We are still waiting for the final bottom of the current medium-term cycle in the broad stock market. As I have stated in previous blogs, it is late in this cycle. The final top (peak) of the cycle happened on Oct. 3 for the DOW (26,952), Sept. 21 for the S&P 500 (2,941), and Aug. 30 (8,133) for the NASDAQ. All three indices have been falling sharply from those highs. There is a small possibility that last Friday's lows were the final cycle bottoms as they happened in a weak reversal zone (which ends tomorrow) or they could bottom today, but it is more likely this market is headed lower (perhaps after a short bounce) into November to make a final cycle bottom in one of the stronger reversal zones coming up in that month. The center points for those reversal zones would be Nov. 7-8, Nov. 16, and Nov. 30. There is a chance that the end of this medium-term cycle will coincide with the end of a longer-term 4 year cycle. If that is the case, we might not see the final bottom until late November/early December (which would line up nicely with that Nov. 30 reversal point) with the DOW getting as low as 22,000 or possibly even lower. But let's not get too far ahead of ourselves. For now we will watch carefully for possible signs of an earlier low to the medium-term cycle (i.e. before the end of the 4 year cycle) happening either now, near Nov. 7-8, or near Nov. 16. We won't worry about any rally this week unless the DOW closes above 25,400 (that would be a sign that last Friday's or today's lows were/are the final cycle bottoms). Continuing to hold my short position in the broad stock market.
In last Thursday's blog on the precious metals I wrote:
"...we have a case of intermarket bearish divergence in this market, and it is happening in a (weak) reversal zone. This means we could see a short-term correction now. The cycle pattern in both metals at the moment also allows for a sharp correction either this week or next week."
It looks like we are getting that correction now as gold and silver prices are dropping today. If gold moves close to the $1200 level this week, we will be looking to buy both metals. On the sidelines of gold and silver for now.