There is still a very strong possibility that the DOW and S&P 500 started new medium-term cycles from their May 13 lows (at 25,222 and 2,801, respectively). Those lows held when the broad stock market took a strong dive last Thursday. The NASDAQ's May 13 low of 7,627, however, was broken which means it could still be forming the bottom of an older cycle (i.e. it didn't start a new one on May 13). That bottom may have happened last Thursday at 7,585, but it might push lower this week (it is due any time now). Because the NASDAQ did break to a new low last week and the DOW and S&P 500 did not, we now have a strong case of intermarket bullish divergence. All three indices could be starting new medium-term cycles, which would make them very bullish. Or the NASDAQ could push a bit lower while the DOW and/or the S&P 500 hold above their May 13 lows. Either way, we should be looking to go long now in this market to ride a new cycle rally into the summer. What we don't want to see next week is the NASDAQ making a new low AND both the DOW and S&P 500 breaking their May 13 lows. That would be a very bearish sign and could mean a serious washout into June to significantly lower levels in all three indices.
We actually have a very good trade set-up here to go long with a close stop loss beneath our entry point. What we can do is enter a long position now in either the DOW and/or S&P 500 (if you are trading index funds) with a stop loss based on the DOW and S&P 500 both breaking their May 13 lows (25,222 and 2,801) along with a new weekly low in the NASDAQ. I am going to place a trade for Tuesday's market open to go long in the broad stock market (markets are closed today in the U.S. for Memorial Day).
Gold and silver prices pushed up a bit in the second half of last week, but the bearish warnings I described in Wednesday's blog still apply. If gold and silver did start new cycles recently then gold could quickly rise to break its recent high of $1304 and silver could break above $15.64 by the first week of June. If that doesn't happen, we could easily see these metals making new lows into the middle of June. Let's stay on the sidelines of this market for now.
In Wednesday's blog on crude oil I wrote:
"If the $60 level breaks and this week closes below there it means that May 5 did not start a new cycle and we might have to wait for the final cycle bottom (of an older cycle) probably in the second week of June."
On Thursday crude dropped to $58 and on Friday it got down to $57.50 (July contract chart). Friday may have been the final bottom to this medium-term cycle (but it wasn't in a reversal zone) or we may see a final low this week. But the best fit for the cycle would be to see a final bottom in the next reversal zone specifically for crude, and that would be anytime between June 7 and June 24. An ideal target price range for a bottom now would be around $52 - $56. If we see support this week around $57 then we might get an early bottom, but ideally we would like to see a lower price into that June reversal period. Still on the sidelines of crude and waiting to buy soon.