MARKETS UPDATE (11:00 pm EDT)
On Friday, crude oil broke and closed below my new stop loss - i.e. the strong support at $60 (Nov. contract chart) - but it did hold above the next support line around $58. While some traders may have been stopped out with my earlier suggested stop loss at $62, others may have bailed out on Friday. These traders can remain out, but because we have now moved inside two strong reversal zones (a general reversal zone from Oct. 8 - 17 and a reversal zone for crude Oct. 10 -21), there is a strong chance a significant bottom is imminent to be followed by a rally. I am therefore going to maintain my long position for now. The medium and longer-term cycles in crude are a little ambiguous right now, so I will refrain from that analysis until they become more clearly defined.
Last week, the S&P 500 and NASDAQ both made new all-time highs, but the DOW did not, and this set up a strong bearish divergence signal between these indices. Not surprisingly, all three plummeted on Friday - something we have been expecting for the last several weeks. The cycle labeling of these broad stock market indices is also a bit unclear at the moment, but the trend is definitely bullish (for now). The DOW has been correcting down for five trading days, but the S&P 500 and NASDAQ just started their correction on Friday. As we are in a strong reversal zone next week, we may see a significant bottom form in all three indices, creating a possible buying opportunity. I am on the sidelines of the broad stock market for now.
Gold and silver prices have taken off, with silver going parabolic and finally breaking its all-time high from 2011. This necessitates a reanalysis of both metals' medium-term and long-term cycles. While this is clearly bullish for both metals, it is too late to chase the current rally. We need to wait for a significant correction before considering any long positions. Next week's reversal zone could provide us with a turning point for a downward correction. We are currently on the sidelines of both metals.
On Friday, crude oil broke and closed below my new stop loss - i.e. the strong support at $60 (Nov. contract chart) - but it did hold above the next support line around $58. While some traders may have been stopped out with my earlier suggested stop loss at $62, others may have bailed out on Friday. These traders can remain out, but because we have now moved inside two strong reversal zones (a general reversal zone from Oct. 8 - 17 and a reversal zone for crude Oct. 10 -21), there is a strong chance a significant bottom is imminent to be followed by a rally. I am therefore going to maintain my long position for now. The medium and longer-term cycles in crude are a little ambiguous right now, so I will refrain from that analysis until they become more clearly defined.
Last week, the S&P 500 and NASDAQ both made new all-time highs, but the DOW did not, and this set up a strong bearish divergence signal between these indices. Not surprisingly, all three plummeted on Friday - something we have been expecting for the last several weeks. The cycle labeling of these broad stock market indices is also a bit unclear at the moment, but the trend is definitely bullish (for now). The DOW has been correcting down for five trading days, but the S&P 500 and NASDAQ just started their correction on Friday. As we are in a strong reversal zone next week, we may see a significant bottom form in all three indices, creating a possible buying opportunity. I am on the sidelines of the broad stock market for now.
Gold and silver prices have taken off, with silver going parabolic and finally breaking its all-time high from 2011. This necessitates a reanalysis of both metals' medium-term and long-term cycles. While this is clearly bullish for both metals, it is too late to chase the current rally. We need to wait for a significant correction before considering any long positions. Next week's reversal zone could provide us with a turning point for a downward correction. We are currently on the sidelines of both metals.
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