the sidelines.
Our longer-term view of this market remains unchanged; that is, we are still going with the idea that a very long-term equity cycle topped out with the all-time highs in Jan. 2022 in the DOW and S&P 500, and in Nov. 2021 in the NASDAQ, and that a major long-term corrective drop is in progress. In this view, our current rally (which started in October 2022) is a sub-cycle wave up that should not exceed those all-time highs before turning back down and making much deeper lows. If those highs are exceeded, however, we may have to abandon this idea of a "crash", and the longer-term broad stock market would be considered bullish.
It looks like we did cover our short position in silver a little too early last Tuesday. Although both silver and gold prices shot up on Wednesday, both came crashing back down Thursday and Friday. Silver is now close to our original $20 - $22 price range for a final medium-term cycle bottom which was technically due last week (but the cycle could be expanding). Gold prices are now just above the 45-day moving average and below the 15-day moving average, which was our price target for a sub-cycle correction. That low is due this week. Tomorrow is the last day of our reversal zone specifically for the precious metals, so a significant bottom in both metals could be forming now. If it looks like a bottom is forming over the next few days, we may go long in both metals.
Last Thursday the U.S. Dollar Index found support near 100 and started a significant rally. That was within our reversal zone specifically for currencies (Feb. 1 - 9). Unless the dollar backs down again before Friday, it looks like last week's low at 100.82 was a significant cycle or sub-cycle bottom and more rallying could be ahead. If that's the case, it could put downward pressure on precious metal prices.
Let me again repeat my cycle analysis of crude oil from Jan. 30 as it still applies today:
"The medium-term cycle labeling for crude oil is still not clear, but there are two likely possibilities at this point in time:
1) Crude started a new medium-term cycle with its low of Sept. 28 at $73.28 (March contract chart). This scenario is bearish because prices have already fallen well below the start of the cycle (crude fell to $70.56 on Dec. 9), and the rally from Dec. 9 should turn back down soon with prices falling below $70.56 to the final cycle bottom due anytime now by March 4.
2) Crude started a new medium-term cycle on Dec. 9 at $70.56. This scenario could be bullish or bearish, depending on whether or not prices can stay above $70.56. Prices seem to have overcome resistance at $80 and are holding above there. The next steps in a bullish cycle would be to clear $85, and then $90. If bearish, however, prices will not clear these hurdles before turning down again and breaking below $70.
We are now also looking for the end of a longer-term 3-year cycle in crude which is due anytime now, but ideally around March 7 (or maybe near Feb. 4). If we get new lows then, it may be a very good spot to buy."
We are now at a crossroad for crude as prices could not hold above $82 and have come back down to $72.25 (March contract chart). If prices continue down and break below $70, we could be looking at scenario 1 (or the bearish version of scenario 2). But if today's low at $72.25 holds, then it could be a mid-point sub-cycle low for the BULLISH version of scenario 2. I would prefer to see scenario 1 pan out because that would line up better with the end of a longer-term 3-year cycle in early March which would be a VERY good place to buy. Let's wait and see how prices move from here. We will remain on the sidelines of crude for now.