MARKETS UPDATE (9:30 pm EDT)
As I mentioned in last Thursday's blog, Greece's decision to exercise the little used option of postponing all of its June debt payments until the end of the month has bought Greece's Prime Minister Alexis Tsipras more time to negotiate a more favorable deal with its international creditors. This decision, however, is prolonging the speculation and worry about the possibility of Greece defaulting and leaving the eurozone. There are conflicting opinions about what impact a Greek default would have on Europe's economy and the value of the euro, but most analysts agree that it wouldn't be good. As traders and investors, we are concerned with its impact on financial markets. Any significant developments in the Greek debt crisis over the next three weeks could lead to major moves and possibly reversals in many markets. We will need to keep this in mind when making trading decisions.
We are nearing the end of a significant medium-term cycle in the DOW (and therefore also the start of a new one) as this index continues to fall. We should therefore be looking for a bottom to buy as the start of a new cycle is always initially bullish. This is also the last week of a four week reversal zone, so the chances of a bottom and a reversal are high over the next 5 trading days. The DOW finally entered our target area of 17,600 - 17,800 today, closing at 17,766. We will look for technical signs of a bottom this week as long as the DOW does not drop and close below 17,500. If it does drop below there, there is a chance it could fall all the way down to 17,000 or below, and the broad stock market could be in trouble (especially if the DOW closes below 17,000). Today strong bearish momentum signals appeared in the charts of the S&P 500 and the NASDAQ so this is a real possibility. For now, we will look for a low above 17,500 and watch for a short-term technical signal to buy. Still on the sidelines.
The patterns unfolding in gold and silver charts are at the moment presenting us with several different price movement possibilities, and most of them are bearish. On Friday gold broke (but did not close) below $1170, and prices were up a bit today (closing at $1174). Silver seems to be holding above $16. If both metals can stay above these levels, there is a chance of a strong rally here, but gold has to at least start closing above $1200 to start looking bullish, and several short-term signals are making that look unlikely. Gold's directional momentum is currently 100% bearish while silver's is mixed bullish and bearish. The current picture is not clear enough for trading so
I am remaining on the sidelines of both metals for now. This Friday could be a significant turning point for gold (and silver) so we will watch how these prices move into the end of the week.
The U.S. Dollar Index dropped sharply today and seems to be abandoning its rally towards the 98 level. The fact that gold and silver prices did not surge up in reaction to this suggests a current weakness in these metals and supports the bearish view of gold stated above. Directional momentum in the dollar seems to be turning bearish again, and the greenback may be resuming the correction it started in mid-March. There is now, however, support in the 93-94 area. If Greek debt negotiations turn sour, we could see another dollar surge over the next three weeks, perhaps from that support level.
The deadline for the end of the current correction we've been following in crude oil is the end of this week (possibly extending into early next week). There is still time for prices to dip below $55, but it's looking like they may not get that far. Either way, I will be looking for a spot to take profits and cover my short position in crude this week or early next week. Holding my short position for now.
As I mentioned in last Thursday's blog, Greece's decision to exercise the little used option of postponing all of its June debt payments until the end of the month has bought Greece's Prime Minister Alexis Tsipras more time to negotiate a more favorable deal with its international creditors. This decision, however, is prolonging the speculation and worry about the possibility of Greece defaulting and leaving the eurozone. There are conflicting opinions about what impact a Greek default would have on Europe's economy and the value of the euro, but most analysts agree that it wouldn't be good. As traders and investors, we are concerned with its impact on financial markets. Any significant developments in the Greek debt crisis over the next three weeks could lead to major moves and possibly reversals in many markets. We will need to keep this in mind when making trading decisions.
We are nearing the end of a significant medium-term cycle in the DOW (and therefore also the start of a new one) as this index continues to fall. We should therefore be looking for a bottom to buy as the start of a new cycle is always initially bullish. This is also the last week of a four week reversal zone, so the chances of a bottom and a reversal are high over the next 5 trading days. The DOW finally entered our target area of 17,600 - 17,800 today, closing at 17,766. We will look for technical signs of a bottom this week as long as the DOW does not drop and close below 17,500. If it does drop below there, there is a chance it could fall all the way down to 17,000 or below, and the broad stock market could be in trouble (especially if the DOW closes below 17,000). Today strong bearish momentum signals appeared in the charts of the S&P 500 and the NASDAQ so this is a real possibility. For now, we will look for a low above 17,500 and watch for a short-term technical signal to buy. Still on the sidelines.
The patterns unfolding in gold and silver charts are at the moment presenting us with several different price movement possibilities, and most of them are bearish. On Friday gold broke (but did not close) below $1170, and prices were up a bit today (closing at $1174). Silver seems to be holding above $16. If both metals can stay above these levels, there is a chance of a strong rally here, but gold has to at least start closing above $1200 to start looking bullish, and several short-term signals are making that look unlikely. Gold's directional momentum is currently 100% bearish while silver's is mixed bullish and bearish. The current picture is not clear enough for trading so
I am remaining on the sidelines of both metals for now. This Friday could be a significant turning point for gold (and silver) so we will watch how these prices move into the end of the week.
The U.S. Dollar Index dropped sharply today and seems to be abandoning its rally towards the 98 level. The fact that gold and silver prices did not surge up in reaction to this suggests a current weakness in these metals and supports the bearish view of gold stated above. Directional momentum in the dollar seems to be turning bearish again, and the greenback may be resuming the correction it started in mid-March. There is now, however, support in the 93-94 area. If Greek debt negotiations turn sour, we could see another dollar surge over the next three weeks, perhaps from that support level.
The deadline for the end of the current correction we've been following in crude oil is the end of this week (possibly extending into early next week). There is still time for prices to dip below $55, but it's looking like they may not get that far. Either way, I will be looking for a spot to take profits and cover my short position in crude this week or early next week. Holding my short position for now.
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