MARKETS UPDATE (7:30 pm EST)
Directional momentum in all three broad stock market indices (DOW, S&P 500 and NASDAQ) is still mixed bullish and bearish although these indices broke and closed above some resistance lines last week which is a bullish sign.
We are, however, now in the center of a strong reversal zone (which could extend into next Monday) and should be watching for a top in this market to be followed by a strong reversal down into the end of the current medium-term cycle (which could be in December but may extend into January 2016). We want to sell short from this top as the correction could be significant. As I mentioned in last Thursday's blog, this is a holiday week in the U.S. (Thanksgiving on Thursday), and equities often rally into holidays. It is a little early for the cycle peak so I suspect we will see more rallying into Thursday - Monday, but we are on alert for signs of a top any time now. One thing to watch for is "intermarket bearish divergence" where only one or two of the stock indices mentioned above make(s) a new monthly high, but not all three. This could be a strong signal to sell short, especially if it happens this week. If this market gets really bullish, we might see all three indices make new highs and push through the current reversal zone (perhaps after a minor dip). In that case, we would look for a top to sell short around mid-December. At the moment, though, it seems like a top is more likely to happen this week so we will watch for this.
I should mention here that the Fed has recently been giving signals suggesting it will announce an interest rate hike in December. The December meeting may thus be another turning point for the market. In reference to the above discussion, that turning point could be either a top or bottom. The movement of the broad stock market over the next two weeks will likely tell us which it will be. If markets continue to rally past next Monday without a significant correction, it will probably be a top. On the other hand, if we see a top this week, equities could easily fall into mid-December and make a cycle bottom. On the sidelines of the broad stock market for now.
In last Thursday's blog on gold I wrote: "That sharp rally we've been waiting for could be starting now, but directional momentum in gold is still 100% bearish so prices could still head lower into next week." It looks like the rally has aborted and both gold and silver prices are now headed lower so it is likely there will not be a significant top to sell short. Because silver and especially gold are close to the end of their current medium-term cycles, we should now be looking for a cycle bottom to buy as a significant rally should follow. Gold's cycle bottom is due any time between now and mid-December, but silver's cycle bottom could come a bit later (possibly in January although it doesn't have to - it could end with gold in December or sooner). The bottom line is that we want to focus now on finding a good spot to go long in both precious metals as it looks like we are close to the start of new cycles in both gold and silver, and the start of a new cycle is always bullish. Identifying those cycle bottoms is going to be a challenge. The financial analysts I follow seem to be divided in their trading strategies at the moment as some are holding short positions in gold and anticipating new lows while others feel we are at the bottom now, and they are going long. This week is a strong reversal zone for precious metals so a significant price turn up could be imminent; however, strong bearish signals appeared in both gold and silver charts today as both metals made new lows so I am putting off any buying at least until I see a short-term buy signal. That may come later in the week. On the sidelines of both gold and silver for now.
The U.S. Dollar Index seems to be close to the edge of a break through the 100 mark. Today this index nearly touched that 100 level intraday before backing down and closing the day at 99.75. Directional momentum is almost 100% bullish in the dollar chart so it seems like the greenback is ready to overcome that strong resistance at 100. Nevertheless, the dollar has been rising steeply for over a month now and is very overbought so it is entitled to take a breather and at least a moderate correction. If it does this now it might be the trigger that kick-starts a rally in the precious metals.
Crude oil prices made a new monthly low today at $38.99 before closing the day a bit above $40. This timing of this new low suggests that any relief rallies now will not be strong until the end of the current cycle. The cycle structure shows crude prices pointing down for at least two more weeks (and possibly up to nine weeks). We will continue to watch for any short-term rally that gives us a top to sell short. We may get one soon as we are seeing new lows in this week's reversal zone. On the sidelines of crude and still looking to sell short the top of any rally.
Directional momentum in all three broad stock market indices (DOW, S&P 500 and NASDAQ) is still mixed bullish and bearish although these indices broke and closed above some resistance lines last week which is a bullish sign.
We are, however, now in the center of a strong reversal zone (which could extend into next Monday) and should be watching for a top in this market to be followed by a strong reversal down into the end of the current medium-term cycle (which could be in December but may extend into January 2016). We want to sell short from this top as the correction could be significant. As I mentioned in last Thursday's blog, this is a holiday week in the U.S. (Thanksgiving on Thursday), and equities often rally into holidays. It is a little early for the cycle peak so I suspect we will see more rallying into Thursday - Monday, but we are on alert for signs of a top any time now. One thing to watch for is "intermarket bearish divergence" where only one or two of the stock indices mentioned above make(s) a new monthly high, but not all three. This could be a strong signal to sell short, especially if it happens this week. If this market gets really bullish, we might see all three indices make new highs and push through the current reversal zone (perhaps after a minor dip). In that case, we would look for a top to sell short around mid-December. At the moment, though, it seems like a top is more likely to happen this week so we will watch for this.
I should mention here that the Fed has recently been giving signals suggesting it will announce an interest rate hike in December. The December meeting may thus be another turning point for the market. In reference to the above discussion, that turning point could be either a top or bottom. The movement of the broad stock market over the next two weeks will likely tell us which it will be. If markets continue to rally past next Monday without a significant correction, it will probably be a top. On the other hand, if we see a top this week, equities could easily fall into mid-December and make a cycle bottom. On the sidelines of the broad stock market for now.
In last Thursday's blog on gold I wrote: "That sharp rally we've been waiting for could be starting now, but directional momentum in gold is still 100% bearish so prices could still head lower into next week." It looks like the rally has aborted and both gold and silver prices are now headed lower so it is likely there will not be a significant top to sell short. Because silver and especially gold are close to the end of their current medium-term cycles, we should now be looking for a cycle bottom to buy as a significant rally should follow. Gold's cycle bottom is due any time between now and mid-December, but silver's cycle bottom could come a bit later (possibly in January although it doesn't have to - it could end with gold in December or sooner). The bottom line is that we want to focus now on finding a good spot to go long in both precious metals as it looks like we are close to the start of new cycles in both gold and silver, and the start of a new cycle is always bullish. Identifying those cycle bottoms is going to be a challenge. The financial analysts I follow seem to be divided in their trading strategies at the moment as some are holding short positions in gold and anticipating new lows while others feel we are at the bottom now, and they are going long. This week is a strong reversal zone for precious metals so a significant price turn up could be imminent; however, strong bearish signals appeared in both gold and silver charts today as both metals made new lows so I am putting off any buying at least until I see a short-term buy signal. That may come later in the week. On the sidelines of both gold and silver for now.
The U.S. Dollar Index seems to be close to the edge of a break through the 100 mark. Today this index nearly touched that 100 level intraday before backing down and closing the day at 99.75. Directional momentum is almost 100% bullish in the dollar chart so it seems like the greenback is ready to overcome that strong resistance at 100. Nevertheless, the dollar has been rising steeply for over a month now and is very overbought so it is entitled to take a breather and at least a moderate correction. If it does this now it might be the trigger that kick-starts a rally in the precious metals.
Crude oil prices made a new monthly low today at $38.99 before closing the day a bit above $40. This timing of this new low suggests that any relief rallies now will not be strong until the end of the current cycle. The cycle structure shows crude prices pointing down for at least two more weeks (and possibly up to nine weeks). We will continue to watch for any short-term rally that gives us a top to sell short. We may get one soon as we are seeing new lows in this week's reversal zone. On the sidelines of crude and still looking to sell short the top of any rally.
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