It seems like the hawkish comments of Fed Chairman Jerome Powell following last Wednesday's FOMC meeting may have spooked equity markets on Thursday as all three of our broad stock market indices floundered and closed with significant losses. The DOW and S&P 500 broke briefly below our stop loss points (33,000 and 4,050, respectively) but closed back above them (and above their 45-day moving averages). The NASDAQ, however, stayed well above its stop loss point (11,800) and also closed above its 45-day moving average. On Friday, all three markets rallied strongly. If any traders were stopped out of their long positions, they should stay on the sidelines for now. Those not stopped out should remain long as we wait to see if Friday was a significant bottom in the DOW and S&P 500. Those two indices made new weekly lows while the NASDAQ did not, and that gives us a bullish divergence signal. But on Friday, the NASDAQ made a new weekly high without the DOW and S&P 500, so that also gives us a bearish divergence signal.
We are about to move into a very strong general reversal zone (perhaps the strongest one this year) at the end of next week (May 11 - 19). If Friday was a significant sub-cycle low for the DOW and S&P 500 (the NASDAQ's low could have been the previous week - 11,799 on April 25), and we see a rally into the time frame of this new reversal, we will probably look to take profits on any long positions and go short as a strong correction could follow any new tops. This new reversal zone could be a major turning point in the market. (If prices fail to rally and fall instead, we will look to go long in the same reversal zone.)
Gold and silver both rallied strongly last week with gold making a new weekly as well as monthly new high on Thursday, and silver doing the same on Friday. Gold prices dropped sharply on Friday, and this could be the start of a sub-cycle correction. We are still holding our long position in gold with a stop loss based on a close below the 45-day moving average (now at $1974 and rising slowly). Let's keep that strategy for now. We will stay on the sidelines of silver.