MARKETS UPDATE (9:00 pm EST)
December is going to be an interesting month for the markets as they await two significant announcements - one from the European Central Bank (ECB) and one from the U.S. Federal Reserve - regarding monetary policy going forward for Europe and the United States. This Thursday it is expected that the ECB will announce an extension and expansion of its QE (quantitative easing) program to stimulate failing European economies. On Dec.15-16, the U.S. Federal Reserve will hold its final meeting for this year, and most analysts are expecting the Fed to announce its first interest rate hike in nine years. Of course, these two banks don't have to do what is expected of them which is why financial markets could see some wild fluctuations in this last month of the year. It is interesting to note that Europe is loosening its monetary policy with more QE and lower interest rates while the U.S. is tightening its policy with no more QE (at least for now) and raising interest rates (or at least saying it will). Another thing to watch for in December is the "Santa Claus effect". Investors often become relaxed and optimistic during the Christmas holiday season, and Wall Street frequently manifests a strong "Santa Claus rally" in equities into the New Year.
Today was the last day of our current reversal period for the broad stock market and the market was down. It is possible the markets are turning down now. The DOW and S&P 500 made new highs on Nov. 20 (the center of the reversal zone) and have not risen above them (yet), but we need to see more short-term bear signals that the market is turning down before we consider a short trade position. If the market rallies this week and the DOW and S&P 500 can exceed their Nov. 20 highs, we will likely wait for mid-December to sell the market short as that is our next reversal zone, and a top then would likely be the final top from which a significant correction to the current cycle bottom would take place. I am going to remain on the sidelines for the next few days to see if the market moves higher. On the sidelines of the broad stock market for now.
Today was also the last day of our reversal zone for gold and silver. Silver made a new monthly low on Nov. 23 at $13.92 and gold made a new monthly low last Friday at $1053. These were within the reversal zone so they could be the bottoms of a new cycle in both metals. This is why we went long in gold and silver last week. Several short-term signals are still bearish, however, so the danger of prices moving lower is still present. We want to now maintain a tight stop loss at those lows ($1053 in gold and $13.92 in silver - these are spot prices). If prices move below those lows, we could see new cycle bottoms for both metals in mid-December. Fortunately, prices are rallying today, but it is still possible for them to turn back down, maybe even later this week when the ECB announces more QE for Europe (or not). More QE for Europe could weaken the euro and strengthen the U.S. dollar, and more dollar rallying would likely push gold and silver prices down. We will watch this carefully during the week. I may decide to sell my long positions in gold and silver before the ECB announcement. Holding long positions in both gold and silver for now.
Crude oil prices moved a bit lower today, but they are still above the Nov.23 low of $40.41 which was in the center of a reversal zone that ends today. This means that Nov. 23 was a significant low, and prices could rally a little more (perhaps into mid-December) before falling again into a final cycle bottom that is due any time within the next two months. If prices continue to fall, however, we could see an early cycle bottom in mid-December instead of a high to sell short. In other words, the cycle pattern is not clear at the moment. If the broad stock market starts to rally into December, crude may follow suit so we may use equity charts to help us gauge the direction of crude oil over the next few weeks. Still on the sidelines of crude oil.
December is going to be an interesting month for the markets as they await two significant announcements - one from the European Central Bank (ECB) and one from the U.S. Federal Reserve - regarding monetary policy going forward for Europe and the United States. This Thursday it is expected that the ECB will announce an extension and expansion of its QE (quantitative easing) program to stimulate failing European economies. On Dec.15-16, the U.S. Federal Reserve will hold its final meeting for this year, and most analysts are expecting the Fed to announce its first interest rate hike in nine years. Of course, these two banks don't have to do what is expected of them which is why financial markets could see some wild fluctuations in this last month of the year. It is interesting to note that Europe is loosening its monetary policy with more QE and lower interest rates while the U.S. is tightening its policy with no more QE (at least for now) and raising interest rates (or at least saying it will). Another thing to watch for in December is the "Santa Claus effect". Investors often become relaxed and optimistic during the Christmas holiday season, and Wall Street frequently manifests a strong "Santa Claus rally" in equities into the New Year.
Today was the last day of our current reversal period for the broad stock market and the market was down. It is possible the markets are turning down now. The DOW and S&P 500 made new highs on Nov. 20 (the center of the reversal zone) and have not risen above them (yet), but we need to see more short-term bear signals that the market is turning down before we consider a short trade position. If the market rallies this week and the DOW and S&P 500 can exceed their Nov. 20 highs, we will likely wait for mid-December to sell the market short as that is our next reversal zone, and a top then would likely be the final top from which a significant correction to the current cycle bottom would take place. I am going to remain on the sidelines for the next few days to see if the market moves higher. On the sidelines of the broad stock market for now.
Today was also the last day of our reversal zone for gold and silver. Silver made a new monthly low on Nov. 23 at $13.92 and gold made a new monthly low last Friday at $1053. These were within the reversal zone so they could be the bottoms of a new cycle in both metals. This is why we went long in gold and silver last week. Several short-term signals are still bearish, however, so the danger of prices moving lower is still present. We want to now maintain a tight stop loss at those lows ($1053 in gold and $13.92 in silver - these are spot prices). If prices move below those lows, we could see new cycle bottoms for both metals in mid-December. Fortunately, prices are rallying today, but it is still possible for them to turn back down, maybe even later this week when the ECB announces more QE for Europe (or not). More QE for Europe could weaken the euro and strengthen the U.S. dollar, and more dollar rallying would likely push gold and silver prices down. We will watch this carefully during the week. I may decide to sell my long positions in gold and silver before the ECB announcement. Holding long positions in both gold and silver for now.
Crude oil prices moved a bit lower today, but they are still above the Nov.23 low of $40.41 which was in the center of a reversal zone that ends today. This means that Nov. 23 was a significant low, and prices could rally a little more (perhaps into mid-December) before falling again into a final cycle bottom that is due any time within the next two months. If prices continue to fall, however, we could see an early cycle bottom in mid-December instead of a high to sell short. In other words, the cycle pattern is not clear at the moment. If the broad stock market starts to rally into December, crude may follow suit so we may use equity charts to help us gauge the direction of crude oil over the next few weeks. Still on the sidelines of crude oil.
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