MARKETS UPDATE (3:00 am EDT)
The next three weeks could see a lot of volatility in all the markets that we follow so we need to be especially careful (nimble, flexible, and perhaps a little more conservative) in our trading during this period.
It looks like the broad stock market may finally be taking the correction that we've been waiting for. On Tuesday last week both the DOW and S&P 500 made new all-time highs while the NASDAQ did not. This continued the intermarket bearish divergence signal from the previous week. Tuesday was technically the last day of our critical reversal zone for equities, and on Wednesday, as if on cue, all three indices began to fall and continued a steep drop into Friday. (Note that our cycle and timing analysis showed that this market was "ripe" for a correction, but the trigger came from a geopolitical event - the U.S. and North Korea threatening each other with nuclear bombs). If the current medium-term cycle in this market is now falling to its final cycle bottom, we could see these three indices move quite a bit lower. We note, however, that we are moving into another potentially very strong reversal zone for all markets that is centered near this month's solar eclipse (Aug. 21). If this cycle is going to bottom in this upcoming reversal zone, equities could fall very steeply this week. The alternative is that we may just see another sub-cycle dip that could reverse quickly back up to form another high in early September before plunging down to the final cycle bottom. We need to be alert to both possibilities. The final cycle bottom could be as much as 8-10 % (or more) from the cycle top so our main focus is still to sell short the final top. That top could have been last Tuesday for the DOW and S&P 500 (and July 27 for the NASDAQ). Our short position (entered Aug. 1) is now making a profit, and we will hold on to it as we wait to see if this correction moves lower next week.
Gold and silver rallied strongly last week and made it fairly clear that both metals started new medium-term cycles on July 10 and are now bullish. Prices could continue to rally this week, but Friday is the center point of another reversal zone specifically for precious metals and so another sub-cycle correction is likely imminent. Instead of chasing this rally, it may be wiser to wait for this correction and buy at a better entry point. Gold could get to $1300 or even higher before topping. Staying on the sidelines of both gold and silver for now.
After bouncing and rallying a bit off of support at 92.8 on Aug. 4, the U.S. Dollar Index fell back again last week and settled just above 93. As I've mentioned in previous blogs, the dollar is dangerously close to breaking down. Directional momentum in the dollar is nearly 100% bearish, and the greenback is testing a "last ditch" support area at 92 - 93. A clear break below there could lead to a severe plunge. Such a scenario could kick start a major rally in the precious metals. One thing the dollar has going for it this week is that it is entering a wide reversal zone specifically for currencies (Aug. 15 - 28). If that support at 92 - 93 can hold, the dollar could stage another rally. Even if it does, however, it may be hard for any rally to get very far as it will encounter a lot of overhead resistance all the way up to 100.
Crude oil has been falling, but it has yet to reach our target area of $45 - $47 for a sub-cycle correction. On Friday prices got down to $47.98. Let's see if they can go lower as we move into the next reversal zone in the second half of this week. Still on the sidelines of crude oil but looking to buy soon.
The next three weeks could see a lot of volatility in all the markets that we follow so we need to be especially careful (nimble, flexible, and perhaps a little more conservative) in our trading during this period.
It looks like the broad stock market may finally be taking the correction that we've been waiting for. On Tuesday last week both the DOW and S&P 500 made new all-time highs while the NASDAQ did not. This continued the intermarket bearish divergence signal from the previous week. Tuesday was technically the last day of our critical reversal zone for equities, and on Wednesday, as if on cue, all three indices began to fall and continued a steep drop into Friday. (Note that our cycle and timing analysis showed that this market was "ripe" for a correction, but the trigger came from a geopolitical event - the U.S. and North Korea threatening each other with nuclear bombs). If the current medium-term cycle in this market is now falling to its final cycle bottom, we could see these three indices move quite a bit lower. We note, however, that we are moving into another potentially very strong reversal zone for all markets that is centered near this month's solar eclipse (Aug. 21). If this cycle is going to bottom in this upcoming reversal zone, equities could fall very steeply this week. The alternative is that we may just see another sub-cycle dip that could reverse quickly back up to form another high in early September before plunging down to the final cycle bottom. We need to be alert to both possibilities. The final cycle bottom could be as much as 8-10 % (or more) from the cycle top so our main focus is still to sell short the final top. That top could have been last Tuesday for the DOW and S&P 500 (and July 27 for the NASDAQ). Our short position (entered Aug. 1) is now making a profit, and we will hold on to it as we wait to see if this correction moves lower next week.
Gold and silver rallied strongly last week and made it fairly clear that both metals started new medium-term cycles on July 10 and are now bullish. Prices could continue to rally this week, but Friday is the center point of another reversal zone specifically for precious metals and so another sub-cycle correction is likely imminent. Instead of chasing this rally, it may be wiser to wait for this correction and buy at a better entry point. Gold could get to $1300 or even higher before topping. Staying on the sidelines of both gold and silver for now.
After bouncing and rallying a bit off of support at 92.8 on Aug. 4, the U.S. Dollar Index fell back again last week and settled just above 93. As I've mentioned in previous blogs, the dollar is dangerously close to breaking down. Directional momentum in the dollar is nearly 100% bearish, and the greenback is testing a "last ditch" support area at 92 - 93. A clear break below there could lead to a severe plunge. Such a scenario could kick start a major rally in the precious metals. One thing the dollar has going for it this week is that it is entering a wide reversal zone specifically for currencies (Aug. 15 - 28). If that support at 92 - 93 can hold, the dollar could stage another rally. Even if it does, however, it may be hard for any rally to get very far as it will encounter a lot of overhead resistance all the way up to 100.
Crude oil has been falling, but it has yet to reach our target area of $45 - $47 for a sub-cycle correction. On Friday prices got down to $47.98. Let's see if they can go lower as we move into the next reversal zone in the second half of this week. Still on the sidelines of crude oil but looking to buy soon.
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