We are living in strange economic times. Equity markets are extremely overbought, and there are many reasons for them to turn down now (e.g. widespread geopolitical instability, threats of nuclear war, natural disasters, a controversial U.S. president, and a U.S. financial debt of over 13 trillion), and yet Wall Street continues to chug along, seemingly oblivious to all of these things that years ago could have easily caused a market selloff. My attitude here is to be cautiously optimistic. We will rely on cycle analysis and technical signals to tell us when the market trend seems bullish (as it does now), but we must keep a cautious eye on any downward corrections (especially from tops in reversal zones) as in this current volatile environment (geopolitical and financial) any dip could easily start to snowball into a major equity selloff.
On Friday the NASDAQ finally made a new all-time high (the DOW and S&P 500 made new all-time highs earlier in the week), and today all three indices are pushing higher. This is a bullish sign (i.e. no bearish divergence) that the broad stock market will continue higher. The NASDAQ index that I normally follow (and report on here) is the NASDAQ COMPOSITE INDEX (COMBINED). The nearby (Dec.) contract chart for the NASDAQ 100 INDEX (E-Mini), another popular NASDAQ index, however, did not make a new all-time high last week and also closed down a bit today. This may not be that significant, but I would like to see this index also break and close above its all-time high (6,026) to avert the possibility of all these indices taking a serious turn down now. Any minor dip in the DOW and S&P 500 would probably give us a good opportunity to go long for a likely rally into the next strong reversal zone coming up at the end of next week and into the first week of October. Longer-term, we are still watching for a peak in the current medium-term cycle (or possibly the next one) from which a significant correction could follow. That top could be in this next reversal zone. The game plan here is to look to buy and ride a rally into early October at which time we will step aside again and maybe even sell short. On the sidelines of the broad stock market for now.
Gold and silver prices fell steeply today. Gold is now getting close to our target price around $1,300 so we should be looking to buy soon. In terms of timing, it would be best to buy closer to the end of this week or even next week. Because both metals made new weekly lows today, we are not going to see any intermarket bullish divergence this week. That could happen next week, though, and if it does it would be a good buy signal. Let's see if these precious metals can get a bit lower before we consider a long position. Gold might go lower than $1,300, but we don't want to see it below $1,280. Silver could get down as low as $16, but we will consider buying close to $17. On the sidelines of both gold and silver but looking to buy this week or next.
Crude oil prices seem to be testing the $50 mark (Oct. contract chart) but have yet to close above it. As I mentioned in my last blog, we need to see prices get above the $50.51 high from Aug. 1 for crude's trend to stay bullish. A good target for the current rally would be $53 - $54. All of next week is a reversal zone specifically for crude oil. Let's see if crude prices can rally closer to our target into that time frame. Holding my long position in crude oil.