Before analyzing the medium-term cycles in our markets (necessary to identify buy and sell points), let's take a quick longer-term view,of these markets so that we don't lose sight of the "forest for the trees" so to speak. I do post the longer-term picture on the Home Page under the BROAD STOCK MARKET "CRASH" UPDATE and GOLD Update, but I think it's a good time to briefly review it here as we are approaching critical turning points in most of our markets.
BROAD STOCK MARKET (LONG-TERM)
The broad stock market (this includes the DOW, S&P 500, and NASDAQ) seems to be in the final stages of several longer-term cycles. It is possible this market is at the end of a roughly 90 year cycle that began with the low following the infamous great stock market crash of 1929. If this is the case, one can see that the 90 year period is ending now. Notice I said "roughly" 90 years as there is some leeway or margin of error on both sides of the 90 year mark. Clearly, this long cycle has been very bullish, and we are still making new all-time highs as I write this. Bullish cycles like this sometimes reach their peak or top very late in the cycle and then fall sharply and deeply (crash) to their final bottom very quickly (as that bottom should be fairly close to the 90 year mark). In other words, the final bottom of the current 90 year cycle is due/overdue. It is not 100% certain that this 90 year cycle will play out, but there are also some other "shorter" longer-term cycles that are also due soon which could lead to a very significant correction in equities any time now. These other cycles could lead to a 15% - 20% correction, but the 90 year cycle correction could be as much as 70% or possibly even more (the market dropped over 80% in the crash of 1929). These are the reasons that we are now primarily looking for a good place to sell this market short.
GOLD and SILVER (LONG-TERM)
The long-term cycle that we study in gold is one that lasts approximately 23 years. The current 23 year cycle in gold began with gold's "double-bottom" low in 1999 and 2001 around $280. That was 20 years ago, so this cycle is obviously coming to completion soon. The highest price in this cycle so far has been $2070 (reached in Aug. 2020). As with the broad stock market's 90 year cycle, this 23 year long-term cycle has been very bullish, but a peak is now due/overdue because it is so late in the cycle. That $2070 high in Aug. 2020 could have been it, but recently this market has been looking very bullish, and it's still possible for that $2070 high to be challenged or exceeded. But if there is going to be another new high, it has to happen soon to give the cycle time to fall to its final bottom due sometime in 2023 - 2024. At the moment, it seems like there is an equally good chance that the $2070 high from last year was the 23 year cycle top. If that's the case, we won't see a new high, and we should be looking to sell this market short as the final cycle correction could take prices back down to the $1000 level.
Silver's longer-term cycle is a bit different than gold's and it is a little ambiguous at the moment. I will discuss this cycle at some point in the future, but for now, we can side step it and just focus on gold. The reason we can do this is because both these metal prices move in tandem. In other words, if gold takes a big price dive as it moves down to complete its long-term cycle bottom, silver will also take a big hit regardless of where it's at in it's long-term cycle.
CRUDE OIL (LONG-TERM)
Unlike the broad stock market and the precious metals, crude oil appears to have completed a long-term cycle recently and is in the early stages of a new one. Because of a global supply glut and a negative demand shock from COVID-19 lock-downs in 2020, crude oil prices made a dramatic plunge in April last year (prices briefly went BELOW zero). That historic low was likely the end AND start of several long-term and short-term cycles - i.e. it was a major price "reset" in crude. The early phase of any cycle is always bullish, and indeed, crude prices have risen sharply from last year's low (from around $20 to $83 in a year and a half time frame). The longest cycle we study in crude is a 36 year cycle. Because this cycle started just last year, we are indeed in the early, bullish phase. But it's too early right now to determine whether or not the overall trend of this new cycle will be long-term bullish. If prices rise too fast, the cycle could peak relatively early and then start a long-term fall. (The super bullish rally from last April is suggesting this might be the case, but it's still too early to tell.) Nevertheless, the cycle is VERY young now, and prices are looking quite bullish.
Current Short-Term Analysis:
The DOW and S&P 500 made new all-time highs today, continuing their bullish trend from last week. The NASDAQ rallied too, but it is still below its all-time high of 15,403 (from Sept. 7), although not far away. Yes, we are getting an intermarket bearish divergence signal here, and we are still inside a reversal zone (it ends tomorrow), so we could see the market turn down now. But we are also getting some very bullish technical signals. If these indices push higher after tomorrow, and especially if the NASDAQ can make a new all-time high, the short-term trend could stay bullish for at least several more weeks. Even a correction now could just be a minor dip to relieve pressure before the rally resumes. It still looks like both these indices are new (young) medium-term cycles that started in late September/early October, and that is supporting our bullish view
As the Thanksgiving and Christmas holiday season approaches in the U.S., equity markets will often rise into a "Santa Claus rally". But COVID-19 fears and other political and financial worries could put a damper on holiday optimism this year. If we do see such a rally, it will probably be the last surge and final top of a longer-term cycle (as discussed above) and will likely be an opportunity to sell the market short. But I'm getting ahead of myself here. For now, we wait to see if this market will take some sort of correction. Staying on the sidelines of the broad stock market for now.
Gold and silver still seem unwilling to show us a definitive trend. Both metals made a new weekly high last Friday within our general reversal zone, but they did not exceed those highs today. The reversal zone ends tomorrow, so if prices don't start falling from here, we could see a "breakout" instead and more rallying. A sub-cycle top is due in gold probably this week or next (if it didn't already happen on Friday). If that top can't exceed $1834, then gold's trend could be turning bearish. Silver is also due for a top and sub-cycle correction now (if it didn't happen Friday). Silver looks a little more bullish than gold at the moment. As long as prices don't fall below $21.44 (the start of the current cycle on Sept. 29), then it should stay bullish for at least several more weeks. We are still on the sidelines of both metals for now.
Crude oil started its current medium-term cycle on Aug. 23 at $61.11 (Dec. contract chart). This cycle has been VERY bullish, but it is now due for a sub-cycle top and a subsequent corrective low that would likely bottom sometime in the first two weeks of November. We will try and buy that corrective low as this market continues to look very bullish. On the sidelines of crude oil for now.