Today the DOW rallied strongly and sharply off its deep low from Friday. The S&P 500 and NASDAQ were also up, but not quite as much. Because we are in the center of a modest reversal zone (Oct. 25 - Nov. 1), the broad stock market is entitled to a bounce back up here; however, I don't think the bounce will get very far for several reasons. First of all, it's a little too early for a significant sub-cycle low in all three indices. Secondly, the current medium-term cycles for all three indices have definitely turned bearish and are pointed down. And finally, any rally from here will be rising into our next STRONG general reversal zone coming up tomorrow (Oct. 31 - Nov. 9), and that would likely curb the rally and send it back down soon. For these reasons we will continue to hold our short position in this market for now.
Gold and silver are a tricky call right now. There are some technical signatures suggesting a strong rally (up to two weeks in duration) in both metals could start tomorrow from an isolated nearby low. Silver made an isolated low just last Thursday (at $22.51) which might qualify, but gold's most recent low was $1958 from last Tuesday. Gold then made an isolated high last Friday at $2008. The problem here is that 20% of the time the current technical signatures can correlate to a high and a subsequent PLUNGE instead of a rally. While it's possible gold could continue to rally from last Tuesday's low along with a rally in silver, it's also possible for both metals to turn sharply down starting tomorrow. Gold's steep rally looks especially vulnerable to a correction. We will stay on the sidelines of both metals for now. If we do see a strong rally this week, we will wait for it to peak either this week or next and then watch for the sharp correction down that usually follows such a rally to give us another possible buying opportunity. There is a reversal zone specifically for the precious metals coming up Thursday (Nov. 2 - 14) as well as the strong general reversal zone mentioned above (Oct. 31 - Nov. 9). They overlap Nov. 2 - 9, so that would be an ideal time for a top in any gold and silver rally. We will watch for it. Alternatively, if prices start falling from here, we will be looking for a low (and possibly a buy spot) in that same time frame.
The U.S. Dollar Index still seems to be finding a support line around 106. If it can launch a rally from there right now, it could put downward pressure on the precious metals and trigger a plunge as just described above. On the other hand, if that 106 support breaks, it could give a lift to gold and silver and kick start a strong rally.
Crude oil is also a difficult market to call right now. The volatility in this market due to the ongoing Israel/Palestine war warns us to be careful. That volatility was seen in the sharp rally from the deep low of $80.20 (Dec. contract chart) on Oct. 6 to near $90 on Oct. 20 and the subsequent fall back to $82 today. We note that crude is making this new low near the center of a reversal zone specifically for crude (Oct. 26 - Nov. 3) and also inside a general reversal zone (Oct. 25 - Nov. 1). This means a reversal back up could be imminent. What bothers me here is that the recent high near $90 on Oct. 20 was significantly below crude's previous high of $92.48 on Sept. 28 which means the cycle could be turning bearish. Also, today's low is getting close to the Oct. 6 low of $80.20 (which could have been the start of a new medium-term cycle) which is another bearish warning. If prices can stay above $80.20 over the next day or two, we may look to buy as we are now deep inside several reversal zones. Let's stay on the sidelines for today.