MARKETS UPDATE (2:00 pm EDT)
The broad stock market's steep fall last week is reinforcing our bearish view of the current medium-term cycles in all three market indices (DOW, S&P 500, NASDAQ). In other words, we expect them to fall further. We may be getting a bullish divergence signal today as the S&P 500 and NASDAQ are making new weekly lows but the DOW is not (at the time of this writing). We could get a small relief bounce here after last week's plunge, but I don't expect it to get far before turning down again. We will continue to hold our short position in the broad stock market for now.
Unfortunately, we missed out on gold and silver's steep rise over the last two weeks because several reversal zones turned out to be "break-outs" instead of "turn-downs". This is not common, but it can happen in very bullish markets. But even in bullish markets, steep rallies eventually take a breather and correct down to some extent, and the current steep rally in precious metals is getting ripe for some sort of correction. There is a strong possibility of more rallying in gold in the first two weeks of November from an isolated low that could happen sometime this week or early next week. We will watch for this as a possible opportunity to buy. If we miss it, we will wait for a top in the rally (if we get one) near mid-November as a sharp correction down should follow and give us another opportunity to go long. We are out of both gold and silver for now.
Crude oil prices nearly touched $90 (Dec. contract chart) on Friday, but today they are falling back into the $85 - $86 area. We are pretty certain that crude started a new medium-term cycle either on Aug. 24 or Oct. 6 (most likely). In either case, a sharp rally took off from the Oct. 6 low. If this rally rolls over now, we could get a corrective dip into two reversal zones coming up later this week: a general reversal zone Oct.25 - Nov. 9, and a reversal zone specifically for crude Oct. 26 - Nov. 3 that may give us a good spot to buy (assuming the dip stays above $80). If instead crude prices rally higher into these reversal zones, we may have to wait a little longer for a correction into a good buy spot. This market looks very bullish right now, but any break below $80, and especially below $77 would start turning things bearish. We remain on the sidelines of crude for now.
The broad stock market's steep fall last week is reinforcing our bearish view of the current medium-term cycles in all three market indices (DOW, S&P 500, NASDAQ). In other words, we expect them to fall further. We may be getting a bullish divergence signal today as the S&P 500 and NASDAQ are making new weekly lows but the DOW is not (at the time of this writing). We could get a small relief bounce here after last week's plunge, but I don't expect it to get far before turning down again. We will continue to hold our short position in the broad stock market for now.
Unfortunately, we missed out on gold and silver's steep rise over the last two weeks because several reversal zones turned out to be "break-outs" instead of "turn-downs". This is not common, but it can happen in very bullish markets. But even in bullish markets, steep rallies eventually take a breather and correct down to some extent, and the current steep rally in precious metals is getting ripe for some sort of correction. There is a strong possibility of more rallying in gold in the first two weeks of November from an isolated low that could happen sometime this week or early next week. We will watch for this as a possible opportunity to buy. If we miss it, we will wait for a top in the rally (if we get one) near mid-November as a sharp correction down should follow and give us another opportunity to go long. We are out of both gold and silver for now.
Crude oil prices nearly touched $90 (Dec. contract chart) on Friday, but today they are falling back into the $85 - $86 area. We are pretty certain that crude started a new medium-term cycle either on Aug. 24 or Oct. 6 (most likely). In either case, a sharp rally took off from the Oct. 6 low. If this rally rolls over now, we could get a corrective dip into two reversal zones coming up later this week: a general reversal zone Oct.25 - Nov. 9, and a reversal zone specifically for crude Oct. 26 - Nov. 3 that may give us a good spot to buy (assuming the dip stays above $80). If instead crude prices rally higher into these reversal zones, we may have to wait a little longer for a correction into a good buy spot. This market looks very bullish right now, but any break below $80, and especially below $77 would start turning things bearish. We remain on the sidelines of crude for now.
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