In last Monday's blog on the broad stock market I wrote:
"My bias at the moment is that these indices will push higher to challenge their all-time highs (27,399 in the DOW, 3,028 for the S&P 500, and 8,340 in the NASDAQ). If this happens with a bearish divergence signal [one or two but not all three breaking their high(s)] then we will want to sell the market short."
Well, the S&P 500 and NASDAQ both pushed higher and made new weekly highs (but not new all-time highs - although the S&P 500 came very close to its all-time high), but the DOW did not even make a new weekly high. We are entering a new reversal zone later this week (Oct. 29 - Nov. 8) so we will now watch for one or two of these indices (but not all three) to make new all-time highs in this time period (this week or next) for a possible short selling opportunity. If all three indices break their all-time highs, we will stay on the sidelines as the market could become very bullish (see last week's blog on a possible QE4 plan from the Fed that could turn this market bullish). Even if we do sell short, the correction may be sharp but brief. If it doesn't get too low, we may be looking to reverse position and buy back soon. Our technical studies and cycle analysis is telling us this market bubble wants to turn bearish, but the Trump Administration may now be putting heavy pressure on the Fed to keep equity markets buoyant into late 2020 as a stock market "crash" before next year's election would severely compromise Trump's chances of winning a second term. This is why I am leaning more towards a bullish market right now (although a bearish reversal is still a possibility).. Still on the sidelines of the broad stock market.
It is starting to look like gold and silver both started new medium-term cycles on October 1, but it is still not clear if these new cycles will be bullish or bearish. Both metals rallied last week, but there are still technical signals suggesting prices will turn down soon. If they do, and they hold above those Oct. 1 lows ($1456 in gold and $16.93 in silver) then we may look to buy. Moving below those lows, however, would mean the new cycles are turning bearish. Let's remain on the sidelines for now.
It looks like crude oil started a new medium-term cycle with its low of $51.40 on Oct. 9 (Dec. contract chart). That means a sub-cycle top is due now to be followed by a sub-cycle correction. That top could easily peak in this upcoming reversal zone (Oct. 29 - Nov. 8) in the $57 - $58 area (it's almost there now). If we see this and a correction that holds above $55, we may look to buy as the start of a new cycle is usually bullish. If prices drop below $53, however, it may indicate the cycle is turning bearish. A drop below $51.40 would confirm that and cause us to switch to a bearish trading strategy (i.e. looking for brief rallies to sell short). Let's stay on the sidelines for now.