MARKETS UPDATE (9:35 pm EST)
Current cycle analysis of the broad stock market still shows that a new medium-term cycle started with the lows on Feb. 9 in all three market indices (DOW, S&P 500, and NASDAQ). These indices then rallied into mid-March and fell to a sub-cycle low on April 2. Because the DOW fell a bit below the Feb. 9 low that started its cycle, there is a good chance that this market is going to be pointed down until the end of the current cycle (i.e. at least several more weeks but possibly much longer). Shorter-term, however, we are now seeing a sub-cycle rally off those April 2 lows, and there is a very good chance that we will see the top to that rally in this week's reversal zone centered on April 18 (Wednesday). It is possible the rally topped out on Friday, but we didn't see any bearish divergence, and we were a bit short of our ideal targets (25,000 in the DOW and 2,700 in the S&P 500). Let's watch for these signals next week for an opportunity to sell short. On the sidelines of the broad stock market.
Interestingly, the U.S. military chose to strike Syria on Friday evening. This, of course, was to avoid panicking financial markets and to cause the least amount of alarm to U.S. citizens (people's interest in the news is usually at a weekly low on Friday night). Traders have now had time to digest this news and speculate on what will happen next. The damage inflicted by the strikes was very minimal and resulted in no civilian casualties and no significant damage to president Assad's military capabilities. It seems that the missile strikes were designed to be a symbolic display of strength as well as a demonstration of the West taking a moral stand against the use of chemical weapons. Despite the heated rhetoric leading up to the air strikes, Russia appears to be exercising restraint towards any military counter-strike. Equity markets do not like uncertainty, and now that the strikes are over there is a good chance the broad stock market will experience a relief rally early next week. This could push equities to a top as described above to be followed by a significant correction.
Gold and silver are very tricky to call right now. Both metals surged last week and both made new monthly highs in the center of a reversal zone specifically relevant to the precious metals. On cue they reversed down, but this week we have unique technical signals that point to a possible strong rally in both gold and silver that could start on Monday and continue into the following week. It all depends on whether gold and/or silver started new cycle(s) recently or if they are still completing older cycles. A new cycle would be bullish, but an older cycle means that lower prices are still ahead until the cycle makes its final bottom. If prices move lower after Monday, we will likely see the bearish scenario unfold. Let's see what happens on Monday. We will continue to hold our long position in gold as long as prices stay above $1320. We may look to buy silver on Monday if we see intermarket bearish divergence (i.e. one of these metals, but not both, making a new weekly low). Any new lows after Monday in either metal would be a bearish sign.
Currently long in gold and on the sidelines of silver. *Please note that even if these metals are completing older cycles, the bottoms of those cycles are due soon. The longer-term picture for both metals is still bullish so we would be looking to buy at those final cycle bottoms.
Crude oil's cycle structure is a bit ambiguous right now, but prices are rallying strongly into this week's reversal zone which is very relevant to crude so we could easily see a high this week followed by some sort of correction. If prices edge higher this week, we may look for a spot to sell short. We should note here that last week's steep rally in crude was undoubtedly fueled by the anticipation of a military strike in Syria. The strikes are likely over so we may see prices easing back down sometime this week. Out of crude oil for now.
Current cycle analysis of the broad stock market still shows that a new medium-term cycle started with the lows on Feb. 9 in all three market indices (DOW, S&P 500, and NASDAQ). These indices then rallied into mid-March and fell to a sub-cycle low on April 2. Because the DOW fell a bit below the Feb. 9 low that started its cycle, there is a good chance that this market is going to be pointed down until the end of the current cycle (i.e. at least several more weeks but possibly much longer). Shorter-term, however, we are now seeing a sub-cycle rally off those April 2 lows, and there is a very good chance that we will see the top to that rally in this week's reversal zone centered on April 18 (Wednesday). It is possible the rally topped out on Friday, but we didn't see any bearish divergence, and we were a bit short of our ideal targets (25,000 in the DOW and 2,700 in the S&P 500). Let's watch for these signals next week for an opportunity to sell short. On the sidelines of the broad stock market.
Interestingly, the U.S. military chose to strike Syria on Friday evening. This, of course, was to avoid panicking financial markets and to cause the least amount of alarm to U.S. citizens (people's interest in the news is usually at a weekly low on Friday night). Traders have now had time to digest this news and speculate on what will happen next. The damage inflicted by the strikes was very minimal and resulted in no civilian casualties and no significant damage to president Assad's military capabilities. It seems that the missile strikes were designed to be a symbolic display of strength as well as a demonstration of the West taking a moral stand against the use of chemical weapons. Despite the heated rhetoric leading up to the air strikes, Russia appears to be exercising restraint towards any military counter-strike. Equity markets do not like uncertainty, and now that the strikes are over there is a good chance the broad stock market will experience a relief rally early next week. This could push equities to a top as described above to be followed by a significant correction.
Gold and silver are very tricky to call right now. Both metals surged last week and both made new monthly highs in the center of a reversal zone specifically relevant to the precious metals. On cue they reversed down, but this week we have unique technical signals that point to a possible strong rally in both gold and silver that could start on Monday and continue into the following week. It all depends on whether gold and/or silver started new cycle(s) recently or if they are still completing older cycles. A new cycle would be bullish, but an older cycle means that lower prices are still ahead until the cycle makes its final bottom. If prices move lower after Monday, we will likely see the bearish scenario unfold. Let's see what happens on Monday. We will continue to hold our long position in gold as long as prices stay above $1320. We may look to buy silver on Monday if we see intermarket bearish divergence (i.e. one of these metals, but not both, making a new weekly low). Any new lows after Monday in either metal would be a bearish sign.
Currently long in gold and on the sidelines of silver. *Please note that even if these metals are completing older cycles, the bottoms of those cycles are due soon. The longer-term picture for both metals is still bullish so we would be looking to buy at those final cycle bottoms.
Crude oil's cycle structure is a bit ambiguous right now, but prices are rallying strongly into this week's reversal zone which is very relevant to crude so we could easily see a high this week followed by some sort of correction. If prices edge higher this week, we may look for a spot to sell short. We should note here that last week's steep rally in crude was undoubtedly fueled by the anticipation of a military strike in Syria. The strikes are likely over so we may see prices easing back down sometime this week. Out of crude oil for now.
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