Last week's equity markets plunged into the Thanksgiving holiday which was unusual (and not a good sign) as pre-holiday markets are typically bullish. Despite the severe plunge, however, neither the DOW nor the S&P 500 broke below their Oct. 29 lows, but the NASDAQ did. This means we now have a potential bullish divergence signal in the broad stock market. It is possible that the DOW and S&P 500 are making double bottoms to their Oct. 29 lows (as they start new medium-term cycles) which would also be a bullish development. The NASDAQ, however, is still completing the bottom of an older medium-term cycle and will be bearish until that bottom is in. We are now entering another strong reversal zone for equities (Nov. 26 - Dec. 5) so the NASDAQ's bottom could be completed in this time frame.
The big question right now is whether or not the DOW and/or the S&P 500 will break below their Oct. 29 lows (24,122 and 2,603, respectively). If they do break those lows then they, like the NASDAQ, will likely be completing older cycle bottoms in this new reversal zone (i.e. by the first week of December). Ideally we would like to see at least one of these indices stay above its Oct. 29 low to maintain our bullish divergence signal. Today's strong rally in equities is supporting the idea of "double bottoms" and the start of new cycles in the DOW and S&P 500, but there is still plenty of time for these indices to turn south again and bottom in the new reversal zone. We are looking for cycle bottoms to buy, but let's wait a few more days to see how this market moves into the center of the reversal zone (Friday) before we go long again. (Note that although we did not get a Thanksgiving rally, we are now in a five week countdown to the Christmas/New Year holidays which often correlates with a "Santa Claus rally" in equity markets. This may kick in strongly if equity cycles bottom soon as I've described above.)
On the sidelines of the broad stock market for now.
We are now in the center of a reversal zone specifically for gold and silver, and prices seem to be falling into it. This reversal zone ends Friday, but it could overlap with the Nov. 26 - Dec. 5 reversal zone for equities so there is still time for these metals to rally and make a high instead of a low in the reversal zone. As with the broad stock market, I am going to stay on the sidelines here and see how prices move into the end of the week before making any trading decisions. A rally is possible, but it is also possible we could see a steep plunge to new lows in this reversal zone (especially in silver).
Directional momentum in the U.S. Dollar Index has been nearly 100% bullish since early October, and that bullishness is not diminishing. The dollar made a significant low at 96.16 on Nov. 19 in the center of a reversal zone specific to currencies so it may be starting a significant rally from there. Last week the dollar found support around 96.5 and it may now attempt to challenge and break its 97.62 high from Nov. 12. This is all bearish news for the precious metals and supports the idea of lower prices in gold and silver.
Crude oil prices have been falling dramatically despite the Trump administration's sanctions imposed on Iran earlier this month. The reason for this seems to be the exemption of eight countries from sanction penalties which has kept the price of oil from skyrocketing. Crude prices got down to $50.10 today (Jan. contract chart) - a new low for the year. We are at the center of a reversal zone for crude, but it could easily overlap with the strong reversal zone for equities that extends into Wednesday (Dec. 5) of next week. Crude oil's medium-term and longer-term cycles are also due either this week or next so we should now be looking for a bottom to buy. On the sidelines of crude but looking to buy soon.