The Alternative Investor
  • Home
  • TRADING BLOG
  • Current Positions
  • Alternative Investor Strategy
  • ETFs
  • About Alternative Investor
  • Contact

Trading Blog           Monday,  October 15,  2018

10/15/2018

 
UPDATE ON THE BROAD STOCK MARKET and PRECIOUS METALS  (3:30 pm EDST)

After last week's severe plunge, the DOW is finding support at the 25,000 level, and the big question on the minds of traders and investors is whether or not this correction in the ​
broad stock market is over. I would say that it probably is not. Although there's a chance that last Thursday's lows were the final bottom of a medium-term cycle, the lows were not in a reversal zone, and the correction from the peak on Oct. 3 to those lows only lasted a week. Final cycle corrections almost always take 2-5 weeks so last Thursday was a bit early for a bottom. There are no major reversal zones until the month of November (but there are some minor potential reversal points Oct. 18, 22, and 24 - we will watch these carefully). Ideally we would like to see the final bottom to the medium-term cycle in November. In the meantime, however, we could get a significant bounce or relief rally from the current support around 25,000 in the DOW and 2,700 in the S&P 500. We won't get too concerned for our short position until any rally gets above say 26,100 in the DOW and 2,840 in the S&P 500. If instead of rallying, the market continues to fall this week, we may take profits and cover our short position around 24,500 in the DOW (if it gets that low). If the S&P 500 breaks below 2,692 while the DOW stays well above 23,997 (these were the lows that started the current medium-term cycles) then that would also be a good signal (bullish divergence) to cover our shorts and possibly go long. So far we have an excellent profit on our short position. Let's hold our short position for now as we watch the direction the market takes this week.

We got our predicted sharp rally in gold (and silver) last week, but that rally is due to top out sometime this week and could be followed by a sharp correction. The depth of that correction will tell us whether or not the precious metals have turned bullish. There is strong evidence that the $1161 Aug. 15 low in gold was not only a medium-term cycle bottom but also a longer-term cycle bottom. If so, gold may be starting a longer-term rally that could take prices as high as $1500 next year. But that long-term cycle is not confirmed yet. For now, we are concerned with a short-term top this week in the $1240 area. Let's hold our long positions in both gold and silver and see if prices can push higher over the next few days.

​Two important recent developments in the precious metals market:


1) Readers of this blog may recall that in the summer months I pointed out the formation of giant "inverted head and shoulders" chart patterns that had been forming in the charts of both gold and silver since 2013 and were near completion and signaling a strong bullish trend about to manifest in this market. I also pointed out that it was possible for these chart patterns to abort if the trend suddenly turned bearish. Well, it looks like the "inverted head and shoulders" in silver has aborted; however, it has morphed into what looks like a giant "double bottom" pattern which is also very bullish. Gold's giant "inverted head and shoulders" bottom has remained intact so it, of course, remains bullish (for now).


2) The recent plunge in the broad stock market did not seem to adversely affect the precious metals (they rallied strongly). This is significant because many investors (myself included) have been fearing that a general stock market crash could initially take down the precious metals as it did in 2008-2009 when panicking investors liquidated equities and commodities and fled to the perceived safety of the U.S. dollar. The strength of gold and silver during this recent equity plunge suggests that the U.S. dollar may have lost some of its appeal as a safe haven, and we may not have to worry about the precious metals initially falling with any significant broad stock market correction.






Comments are closed.

    RSS Feed

    Archives

    May 2023
    April 2023
    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    December 2012

The Alternative Investor takes no advertising or incentives from any company, institution or investment that is discussed on the website.  Any trading and investing information presented is based on Alternative Investor's independent and unbiased research and analysis of current financial markets.

                                                                                                                                                            LEGAL and DISCLAIMER

All statements and trading/investment information on this website represent solely the personal opinion of The Alternative Investor based on information available at the time of writing and are intended for educational purposes only and are not a recommendation to buy or sell securities, commodities or currencies.  The Alternative Investor is not a licensed broker or financial advisor.  The Alternative Investor presents the trading and investing information on this site in good faith based on his own research into current financial markets but cannot and does not guarantee profit and does not guarantee against any financial losses that result from using this information.  All users of this website and the information presented within it assume full responsibility for their own personal trading/investing decisions and any losses that may result from them.

Trading and investing in any financial market may involve serious risk of loss.  For this reason all traders and investors should never place more money than they can afford to lose in any individual market.  The Alternative Investor monitors several markets and encourages a balanced distribution of funds among them (and others).  The Alternative Investor recommends consulting with a professional financial advisor before making any transactions with financial ramifications.  All trading, investing and financial transactions should always be made in accordance with the appropriate laws and legal regulations in your area of jurisdiction.

The Alternative Investor is an independent researcher and analyst and receives no compensation of any kind from any individuals, groups, companies or institutions discussed on this website.