MARKETS UPDATE (9:00 pm EST)
After a steep plunge in equities last Monday (Dec. 20), I wrote in my blog on the broad stock market:
"Unless this market can snap back strongly tomorrow, it looks like our chances for a "Santa Claus" rally are almost gone."
Well, the markets DID snap back on Tuesday and rose steeply into Thursday (Wall Street was closed on Friday). So despite a three trade-day tumble (Dec. 17 - 20), our "Santa Claus rally" seems to be back on track. But can it continue for another week into the New Year's Day holiday? That is a good question.
The markets closed last week with the S&P 500 and NASDAQ both making new weekly highs but the DOW unable to exceed its previous week's high. We thus have a bearish divergence signal right in the middle of our current strong reversal zone (Dec. 21 - 31). That bearish divergence signal will be even stronger if the S&P 500 makes a new all-time high next week (it is VERY close), without the DOW and NASDAQ (they are not as close to their all-time highs), and thus a correction down could be imminent. But the "holiday spirit" is still with us through Jan. 1, and this usually favors rallies in equities, or at least it tends to delay any serious sell-offs. If this market does edge up some more next week and the S&P 500 hits a new all-time high without one or both of the other two indices, we may have a very good opportunity to sell the market short. We will watch for that. We are still on the sidelines of the broad stock market.
Speaking of bearish divergences, last week gold fell just short of making a new weekly high while silver pushed well above its previous week's high. As with equities, this is happening in the center of a strong reversal zone. Although gold may have started a new medium-term cycle on Dec. 15 and is potentially very bullish, the possibility of an imminent correction in both metals will keep us on the sidelines for now.
In my Dec. 13 blog on crude oil I suggested two possible scenarios for crude:
"There are two possible scenarios for crude oil right now. One is bearish and the other could be very bullish.
The bearish scenario says that the deep low of $62.43 (Jan. contract chart) on Dec. 2 was a sub-cycle low near the end of an old medium-term cycle. This should be followed by a short and modest rally to a sub-cycle top and then a final plunge to the end of the medium-term cycle below $62.43.
But it is also possible that Dec. 2 low was the end of the old medium-term cycle and the start of a new one. Furthermore, it may also be the start of a new longer-term (17 month) cycle. If this is true, crude could be VERY bullish now with prices ready to surge above the $83.83 high of October 25."
Early last week as crude prices plummeted with the broad stock market, I thought the first (bearish) scenario was playing out. But with crude's recovery alongside equities, it seems like the second (bullish) scenario of a new medium-term cycle starting Dec. 2 is still possible. If prices can now close above $76, it would give more support to that idea. We will stay on the sidelines of crude until the cycle pattern is more clear.
After a steep plunge in equities last Monday (Dec. 20), I wrote in my blog on the broad stock market:
"Unless this market can snap back strongly tomorrow, it looks like our chances for a "Santa Claus" rally are almost gone."
Well, the markets DID snap back on Tuesday and rose steeply into Thursday (Wall Street was closed on Friday). So despite a three trade-day tumble (Dec. 17 - 20), our "Santa Claus rally" seems to be back on track. But can it continue for another week into the New Year's Day holiday? That is a good question.
The markets closed last week with the S&P 500 and NASDAQ both making new weekly highs but the DOW unable to exceed its previous week's high. We thus have a bearish divergence signal right in the middle of our current strong reversal zone (Dec. 21 - 31). That bearish divergence signal will be even stronger if the S&P 500 makes a new all-time high next week (it is VERY close), without the DOW and NASDAQ (they are not as close to their all-time highs), and thus a correction down could be imminent. But the "holiday spirit" is still with us through Jan. 1, and this usually favors rallies in equities, or at least it tends to delay any serious sell-offs. If this market does edge up some more next week and the S&P 500 hits a new all-time high without one or both of the other two indices, we may have a very good opportunity to sell the market short. We will watch for that. We are still on the sidelines of the broad stock market.
Speaking of bearish divergences, last week gold fell just short of making a new weekly high while silver pushed well above its previous week's high. As with equities, this is happening in the center of a strong reversal zone. Although gold may have started a new medium-term cycle on Dec. 15 and is potentially very bullish, the possibility of an imminent correction in both metals will keep us on the sidelines for now.
In my Dec. 13 blog on crude oil I suggested two possible scenarios for crude:
"There are two possible scenarios for crude oil right now. One is bearish and the other could be very bullish.
The bearish scenario says that the deep low of $62.43 (Jan. contract chart) on Dec. 2 was a sub-cycle low near the end of an old medium-term cycle. This should be followed by a short and modest rally to a sub-cycle top and then a final plunge to the end of the medium-term cycle below $62.43.
But it is also possible that Dec. 2 low was the end of the old medium-term cycle and the start of a new one. Furthermore, it may also be the start of a new longer-term (17 month) cycle. If this is true, crude could be VERY bullish now with prices ready to surge above the $83.83 high of October 25."
Early last week as crude prices plummeted with the broad stock market, I thought the first (bearish) scenario was playing out. But with crude's recovery alongside equities, it seems like the second (bullish) scenario of a new medium-term cycle starting Dec. 2 is still possible. If prices can now close above $76, it would give more support to that idea. We will stay on the sidelines of crude until the cycle pattern is more clear.
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