MARKETS UPDATE (3:30 pm EDST)
There are several technical and cycle factors coming together now that are making the precious metals look very bullish in the medium-term and maybe longer-term as well. Short-term, there is a possibility of both metals (especially silver) correcting down a bit more which is why we have put off buying silver (we are long in gold), but once we are confident that a medium-term cycle bottom is in, we will be fully bullish and long in both metals. The bottom may already be in for gold with the low of $1161 on August 15. Silver's bottom could have happened last Tuesday at $14.01, but there's a chance it could break lower this week as we are in a general reversal zone for all markets. If silver breaks below $14.01 while gold stays above $1161 in this week's reversal zone, that would be a strong signal to be long in both metals.
So why should we be so bullish on precious metals now? Cycle-wise, not only are we at or near the end of medium-term cycles in both gold and silver, but we are also ending a longer-term 2 - 3 year cycle in gold. Once that bottom is in (it may have happened Aug. 15), both metals should start very significant strong rallies. In addition to this, COT (Commitments of Traders) charts are now very bullish for both gold and silver. In these charts, commercial positions (smart money) are more bullish than they've been since 2001, and they are rarely wrong. The U.S. Dollar Index might also support an imminent rally in precious metals as it has rallied up to a resistance line near 95.5 near the center of a reversal zone for currencies (this Wednesday) and could easily turn down again to kick start a rally in gold and silver.
Based on all these factors, we are now long in gold and looking to go long in silver soon.
The broad stock market seems indecisive today and is staying relatively flat. Ideally, we want to see this market make a low in this week's reversal zone. There's a slight chance that the NASDAQ and S&P 500 made significant lows on Friday (the first day of the reversal zone), but it would be more likely for the DOW, S&P 500, and NASDAQ (or at least one or two of these indices) to make new lows this week. We will watch for this as we hold our short position in the DOW for now. If the DOW makes a new high this week (it is close) without the other two indices, we will have bearish divergence and a strong incentive to hold our short position.
There is a strong possibility that the $71 high in crude oil on Sept. 4 (Nov. contract chart) was the medium-term cycle high as well as a longer-term cycle high. If so, this market is turning bearish and could be headed down to a final low near $60 or even $50 before the end of this year. We are in the center of a reversal zone for crude so we may see a temporary low this week followed by a weak counter rally with a top that could give us another opportunity to sell short. We will watch for that. On the sidelines of crude oil for now.
There are several technical and cycle factors coming together now that are making the precious metals look very bullish in the medium-term and maybe longer-term as well. Short-term, there is a possibility of both metals (especially silver) correcting down a bit more which is why we have put off buying silver (we are long in gold), but once we are confident that a medium-term cycle bottom is in, we will be fully bullish and long in both metals. The bottom may already be in for gold with the low of $1161 on August 15. Silver's bottom could have happened last Tuesday at $14.01, but there's a chance it could break lower this week as we are in a general reversal zone for all markets. If silver breaks below $14.01 while gold stays above $1161 in this week's reversal zone, that would be a strong signal to be long in both metals.
So why should we be so bullish on precious metals now? Cycle-wise, not only are we at or near the end of medium-term cycles in both gold and silver, but we are also ending a longer-term 2 - 3 year cycle in gold. Once that bottom is in (it may have happened Aug. 15), both metals should start very significant strong rallies. In addition to this, COT (Commitments of Traders) charts are now very bullish for both gold and silver. In these charts, commercial positions (smart money) are more bullish than they've been since 2001, and they are rarely wrong. The U.S. Dollar Index might also support an imminent rally in precious metals as it has rallied up to a resistance line near 95.5 near the center of a reversal zone for currencies (this Wednesday) and could easily turn down again to kick start a rally in gold and silver.
Based on all these factors, we are now long in gold and looking to go long in silver soon.
The broad stock market seems indecisive today and is staying relatively flat. Ideally, we want to see this market make a low in this week's reversal zone. There's a slight chance that the NASDAQ and S&P 500 made significant lows on Friday (the first day of the reversal zone), but it would be more likely for the DOW, S&P 500, and NASDAQ (or at least one or two of these indices) to make new lows this week. We will watch for this as we hold our short position in the DOW for now. If the DOW makes a new high this week (it is close) without the other two indices, we will have bearish divergence and a strong incentive to hold our short position.
There is a strong possibility that the $71 high in crude oil on Sept. 4 (Nov. contract chart) was the medium-term cycle high as well as a longer-term cycle high. If so, this market is turning bearish and could be headed down to a final low near $60 or even $50 before the end of this year. We are in the center of a reversal zone for crude so we may see a temporary low this week followed by a weak counter rally with a top that could give us another opportunity to sell short. We will watch for that. On the sidelines of crude oil for now.
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