MARKETS UPDATE (6:30 pm EST)
The broad stock market gave us a little scare today with the DOW's nearly 400 point drop (especially as we entered a long position last Thursday); however, last week's low (24,787) has not been broken, and today's close was above the support line of 25,000. Nevertheless, we are on alert for the possibility of this market turning bearish and breaking below the Oct. 29 lows that may have started new cycles in all three market indices (DOW, S&P 500, and NASDAQ). Let's lower the stop loss on our long positions to a close below 24,750 in the DOW and keep it at 2,650 for the S&P 500. One bullish factor now is the fact that this is a major holiday week in the U.S. (Thanksgiving on Thursday) and equity markets are often bullish into long holiday week-ends. Trading volume should also taper off significantly by Wednesday. We should also keep in mind that even if we take out last week's lows, we are still in a major reversal zone through Wednesday, and as long as we stay above the Oct. 29 lows we could still reverse strongly back up and stay bullish. In fact, if the NASDAQ does break its Oct. 29 low of 6,922 (it is close) while the DOW and S&P 500 stay above their Oct. 29 lows (24,122 and 2,603, respectively), we will have a strong bullish divergence signal and a strong incentive to stay long in this market. Unfortunately, all financial markets could be very volatile over the next three to four weeks so we could see a lot of price fluctuations and testing of support and resistance lines. We will need to watch these markets carefully and be nimble in our trading. Holding my long position in the broad stock market for now.
We also need to keep a close eye on the precious metals now. Gold and silver rallied a bit today, but not very strongly. Gold may have started a new medium-term cycle with last week's low at $1197, but it needs to rally strongly above $1246 to confirm that. Otherwise, the current rally may end soon with prices turning down and dropping below last week's low. Silver needs to rally above $14.91 soon to stay bullish or else it too could turn back down and make a new low below the $13.95 low that started its medium-term cycle on Sept. 11. We are currently long in gold but out of silver. Let's keep our stop loss for this gold trade on a close below $1181.
We are now entering (today) a reversal zone for crude oil that will last through Nov. 28. Crude made a new low today at $55.08 (Dec. contract chart), and a medium-term and longer-term cycle bottom are due (overdue). Today's low could be it or it could go lower over the next five trading days. A drop closer to $53 would be an ideal target to buy so we will watch for that this week or next. Still on the sidelines of crude oil.
The broad stock market gave us a little scare today with the DOW's nearly 400 point drop (especially as we entered a long position last Thursday); however, last week's low (24,787) has not been broken, and today's close was above the support line of 25,000. Nevertheless, we are on alert for the possibility of this market turning bearish and breaking below the Oct. 29 lows that may have started new cycles in all three market indices (DOW, S&P 500, and NASDAQ). Let's lower the stop loss on our long positions to a close below 24,750 in the DOW and keep it at 2,650 for the S&P 500. One bullish factor now is the fact that this is a major holiday week in the U.S. (Thanksgiving on Thursday) and equity markets are often bullish into long holiday week-ends. Trading volume should also taper off significantly by Wednesday. We should also keep in mind that even if we take out last week's lows, we are still in a major reversal zone through Wednesday, and as long as we stay above the Oct. 29 lows we could still reverse strongly back up and stay bullish. In fact, if the NASDAQ does break its Oct. 29 low of 6,922 (it is close) while the DOW and S&P 500 stay above their Oct. 29 lows (24,122 and 2,603, respectively), we will have a strong bullish divergence signal and a strong incentive to stay long in this market. Unfortunately, all financial markets could be very volatile over the next three to four weeks so we could see a lot of price fluctuations and testing of support and resistance lines. We will need to watch these markets carefully and be nimble in our trading. Holding my long position in the broad stock market for now.
We also need to keep a close eye on the precious metals now. Gold and silver rallied a bit today, but not very strongly. Gold may have started a new medium-term cycle with last week's low at $1197, but it needs to rally strongly above $1246 to confirm that. Otherwise, the current rally may end soon with prices turning down and dropping below last week's low. Silver needs to rally above $14.91 soon to stay bullish or else it too could turn back down and make a new low below the $13.95 low that started its medium-term cycle on Sept. 11. We are currently long in gold but out of silver. Let's keep our stop loss for this gold trade on a close below $1181.
We are now entering (today) a reversal zone for crude oil that will last through Nov. 28. Crude made a new low today at $55.08 (Dec. contract chart), and a medium-term and longer-term cycle bottom are due (overdue). Today's low could be it or it could go lower over the next five trading days. A drop closer to $53 would be an ideal target to buy so we will watch for that this week or next. Still on the sidelines of crude oil.
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