The broad stock market is very tricky to call right now due to increased volatility created by the Fed's rate hike last week as well as the fact that this week ends with a major holiday (Chistmas on Friday). Last Friday, equity markets continued to show their displeasure with the first rate hike in nine years as the DOW dropped 367 points (following a 253 point loss on Thursday). The DOW broke below its Monday low while the S&P 500 and NASDAQ stayed above their lows from Monday. This is a case of intermarket bullish divergence unless these latter two indices break their lows. The end of this coming week through Thursday of the following week is a weak reversal zone for equity markets, so we could see a cycle bottom forming in this time in the DOW, especially if the S&P 500 and NASDAQ can stay above their lows from last Monday (1993 in the S&P 500 and 4871 in the NASDAQ Composite Index). If all three indices make new lows next week then we could see equities continue to fall into mid-January and a final cycle bottom then. Still on the sidelines of the broad stock market.
Last week silver made a new six year low while gold stayed above its multi-year low from Dec.2 which is another case of intermarket bullish divergence. There are still many short-term technical signals suggesting that these metals are forming a medium-term cycle bottom now so we are still holding our long positions in both gold and silver. As I mentioned in my last blog, we don't want to see gold move below its Dec.2 low ($1046) as that would mean prices could move lower into mid-January. If that low holds next week, we could see a rally towards $1100 in gold and $15 in silver. Holding my long position in gold and silver for now.