Both the S&P 500 and the NASDAQ made new all-time highs last week, and again, the DOW did not. Our intermarket bearish divergence signal between these indices is thus persisting into the Labor Day holiday (Monday). The DOW's medium-term cycle is now a bit old (12 weeks). If this index does not break above its Aug.16 all-time high at 35,631 soon, the cycle could turn bearish and start a steep multi-week descent to the final cycle bottom. Because we are in the center of another reversal zone (Sept. 1 - 8), the DOW could edge up higher than last Monday's high at 35,510 early this week. If it does that without exceeding 35,631, we could have a strong set-up to sell short.
The S&P 500 may also be a bit "long in the tooth" (11 weeks old), but there's a chance it could be "younger" (only 7 weeks), and if so, it may still be quite bullish. The NASDAQ seems to be a VERY young cycle (only 3 weeks from its low on Aug. 19). This would make it potentially very bullish, and in fact, it has been rallying very sharply from that low.
Despite our bearish divergence signal, there are other technical signs that are suggesting the broad stock market is not yet ready to make a strong reversal down. Let's remain on the sidelines for now and see if the DOW can make a new all-time high next week.
It looks fairly certain that gold started a new medium-term cycle with its low of $1693 on Aug. 9. That probably also marks the start of a new longer-term cycle, and that would make gold very bullish now. But gold is now rallying sharply into another strong reversal zone specifically for precious metals (Sept. 1-10). This means we could see a top anytime by the end of this week followed by some sort of correction (probably a modest one considering this is a young medium-term and longer-term cycle). We may be looking to buy gold on any dips into the $1780 - $1800 range. Let's stay on the sidelines for now.
Silver also seems to be a bullish young cycle that started with a "double-bottom" on Aug. 9 and Aug. 20 near $23. Like gold, silver is rising steeply into our new reversal zone. Let's watch for a modest correction from a high in this time frame and a good spot to go long. A good target for a corrective dip could be around $23.75. We will watch for that. We are on the sidelines for now.
There is a good chance that crude oil started a new medium-term cycle as well as a new longer-term cycle on Aug. 23 at $61.74 (Oct. contract chart). If that's the case, crude prices could be quite bullish now and ready to rally significantly higher. (This would also support the short-term bullish case for the broad stock market right now.) We are now moving into the center of a reversal zone specifically for crude (Sept. 3 - 13). Any new high in this time frame could be a top that could be followed by a short-term sub-cycle correction, or we might just see prices fall and make a sub-cycle bottom in here. If we see either scenario, we may use it as an opportunity to go long as crude now has the potential to go up to $90 or even higher. Any close below $65.60 would probably negate that bullish outlook. Let's stay on the sidelines of crude for now.