MARKETS UPDATE and GOLD and SiLVER TRADE ALERT (11:30 pm EDT)
The results of the French presidential election are in, and the centrist Emmanuel Macron won in a sweeping victory over far-right nationalist Marine Le Pen. Most media and polls had been predicting Macron's win over the last two weeks, though some had feared a surprise Le Pen victory and the possible negative repercussions in financial markets due to Le Pen's anti-EU platform. With those fears gone, equity markets could (should) rally now unless the market has already factored in Macron's victory over the last two weeks of media and poll endorsement. We are holding a long position in the broad stock market. There seems to be no reason at the moment to abandon our bullish stance.
Macron's victory should give a boost to the euro, but it will likely weaken the U.S. dollar. As I've mentioned in recent blogs, the U.S. Dollar Index chart is starting to look quite bearish. If the dollar's Feb.1 low at 99.50 was the start of a new medium-term cycle (as it seems to be), then the overall trend could be turning bearish because the dollar has already broken below that low. If the dollar starts closing below 98.50, it could be in trouble.
A falling dollar could be just the thing to kick precious metal prices up from their current lows. It is late in the medium-term cycles of both gold and silver so these lows forming now could easily be the final cycle bottoms from which a strong rally could start. We are now in the center of a minor reversal zone (for all of the markets we follow), both gold and silver are in the ideal price target range for their cycle bottoms, and we have a case of intermarket bullish divergence as last week silver plunged significantly below its March low while gold stayed well above its low from March. Macron's victory (and a falling dollar) are also favoring the idea of a cycle bottom and a reversal in the precious metals. A long position in both metals may be desirable now because of a favorable risk/reward ratio for the trade. We don't want to see silver break below the start of its cycle which was $15.65 back in Dec. 2016 because that would mean that the trend is turning bearish. It is close to that level now (last Thursday it hit $16.18) so we can set a stop loss for a long position in silver on a close below $15.65. Gold also started its cycle in Dec. 2016 at $1124. We definitely don't want to see that level broken, but that is too far below the current price to set as a comfortable stop loss point. A more recent sub-cycle low in gold on March 10 at $1195 offers significant support and is much closer to gold's current price to make it a desirable stop loss level for a gold long position. I should mention here that there is a stronger reversal zone specifically for precious metals coming up in early June so there is a possibility of gold and silver's cycles bottoming then. If prices move lower into that time frame, however, the trend could turn bearish, and we may not want to buy. I am going to enter a long position in both metals now (for Monday's market open) with a stop loss based on both metals closing below these stop loss points ($1195 in gold and $15.65 in silver). Note: very low risk conservative traders may just wish to trade gold here as silver is very volatile and may open tomorrow significantly above the suggested stop loss. Traders may also wait for the market to open and then decide if the prices are acceptable to buy.
Crude oil prices may have made a sub-cycle bottom last Friday, and if so they could rally sharply into this week's major reversal zone specifically for crude (the center point is this Friday). Because crude's overall trend seems to be bearish, we will watch for this as a possible top to sell short. Should prices plunge lower this week, we will instead watch for a reversal from a new low. Still on the sidelines of crude oil.
The results of the French presidential election are in, and the centrist Emmanuel Macron won in a sweeping victory over far-right nationalist Marine Le Pen. Most media and polls had been predicting Macron's win over the last two weeks, though some had feared a surprise Le Pen victory and the possible negative repercussions in financial markets due to Le Pen's anti-EU platform. With those fears gone, equity markets could (should) rally now unless the market has already factored in Macron's victory over the last two weeks of media and poll endorsement. We are holding a long position in the broad stock market. There seems to be no reason at the moment to abandon our bullish stance.
Macron's victory should give a boost to the euro, but it will likely weaken the U.S. dollar. As I've mentioned in recent blogs, the U.S. Dollar Index chart is starting to look quite bearish. If the dollar's Feb.1 low at 99.50 was the start of a new medium-term cycle (as it seems to be), then the overall trend could be turning bearish because the dollar has already broken below that low. If the dollar starts closing below 98.50, it could be in trouble.
A falling dollar could be just the thing to kick precious metal prices up from their current lows. It is late in the medium-term cycles of both gold and silver so these lows forming now could easily be the final cycle bottoms from which a strong rally could start. We are now in the center of a minor reversal zone (for all of the markets we follow), both gold and silver are in the ideal price target range for their cycle bottoms, and we have a case of intermarket bullish divergence as last week silver plunged significantly below its March low while gold stayed well above its low from March. Macron's victory (and a falling dollar) are also favoring the idea of a cycle bottom and a reversal in the precious metals. A long position in both metals may be desirable now because of a favorable risk/reward ratio for the trade. We don't want to see silver break below the start of its cycle which was $15.65 back in Dec. 2016 because that would mean that the trend is turning bearish. It is close to that level now (last Thursday it hit $16.18) so we can set a stop loss for a long position in silver on a close below $15.65. Gold also started its cycle in Dec. 2016 at $1124. We definitely don't want to see that level broken, but that is too far below the current price to set as a comfortable stop loss point. A more recent sub-cycle low in gold on March 10 at $1195 offers significant support and is much closer to gold's current price to make it a desirable stop loss level for a gold long position. I should mention here that there is a stronger reversal zone specifically for precious metals coming up in early June so there is a possibility of gold and silver's cycles bottoming then. If prices move lower into that time frame, however, the trend could turn bearish, and we may not want to buy. I am going to enter a long position in both metals now (for Monday's market open) with a stop loss based on both metals closing below these stop loss points ($1195 in gold and $15.65 in silver). Note: very low risk conservative traders may just wish to trade gold here as silver is very volatile and may open tomorrow significantly above the suggested stop loss. Traders may also wait for the market to open and then decide if the prices are acceptable to buy.
Crude oil prices may have made a sub-cycle bottom last Friday, and if so they could rally sharply into this week's major reversal zone specifically for crude (the center point is this Friday). Because crude's overall trend seems to be bearish, we will watch for this as a possible top to sell short. Should prices plunge lower this week, we will instead watch for a reversal from a new low. Still on the sidelines of crude oil.
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