In last Monday's blog I wrote:
"...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."
That Dec. NASDAQ 100 INDEX still has not exceeded 6,026 and is dropping steeply today along with the DOW, S&P 500 and NASDAQ COMPOSITE INDEX (COMBINED). We could thus be falling now into the upcoming reversal zone that begins near the end of this week and continues through next week (Sept. 27 - Oct.6). The longer-term cycles in the broad stock market are a bit confusing at the moment. They tell us that a long-term cycle high of major importance is due to be followed by a significant correction, but it is still not clear when that top will happen (it may have already happened with the recent all-time highs in the DOW and S&P 500). Several scenarios are possible now, but I am going to go with the idea that this market is still bullish and that it is taking a modest sub-cycle dip here before continuing higher. We will thus watch for a low to buy this week. If the DOW gets below 21,800 and/or the S&P breaks below 2,460, however, we may have to give up our bullish view. Still on the sidelines of the broad stock market.
Gold and silver prices are rallying today. Could we have seen the bottom of the recent steep correction in these metals with last Thursday's lows of $1,286 in gold and $16.85 in silver (spot prices)? It's possible, but we are now approaching another significant reversal zone for precious metals (Sept. 27 - Oct. 6), and there was no intermarket bullish divergence signal last week (both metals made new lows). Commitment of Traders (COT) charts are still looking somewhat bearish so I think gold and silver prices could move lower into this upcoming reversal zone. If they do, and one metal makes a new weekly low but not the other (bullish divergence), we will look to buy. On the sidelines of gold and silver for now.
The long-term chart of the U.S. Dollar Index is looking very bearish and is suggesting the possibility of a severe breakdown in the dollar soon. Short-term technical signals, however, are pointing to at least a brief rally in the greenback from a support level around 91. This dollar rally could help push gold and silver prices lower as suggested above, but it may not get very far before turning down again. That could happen in this upcoming reversal zone, which may be a good time to go long in the precious metals.
Our crude oil long position is doing well. We entered this trade on Sept. 11 with prices around $48. Today crude shot up to over $52. Our target for this rally was (is) $53 - $54 so we should be thinking about taking profits now. We just entered a reversal zone for crude oil on Friday, and the center point of this reversal is Wednesday. Let's see if we can at least hit $53 over the next few days before selling. (Of course, traders may take profits now if they wish as we are close to our target). Holding my long position in crude.