MARKETS UPDATE (10:00 pm EDT)
Apparently the DOW was not ready to roll over with Last Thursday's high as it pushed higher on Friday and closed above 41,000. This end of week surge was almost certainly triggered by Federal Reserve Chairman Jerome Powell's speech on Thursday in Wyoming's Jackson Hole in which he expressed strong confidence in imminent financial policy easing. This virtually guarantees there will be a rate cut in September by the Fed. Although he cautioned that the timing and number of rate cuts going forward would depend on incoming data, Powell seemed outright dovish in his statement that "The time has come for policy to adjust." Analysts had already been expecting a rate cut in September, so the effect of Powell's speech on the broad stock market may be short-lived.
Both the DOW and S&P 500 are VERY close to making new all-time highs, and they could do this (especially after Powell's "pep talk") as we enter a new strong general reversal zone next week (Aug. 26 - Sept. 6). The NASDAQ, however, is still a comfortable distance below its all-time high (18,671) and is now encountering resistance at the 18,000 level. If it rallies strongly now, it too might make a new all-time high over the next two weeks, but the other two indices would certainly do so first and create a strong bearish divergence signal inside our reversal zone. Next Wednesday could be an important pivot point for all markets, so I will probably hold my short position in the broad stock market (DOW) until then with the expectation of an imminent top and reversal back down.
Gold and silver prices also rallied on Friday, most likely also due to Powell's speech. The U.S. Dollar Index does not like a dovish Fed, so the greenback's drop on Friday was not unexpected, and a drop in the dollar usually boosts precious metal prices. But as I mentioned above, these price movements may turn out to be a "flash in the pan" as most traders and investors were already expecting a rate cut in September, so that may already be factored into the markets.
Gold made a new all-time high last week at $2530 with silver still well below its high of $32.38 in May (and certainly far below its all-time high near $50 in 2011). This gives us a strong bearish divergence between the two metals as we enter our new reversal zone. Silver's rise on Friday to $29.87 did not exceed its high from earlier in the week and its still below a resistance line at $30, so there's a good chance prices could roll over soon. This is our expectation based on silver's current medium-term cycle beginning on June 26 which would make the cycle's trend very bearish. But as I mentioned in last Monday's blog on silver:
"Alternatively, there is a slight chance that the Aug. 8 low at $26.52 could have been the start of a new medium-term cycle. If that's the case, prices could be very bullish."
If silver closes and stays above $30 past next Wednesday, I may consider covering my short position in this metal. But for now, I am staying with my short position. We are still on the sidelines of gold.
In my recent (Aug. 20) update on the U.S. Dollar Index, I wrote:
"Our preferred view is bullish with a younger 14-year cycle about to rally strongly. But the U.S. Dollar Index is now approaching a support area that if broken could make the bearish view much more likely. There is an upward sloping trend line currently around 101.52 that the dollar is testing today. A weekly close below there would not be good. A close below last year's lows of 100.62 (Dec.) and 99.58 (July) would also be bearish, and a clear break below the Jan. 2021 low of 89.20 would confirm the bearish labeling of an older cycle taking a deep correction into next year."
The greenback closed the week at 100.72 which is a little concerning, but because the effect of Powell's speech may be short-term, we may see the U.S. dollar snapping back up soon, especially as this deep low is happening as we enter a strong reversal zone for all markets. We will keep a close eye on this index next week.
Crude oil's "double-bottom" around $72 (Oct. contract chart) held firm last week, and prices rallied strongly on Friday.
The cycle and trend in this market are still not clear. Last week's low was near the center of a strong reversal zone, which along with Friday's rally is bullish. But we note that our new reversal zone could put a damper on any rally and possibly turn it back down. It is best to stay on the sidelines of this market for now.
Apparently the DOW was not ready to roll over with Last Thursday's high as it pushed higher on Friday and closed above 41,000. This end of week surge was almost certainly triggered by Federal Reserve Chairman Jerome Powell's speech on Thursday in Wyoming's Jackson Hole in which he expressed strong confidence in imminent financial policy easing. This virtually guarantees there will be a rate cut in September by the Fed. Although he cautioned that the timing and number of rate cuts going forward would depend on incoming data, Powell seemed outright dovish in his statement that "The time has come for policy to adjust." Analysts had already been expecting a rate cut in September, so the effect of Powell's speech on the broad stock market may be short-lived.
Both the DOW and S&P 500 are VERY close to making new all-time highs, and they could do this (especially after Powell's "pep talk") as we enter a new strong general reversal zone next week (Aug. 26 - Sept. 6). The NASDAQ, however, is still a comfortable distance below its all-time high (18,671) and is now encountering resistance at the 18,000 level. If it rallies strongly now, it too might make a new all-time high over the next two weeks, but the other two indices would certainly do so first and create a strong bearish divergence signal inside our reversal zone. Next Wednesday could be an important pivot point for all markets, so I will probably hold my short position in the broad stock market (DOW) until then with the expectation of an imminent top and reversal back down.
Gold and silver prices also rallied on Friday, most likely also due to Powell's speech. The U.S. Dollar Index does not like a dovish Fed, so the greenback's drop on Friday was not unexpected, and a drop in the dollar usually boosts precious metal prices. But as I mentioned above, these price movements may turn out to be a "flash in the pan" as most traders and investors were already expecting a rate cut in September, so that may already be factored into the markets.
Gold made a new all-time high last week at $2530 with silver still well below its high of $32.38 in May (and certainly far below its all-time high near $50 in 2011). This gives us a strong bearish divergence between the two metals as we enter our new reversal zone. Silver's rise on Friday to $29.87 did not exceed its high from earlier in the week and its still below a resistance line at $30, so there's a good chance prices could roll over soon. This is our expectation based on silver's current medium-term cycle beginning on June 26 which would make the cycle's trend very bearish. But as I mentioned in last Monday's blog on silver:
"Alternatively, there is a slight chance that the Aug. 8 low at $26.52 could have been the start of a new medium-term cycle. If that's the case, prices could be very bullish."
If silver closes and stays above $30 past next Wednesday, I may consider covering my short position in this metal. But for now, I am staying with my short position. We are still on the sidelines of gold.
In my recent (Aug. 20) update on the U.S. Dollar Index, I wrote:
"Our preferred view is bullish with a younger 14-year cycle about to rally strongly. But the U.S. Dollar Index is now approaching a support area that if broken could make the bearish view much more likely. There is an upward sloping trend line currently around 101.52 that the dollar is testing today. A weekly close below there would not be good. A close below last year's lows of 100.62 (Dec.) and 99.58 (July) would also be bearish, and a clear break below the Jan. 2021 low of 89.20 would confirm the bearish labeling of an older cycle taking a deep correction into next year."
The greenback closed the week at 100.72 which is a little concerning, but because the effect of Powell's speech may be short-term, we may see the U.S. dollar snapping back up soon, especially as this deep low is happening as we enter a strong reversal zone for all markets. We will keep a close eye on this index next week.
Crude oil's "double-bottom" around $72 (Oct. contract chart) held firm last week, and prices rallied strongly on Friday.
The cycle and trend in this market are still not clear. Last week's low was near the center of a strong reversal zone, which along with Friday's rally is bullish. But we note that our new reversal zone could put a damper on any rally and possibly turn it back down. It is best to stay on the sidelines of this market for now.
RSS Feed