BROAD STOCK MARKET TRADE ALERT and MARKETS UPDATE (8:00 pm EST)
My "sigh of relief" (for our short position in equities) with Thursday's sharp drop in the broad stock market was short-lived as Friday saw a strong rally that pushed all three market indices (DOW, S&P 500, NASDAQ) back above their mid-October highs.
Last Tuesday I wrote:
"We are now at a critical juncture that will determine which labeling is correct. If our old labeling is correct (new medium-term cycles starting from the Aug. lows), the trend is definitely bearish. With this labeling, we expect any rally to top out this week, turn sharply down again and continue to decline into the end of the year....If our new labeling is correct (new medium-term cycles starting from the Oct. 26-27 lows), these indices should have no trouble exceeding their mid-Oct. highs and should rally strongly into the end of the year."
Friday's close above the mid-Oct. highs in all three indices negated last week's bearish divergence signal and strongly suggests the new labeling is correct. That is, it looks like new medium-term cycles began with the Oct. 27-27 lows. Friday was technically one day out of our strong reversal zone, so it looks like this "reversal" could turn out to be a "break-out" instead. Our stop loss for our short position in this market was based on all three indices exceeding those mid-Oct. highs, so some traders may have covered their short positions already. I was not able to trade on Friday and am still holding my short position which I will cover (unload) at Monday's market open. Any traders still holding shorts can do the same. It's possible Friday's break-out could be a "fake-out" with the market turning strongly down early next week. If that happens, we might get a better exit price on Monday's early trade, but we have very little loss on this trade anyway because we entered it on Oct. 12 and are close to our entry point - especially in the S&P 500 and NASDAQ (we traded the S&P 500). I am placing an order this week-end to cover (unload) my short position in the broad stock market at Monday's market open.
Gold and silver prices fell some more on Friday which puts our long gold position (entered on Thursday) sightly in the red. Support around $1950 was broken, but prices are still above the 45-day moving average (around $1923), and we are still inside a reversal zone for precious metals as well as a potential "pivot point" for gold though next Wednesday. Let's hold our long position in gold and stay on the sidelines of silver for now.
A rising U.S. Dollar Index last week put downward pressure on the precious metals, but the greenback is now coming up against a resistance line (formally support) around 106 where the 45-day and 15-day moving averages are converging. If this turns the dollar back down, it could send gold and silver prices back up.
Crude oil may be finding a support around $75 and bouncing up from last week's low of $74.91 (December contract chart), but as I pointed out in my last blog on crude, the current medium-term cycle has likely turned bearish (whether it started on Oct. 24 or Aug. 6) so we are not keen to buy right now. We are staying on the sidelines of crude for the time being.
My "sigh of relief" (for our short position in equities) with Thursday's sharp drop in the broad stock market was short-lived as Friday saw a strong rally that pushed all three market indices (DOW, S&P 500, NASDAQ) back above their mid-October highs.
Last Tuesday I wrote:
"We are now at a critical juncture that will determine which labeling is correct. If our old labeling is correct (new medium-term cycles starting from the Aug. lows), the trend is definitely bearish. With this labeling, we expect any rally to top out this week, turn sharply down again and continue to decline into the end of the year....If our new labeling is correct (new medium-term cycles starting from the Oct. 26-27 lows), these indices should have no trouble exceeding their mid-Oct. highs and should rally strongly into the end of the year."
Friday's close above the mid-Oct. highs in all three indices negated last week's bearish divergence signal and strongly suggests the new labeling is correct. That is, it looks like new medium-term cycles began with the Oct. 27-27 lows. Friday was technically one day out of our strong reversal zone, so it looks like this "reversal" could turn out to be a "break-out" instead. Our stop loss for our short position in this market was based on all three indices exceeding those mid-Oct. highs, so some traders may have covered their short positions already. I was not able to trade on Friday and am still holding my short position which I will cover (unload) at Monday's market open. Any traders still holding shorts can do the same. It's possible Friday's break-out could be a "fake-out" with the market turning strongly down early next week. If that happens, we might get a better exit price on Monday's early trade, but we have very little loss on this trade anyway because we entered it on Oct. 12 and are close to our entry point - especially in the S&P 500 and NASDAQ (we traded the S&P 500). I am placing an order this week-end to cover (unload) my short position in the broad stock market at Monday's market open.
Gold and silver prices fell some more on Friday which puts our long gold position (entered on Thursday) sightly in the red. Support around $1950 was broken, but prices are still above the 45-day moving average (around $1923), and we are still inside a reversal zone for precious metals as well as a potential "pivot point" for gold though next Wednesday. Let's hold our long position in gold and stay on the sidelines of silver for now.
A rising U.S. Dollar Index last week put downward pressure on the precious metals, but the greenback is now coming up against a resistance line (formally support) around 106 where the 45-day and 15-day moving averages are converging. If this turns the dollar back down, it could send gold and silver prices back up.
Crude oil may be finding a support around $75 and bouncing up from last week's low of $74.91 (December contract chart), but as I pointed out in my last blog on crude, the current medium-term cycle has likely turned bearish (whether it started on Oct. 24 or Aug. 6) so we are not keen to buy right now. We are staying on the sidelines of crude for the time being.
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