UPDATES on GOLD, SILVER, and the BROAD STOCK MARKET (4:30 pm EDST)
Fears of a real estate crisis in China as well as the looming likelihood of the Fed raising interest rates before the year is over (possibly in November) spooked the broad stock market today into a serious tumble. All of our major indices (DOW, S&P 500, NASDAQ) are now looking seriously bearish or at least potentially very bearish.
The DOW is the most bearish looking index right now. It is most likely an older medium-term cycle that is now headed down to its final low, which is due in 4-8 weeks. That would put the final bottom sometime in October/November.. How low could it go? Well, 33,271, the start of the cycle back in June is a likely first target to test. Today's plunge is already taking us fairly close to that level. A second target below that would be around 32,780. If a major long-term correction is underway (now possible), the DOW could even get as low as 27,000 pretty quickly. One likely scenario now would be to see the current medium-term cycle bottom in October followed by the start of a new medium-term cycle which could rally into the end of the year. That new cycle may or may not make a new all-time high, but once it tops out, we would expect it to start a long correction to the bottom of a longer-term cycle over the next few years. This could be a potentially VERY serious correction (possibly 50% or more) - the one we have been anticipating for some time now.
The S&P 500 is also an older cycle, and today it has, like the DOW, now taken out its Aug. 19 low. This is a bearish signal and indicates the medium-term cycle has likely peaked and is now headed to its final corrective bottom, which is due in 3-10 weeks, maybe longer. A likely target for this bottom would be in the 4,100 - 4,200 range.
We have been labeling the NASDAQ a younger cycle that started with its 14,424 low on Aug. 19, but today's steep plunge is putting that into question. It could still be a young cycle if this decline holds that 14,424 low and forms a "double-bottom". But if that low breaks, it's possible an older cycle could be bottoming anytime over the next four weeks. The target could be around 14,100.
Based on this analysis, I think the best trading strategy now is to wait for these medium-term cycles to bottom. This may give us a buying opportunity for at least a short-term rally at the start of the new cycles. But our main objective is to identify the final long-term top in this market and position ourselves to sell it short for the "big drop". If these indices can't make new all-time highs by the end of this year, that final top may already be in. Staying on the sidelines of the broad stock market for now.
The trend in the precious metals is not clear at the moment. Silver prices are clearly breaking well below the $23 low of Aug. 9, which we had labeled as the start of a new medium-term cycle. If that labeling is correct, silver has turned very bearish and prices are breaking down. There is, however, the possibility that Aug. 9 was not the start of a new cycle and that instead an older cycle is now completing its final corrective drop to its final bottom below $23. This view is supported by the fact that silver is breaking below its Aug. 9 low while gold is still holding well above its Aug. 9 low. This creates a strong intermarket bullish divergence between the two metals. Nevertheless, we can't rule out the bearish view yet. If silver is breaking down, it could pull gold down with it. If gold breaks below its Aug. 9 low ($1693), then that would confirm the bearish trend, and gold could be starting its long descent to its final 23 year cycle low (due around 2023 - 2024) with a price target back down to the $1000 area.
But there is still hope that gold can rally now and re-test and even exceed the recent $1915 high (from June 1), as long as prices stay above $1693. A bullish sign would be gold breaking and closing clearly above $1800 and silver above $23.50. Until that happens, we will remain on the sidelines of both metals.
Fears of a real estate crisis in China as well as the looming likelihood of the Fed raising interest rates before the year is over (possibly in November) spooked the broad stock market today into a serious tumble. All of our major indices (DOW, S&P 500, NASDAQ) are now looking seriously bearish or at least potentially very bearish.
The DOW is the most bearish looking index right now. It is most likely an older medium-term cycle that is now headed down to its final low, which is due in 4-8 weeks. That would put the final bottom sometime in October/November.. How low could it go? Well, 33,271, the start of the cycle back in June is a likely first target to test. Today's plunge is already taking us fairly close to that level. A second target below that would be around 32,780. If a major long-term correction is underway (now possible), the DOW could even get as low as 27,000 pretty quickly. One likely scenario now would be to see the current medium-term cycle bottom in October followed by the start of a new medium-term cycle which could rally into the end of the year. That new cycle may or may not make a new all-time high, but once it tops out, we would expect it to start a long correction to the bottom of a longer-term cycle over the next few years. This could be a potentially VERY serious correction (possibly 50% or more) - the one we have been anticipating for some time now.
The S&P 500 is also an older cycle, and today it has, like the DOW, now taken out its Aug. 19 low. This is a bearish signal and indicates the medium-term cycle has likely peaked and is now headed to its final corrective bottom, which is due in 3-10 weeks, maybe longer. A likely target for this bottom would be in the 4,100 - 4,200 range.
We have been labeling the NASDAQ a younger cycle that started with its 14,424 low on Aug. 19, but today's steep plunge is putting that into question. It could still be a young cycle if this decline holds that 14,424 low and forms a "double-bottom". But if that low breaks, it's possible an older cycle could be bottoming anytime over the next four weeks. The target could be around 14,100.
Based on this analysis, I think the best trading strategy now is to wait for these medium-term cycles to bottom. This may give us a buying opportunity for at least a short-term rally at the start of the new cycles. But our main objective is to identify the final long-term top in this market and position ourselves to sell it short for the "big drop". If these indices can't make new all-time highs by the end of this year, that final top may already be in. Staying on the sidelines of the broad stock market for now.
The trend in the precious metals is not clear at the moment. Silver prices are clearly breaking well below the $23 low of Aug. 9, which we had labeled as the start of a new medium-term cycle. If that labeling is correct, silver has turned very bearish and prices are breaking down. There is, however, the possibility that Aug. 9 was not the start of a new cycle and that instead an older cycle is now completing its final corrective drop to its final bottom below $23. This view is supported by the fact that silver is breaking below its Aug. 9 low while gold is still holding well above its Aug. 9 low. This creates a strong intermarket bullish divergence between the two metals. Nevertheless, we can't rule out the bearish view yet. If silver is breaking down, it could pull gold down with it. If gold breaks below its Aug. 9 low ($1693), then that would confirm the bearish trend, and gold could be starting its long descent to its final 23 year cycle low (due around 2023 - 2024) with a price target back down to the $1000 area.
But there is still hope that gold can rally now and re-test and even exceed the recent $1915 high (from June 1), as long as prices stay above $1693. A bullish sign would be gold breaking and closing clearly above $1800 and silver above $23.50. Until that happens, we will remain on the sidelines of both metals.
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