We entered a long position in gold last Thursday with the idea that a significant bottom was forming in the current reversal zone for the precious metals (Sept. 27 - Oct. 6). That could still happen, but last week I also suggested a stop loss for this trade based on prices closing below $1,270 or both gold and silver making new lows this week (i.e. no bullish divergence signal). Today both metals are making new lows and short-term technical signals are suggesting prices could go lower. The rally in the U.S. Dollar Index also seems to be gaining a little strength which is not good for the precious metals. There is a danger here of prices breaking down instead of reversing this week so I am going to unload (sell) my long position in gold now and stay on the sidelines to see how prices move into the end of this week. We are still on the sidelines of silver.
The broad stock market continues to push higher with the DOW, S&P 500 and NASDAQ (COMPOSITE INDEX COMBINED) all making new highs today. The NASDAQ 100 INDEX (E-MINI) (Dec. contract), however, still has not breached its all-time high of 6,026 so we may still have an intermarket bearish divergence signal in effect. The current strong reversal zone for the broad stock market is in effect all week which means we could still see a top and some sort of reversal any day now. Since directional momentum in this market is still strongly bullish, I think any correction now will be minor and may give us an opportunity to go long. Let's stay on the sidelines for now and see if a correction starts from a high sometime this week. We still want to see that 6,026 high broken to maintain our bullish view.
We were wise to take profits in our crude oil long positions last Thursday as prices are plummeting today. Crude prices are likely falling to the next sub-cycle bottom which could happen in the next reversal zone for crude coming up in the last week of October. On the sidelines of crude oil for now.