MARKETS UPDATE (11:00 pm EDT)
After crude oil's dramatic plunge last Thursday driven by President Trump's reciprocal tariff announcement, OPEC and its allies added further pressure to the sell-off by announcing larger-than-expected production increases. Prices dropped another $4 on Friday to close near $62 (May contract chart), and some analysts are predicting a further drop to $60. Other analysts point to the fact that Trump's tariffs on key OPEC nations (Russia, Iran, and Venezuela) may reduce their supplies to offset planned production estimates (note that oil and gas as commodities are exempt from the new tariffs).
As I mentioned in my last blog, we were expecting a correction in crude prices, and we got one with a top falling precisely in the center of a general reversal zone (April 1 - 8). The correction, however, was MUCH bigger than I expected. Prices are now below what had appeared to be the start of the current medium-term cycle ($64.85 on March 5). We may have to change the labeling of this cycle. We now need to consider the possibility that a 2 year longer-term cycle bottom is still in the process of forming (instead of having bottomed on March 5 as I had suggested in my last blog). If this is the case, it means the longer-term trend in crude has likely turned bearish because prices are now below the last bottom of a 2 year cycle ($63.28 on May 4, 2023).
Any traders who were stopped out at $64.85 should stay out for now. I am still long and will watch for a better exit point on any relief rally that could be forthcoming after such a steep drop.
The broad stock market also continued its panic sell-off on Friday triggered by the Trump tariffs. In last Thursday's blog I wrote:
"Today's market sell-off (triggered by President Trump's tariff announcement) hurled these indices below the March 13 lows which further confirms the bearish trend in the current medium-term cycles. So what does this all mean?
It means that these indices will fall lower until they reach the end of their medium-term cycles 2 - 12 weeks from now. Target prices for the cycle bottoms could be around 39,000 in the DOW and 5,200 for the S&P 500."
Friday's lows were already below these targets. There is another significant general reversal zone coming up (April 14 - 25) soon. We could see the sell-off continue into that time frame for a final cycle bottom. We will watch for that. Any modest rally following the final medium-term cycle bottom will mostly likely give us an opportunity to sell short as the overall trend of this market has turned bearish. We are still on the sidelines of the broad stock market.
Gold prices may be rolling over now and falling to a significant medium-term cycle low. A new reversal zone for the precious metals is coming up next week (April 9 - 18). A good price target for a low would be around $2800 - $2850. If gold moves into that range inside this reversal zone, it may be a good buying opportunity.
Unlike gold, silver prices fell dramatically last week as silver is not only a currency-backing precious metal but also an industrial metal used in high tech industries. It's value was thus more vulnerable to last week's tariff fears affecting the general economy. It is late in silver's current medium-term cycle, and we were expecting a sharp correction to the final bottom of the cycle. It is right on time. We normally anticipate a 2-5 week correction from the top (the top, in this case, was the March 28 high at $34.54). Next week is the second week of the correction down, and we are entering that new reversal zone at the end of the week. It looks like the final bottom could be imminent.
Unfortunately, as with crude oil, silver's correction has been unusually deep and is now testing the start of the medium-term cycle around $29. If it drops below that level, silver's trend will turn bearish. Although I was planning on going long at the cycle bottom, this may not be a good idea if the price continues to fall. We are still on the sidelines of both gold and silver for now.
After crude oil's dramatic plunge last Thursday driven by President Trump's reciprocal tariff announcement, OPEC and its allies added further pressure to the sell-off by announcing larger-than-expected production increases. Prices dropped another $4 on Friday to close near $62 (May contract chart), and some analysts are predicting a further drop to $60. Other analysts point to the fact that Trump's tariffs on key OPEC nations (Russia, Iran, and Venezuela) may reduce their supplies to offset planned production estimates (note that oil and gas as commodities are exempt from the new tariffs).
As I mentioned in my last blog, we were expecting a correction in crude prices, and we got one with a top falling precisely in the center of a general reversal zone (April 1 - 8). The correction, however, was MUCH bigger than I expected. Prices are now below what had appeared to be the start of the current medium-term cycle ($64.85 on March 5). We may have to change the labeling of this cycle. We now need to consider the possibility that a 2 year longer-term cycle bottom is still in the process of forming (instead of having bottomed on March 5 as I had suggested in my last blog). If this is the case, it means the longer-term trend in crude has likely turned bearish because prices are now below the last bottom of a 2 year cycle ($63.28 on May 4, 2023).
Any traders who were stopped out at $64.85 should stay out for now. I am still long and will watch for a better exit point on any relief rally that could be forthcoming after such a steep drop.
The broad stock market also continued its panic sell-off on Friday triggered by the Trump tariffs. In last Thursday's blog I wrote:
"Today's market sell-off (triggered by President Trump's tariff announcement) hurled these indices below the March 13 lows which further confirms the bearish trend in the current medium-term cycles. So what does this all mean?
It means that these indices will fall lower until they reach the end of their medium-term cycles 2 - 12 weeks from now. Target prices for the cycle bottoms could be around 39,000 in the DOW and 5,200 for the S&P 500."
Friday's lows were already below these targets. There is another significant general reversal zone coming up (April 14 - 25) soon. We could see the sell-off continue into that time frame for a final cycle bottom. We will watch for that. Any modest rally following the final medium-term cycle bottom will mostly likely give us an opportunity to sell short as the overall trend of this market has turned bearish. We are still on the sidelines of the broad stock market.
Gold prices may be rolling over now and falling to a significant medium-term cycle low. A new reversal zone for the precious metals is coming up next week (April 9 - 18). A good price target for a low would be around $2800 - $2850. If gold moves into that range inside this reversal zone, it may be a good buying opportunity.
Unlike gold, silver prices fell dramatically last week as silver is not only a currency-backing precious metal but also an industrial metal used in high tech industries. It's value was thus more vulnerable to last week's tariff fears affecting the general economy. It is late in silver's current medium-term cycle, and we were expecting a sharp correction to the final bottom of the cycle. It is right on time. We normally anticipate a 2-5 week correction from the top (the top, in this case, was the March 28 high at $34.54). Next week is the second week of the correction down, and we are entering that new reversal zone at the end of the week. It looks like the final bottom could be imminent.
Unfortunately, as with crude oil, silver's correction has been unusually deep and is now testing the start of the medium-term cycle around $29. If it drops below that level, silver's trend will turn bearish. Although I was planning on going long at the cycle bottom, this may not be a good idea if the price continues to fall. We are still on the sidelines of both gold and silver for now.
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