MARKETS UPDATE (11:00 pm EDST)
A current analysis of the broad stock market medium-term cycle pattern shows several different possibilities, and it will likely be at least several more weeks before this ambiguity is resolved. The lack of a definitive cycle position is preventing us from making a long-term trade, but we can still make short-term trades based on sub-cycle timing within our reversal zone time frames. Even this, however, is being hampered by the market's extreme volatility due to coronavirus fears.
Last week equities made a significant low on Monday and then rallied sharply into Thursday (before backing off a bit on Friday). Monday's low was early in our current reversal zone ( March 20 - April 6), and that reversal zone extends into all of this week. It's possible for markets to drop back to that bottom (or lower) this week for a new bottom (or a double bottom). We may even see that with intermarket bullish divergence (which we didn't get last Monday). If that happens, we will look for a buying opportunity. But if this market continues to rally this week, we could instead see a significant top in this reversal zone (especially if one or two - not all three - market indices - DOW, S&P 500, NASDAQ - make new highs - i.e. intermarket BEARISH divergence). That could give us a shorting opportunity. At the moment, I would say it is quite dangerous and risky to be long in this market. That could change, however, once we identify with more certainty the start of a new medium-term cycle. As I mentioned in my previous blog, we could see a very significant "snap back" rally into the summer (although I don't think the market will make new all-time highs before turning back down for a more severe correction). We are still on the sidelines of the broad stock market.
Gold and silver prices are also rising into the current reversal zone. Many technical signals are suggesting this market is getting ready to roll over and head down again. In other words, it looks at least short-term bearish. We need to note here that gold could still be longer-term bullish as long as the recent low around $1450 holds. Silver also looks bearish right now, and if it turns back down now, it could fall back to the $12 level. We will consider buying both metals if we see a reversal and those support levels hold. On the sidelines of gold and silver for now.
The precious metal rally last week was certainly helped by a steep fall in the U.S. Dollar Index. That decline in the greenback was the result of the Fed's announcement of unlimited QE (combined with its previously declared near zero benchmark interest rate). Needless to say, printing money "out of thin air" is not good for the greenback's value. But the Fed has now exhausted its bag of tricks. Interest rates cannot go lower (unless they turn negative) so the dollar may snap back and make another attempt to break through its Jan. 2017 high of 103.82. If it can do that, the greenback could become very bullish. Note that if this happens, it won't necessarily spell doom for gold and silver prices. Under certain circumstances, the U.S. dollar and the precious metals can rise together.
Last week crude oil prices held just above $20 (may contract chart), but tonight prices seem to be edging lower and making new lows. We are still in a reversal zone this week. If prices go lower (say to $16) but remain above $15, we may look for a spot to buy. Still on the sidelines of crude oil.
A current analysis of the broad stock market medium-term cycle pattern shows several different possibilities, and it will likely be at least several more weeks before this ambiguity is resolved. The lack of a definitive cycle position is preventing us from making a long-term trade, but we can still make short-term trades based on sub-cycle timing within our reversal zone time frames. Even this, however, is being hampered by the market's extreme volatility due to coronavirus fears.
Last week equities made a significant low on Monday and then rallied sharply into Thursday (before backing off a bit on Friday). Monday's low was early in our current reversal zone ( March 20 - April 6), and that reversal zone extends into all of this week. It's possible for markets to drop back to that bottom (or lower) this week for a new bottom (or a double bottom). We may even see that with intermarket bullish divergence (which we didn't get last Monday). If that happens, we will look for a buying opportunity. But if this market continues to rally this week, we could instead see a significant top in this reversal zone (especially if one or two - not all three - market indices - DOW, S&P 500, NASDAQ - make new highs - i.e. intermarket BEARISH divergence). That could give us a shorting opportunity. At the moment, I would say it is quite dangerous and risky to be long in this market. That could change, however, once we identify with more certainty the start of a new medium-term cycle. As I mentioned in my previous blog, we could see a very significant "snap back" rally into the summer (although I don't think the market will make new all-time highs before turning back down for a more severe correction). We are still on the sidelines of the broad stock market.
Gold and silver prices are also rising into the current reversal zone. Many technical signals are suggesting this market is getting ready to roll over and head down again. In other words, it looks at least short-term bearish. We need to note here that gold could still be longer-term bullish as long as the recent low around $1450 holds. Silver also looks bearish right now, and if it turns back down now, it could fall back to the $12 level. We will consider buying both metals if we see a reversal and those support levels hold. On the sidelines of gold and silver for now.
The precious metal rally last week was certainly helped by a steep fall in the U.S. Dollar Index. That decline in the greenback was the result of the Fed's announcement of unlimited QE (combined with its previously declared near zero benchmark interest rate). Needless to say, printing money "out of thin air" is not good for the greenback's value. But the Fed has now exhausted its bag of tricks. Interest rates cannot go lower (unless they turn negative) so the dollar may snap back and make another attempt to break through its Jan. 2017 high of 103.82. If it can do that, the greenback could become very bullish. Note that if this happens, it won't necessarily spell doom for gold and silver prices. Under certain circumstances, the U.S. dollar and the precious metals can rise together.
Last week crude oil prices held just above $20 (may contract chart), but tonight prices seem to be edging lower and making new lows. We are still in a reversal zone this week. If prices go lower (say to $16) but remain above $15, we may look for a spot to buy. Still on the sidelines of crude oil.
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