MARKETS UPDATE (11:30 pm EDST)
Last week equity markets gave investors another roller coaster ride with a 1000+ point drop in the DOW early in the week followed by a nearly 800 point recovery on Friday. We are now entering another reversal zone Oct. 4 - 16. The deep low on Oct. 3 last week was one day out of this range; nevertheless, that low (25,743 in the DOW) could have been the final medium-term cycle bottom in the DOW as well as in the other two major market indices (2,855 in the S&P 500 and 7,700 in the NASDAQ). The sharp rally off those lows is supporting this idea of a final bottom and the start of new cycles. An argument against this is the fact that all three indices made new lows so we have no intermarket bullish divergence signal (which we like to see at the start of new cycles). I am favoring the idea of new cycles starting now off those Oct. 3 lows. If that's the case, the broad stock market will likely rally now to challenge the all-time highs in this new reversal zone. If not, we could see markets plunging again this week to make new lows in the same reversal zone as the older cycle establishes its final bottom. It's still too early to make any trading decisions as we wait to see if we get new highs or new lows this week and/or early next week. Still on the sidelines of the broad stock market.
As I mentioned last week, a major factor influencing these markets now is the status of the U.S./China 'trade deal" negotiations. President Trump's positive statement about upcoming talks with China likely boosted the markets on Friday. If investors remain optimistic about this, we could see an extended rally into the scheduled time period (mid-October) for these talks. But note that this falls right in the center of our reversal zone. If the talks don't go well, we could see the markets tank shortly after. Of course, the Democrat's current impeachment rhetoric is also not helping equity markets, and equities will also be sensitive to whether or not the Fed decides on another rate cut later this month. The broad stock market's roller coaster ride may not be over yet!
We are still in a reversal zone specifically for the precious metals this week (and possibly early next week). Last Tuesday gold prices dropped down to $1456 and then rallied sharply off that low. The same day silver prices dipped to $16.94 and also rallied from there. Even though we didn't get a bullish divergence signal, those lows may have been the final medium-term cycle lows and the start of new cycles. If so, both metals are bullish now. There's still a chance the old cycles are not finished and still time for new lows in the reversal zone. We will watch for that (and a bearish divergence signal) for a good spot to buy or we may just buy any small dip next week, so stay tuned. If prices rally strongly before we get a chance to buy, we will wait to see if gold can break above its Sept. high at $1557 and then try and buy as that break will confirm a bullish trend. On the sidelines of gold and silver for now.
Last Friday crude oil prices made a new low at $52.04 which is a double bottom to the low of $52.06 on Aug. 7 (Nov. contract chart). Friday was the first day of our current reversal zone (Oct. 3 - 16) so that could be the final bottom to our current medium-term cycle (which is due now). But directional momentum also turned from mixed bullish and bearish to 100% bearish on Friday. This reversal zone extends through this week and early next week so there's plenty of time for prices to edge lower. If they do, we may look to buy in the $45 - $46 area. On the sidelines of crude for now.
Last week equity markets gave investors another roller coaster ride with a 1000+ point drop in the DOW early in the week followed by a nearly 800 point recovery on Friday. We are now entering another reversal zone Oct. 4 - 16. The deep low on Oct. 3 last week was one day out of this range; nevertheless, that low (25,743 in the DOW) could have been the final medium-term cycle bottom in the DOW as well as in the other two major market indices (2,855 in the S&P 500 and 7,700 in the NASDAQ). The sharp rally off those lows is supporting this idea of a final bottom and the start of new cycles. An argument against this is the fact that all three indices made new lows so we have no intermarket bullish divergence signal (which we like to see at the start of new cycles). I am favoring the idea of new cycles starting now off those Oct. 3 lows. If that's the case, the broad stock market will likely rally now to challenge the all-time highs in this new reversal zone. If not, we could see markets plunging again this week to make new lows in the same reversal zone as the older cycle establishes its final bottom. It's still too early to make any trading decisions as we wait to see if we get new highs or new lows this week and/or early next week. Still on the sidelines of the broad stock market.
As I mentioned last week, a major factor influencing these markets now is the status of the U.S./China 'trade deal" negotiations. President Trump's positive statement about upcoming talks with China likely boosted the markets on Friday. If investors remain optimistic about this, we could see an extended rally into the scheduled time period (mid-October) for these talks. But note that this falls right in the center of our reversal zone. If the talks don't go well, we could see the markets tank shortly after. Of course, the Democrat's current impeachment rhetoric is also not helping equity markets, and equities will also be sensitive to whether or not the Fed decides on another rate cut later this month. The broad stock market's roller coaster ride may not be over yet!
We are still in a reversal zone specifically for the precious metals this week (and possibly early next week). Last Tuesday gold prices dropped down to $1456 and then rallied sharply off that low. The same day silver prices dipped to $16.94 and also rallied from there. Even though we didn't get a bullish divergence signal, those lows may have been the final medium-term cycle lows and the start of new cycles. If so, both metals are bullish now. There's still a chance the old cycles are not finished and still time for new lows in the reversal zone. We will watch for that (and a bearish divergence signal) for a good spot to buy or we may just buy any small dip next week, so stay tuned. If prices rally strongly before we get a chance to buy, we will wait to see if gold can break above its Sept. high at $1557 and then try and buy as that break will confirm a bullish trend. On the sidelines of gold and silver for now.
Last Friday crude oil prices made a new low at $52.04 which is a double bottom to the low of $52.06 on Aug. 7 (Nov. contract chart). Friday was the first day of our current reversal zone (Oct. 3 - 16) so that could be the final bottom to our current medium-term cycle (which is due now). But directional momentum also turned from mixed bullish and bearish to 100% bearish on Friday. This reversal zone extends through this week and early next week so there's plenty of time for prices to edge lower. If they do, we may look to buy in the $45 - $46 area. On the sidelines of crude for now.
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