After looking over the precious metals charts this week-end, I don't see a strong reason to abandon my long positions in gold and silver before tomorrow's market open. As I stated in Friday's blog, last week's rally in both metals was rather lackluster and Friday's prices were down which suggests the possibility of lower prices into this week's reversal zone (Sept. 18 - 27). But if that happens, we would still be looking to go long. Silver is very close to breaking below last week's new low at $13.95. If it does that in next week's reversal zone and gold stays above its Aug. 15 low of $1161 (it is well above that now) then we will have yet another bullish divergence signal in a reversal zone and a strong reason to be long in both metals. The risk here is that if both metals fall strongly we could end up a bit in the red before a final bottom is in (which could be as late as the first week in October). Let's keep a close eye on prices over the next several days. Gold moving below last week's low of $1188 and especially below $1180 might be a warning sign to sell. Holding my long positions in gold and silver for now.
Unless the DOW turns down sharply early next week, it looks like the broad stock market could continue rallying into our next reversal zone for equities coming up Sept. 28 - Oct. 8. But a downturn could be imminent. The DOW is still far below its all-time high of 26,617 from January while the S&P 500 and NASDAQ made new all-time highs in August (strong bearish divergence). Furthermore, the NASDAQ did not make a new weekly high last week as the DOW and S&P 500 did thus giving us more bearish divergence. On top of this, it seems like "trade wars" with China are set to escalate this week as the Trump administration plans to unveil fresh tariffs on $200 billion in Chinese products entering the U.S. This will definitely make Wall Street nervous and prone to selling off. On the other hand, many investors seem to have confidence in Mr. Trump's strategies so we will have to see how this plays out this week. We are ready to cover our short position in the DOW if this market seems bullish past Monday, but for now I am holding my short position.
China and "trade wars" may dominate geopolitical news this week as hurricane Florence winds down, but we shouldn't forget that the U.S. is still planning sanctions against Iran which could keep crude oil prices volatile. I am staying on the sidelines of this market for now.