The broad stock market rallied a bit on Friday, but a bounce from last Wednesday's dramatic low was to be expected, and this does not really jeopardize the short position we entered in the market on Thursday. My suggested stop loss for this trade was (is) a break above the 2115 level in the S&P 500. If July 6 was the start of a new medium-term cycle, then we could be seeing a brief (3-8 day) sub-cycle bounce now that shouldn't get very far if the trend is pointed down (as I think it is). What we don't want to see is the DOW rise above 17,783 as this would call into question our short-term bearish trading strategy. Holding my short position in the broad stock market.
Our gold and silver long positions did well last week. It looks like we have started new medium-term cycles in both metals and are on track for prices rising into our target areas of $1140 in gold and $16 in silver. If we reach or exceed those targets by the end of this week (or ideally next week) then we will take profits in our long positions and consider selling short if the longer term trend remains bearish. There is a slight chance that gold and silver prices peaked in the middle of last week and could now fall hard so we will maintain tight stop loss points for our long positions at $1080 in gold and $14.50 in silver. Holding long positions in both gold and silver for now.
Crude oil prices fell to a new yearly low of $41.35 intraday on Friday which means that the medium-term trend is now bearish and pointed down. Nevertheless, a cycle bottom (and the start of a new cycle) is due (overdue) and could be forming now or it could form in the last week of August. Even within a bearish trend, a new cycle will usually rally for at least a few weeks so we may see a good opportunity for a short-term trade on the long side over the next week or two. If we miss it we will wait for a top to sell short as the trend seems to be very bearish and prices could continue lower for many more weeks. Still out of this market.
A strong bearish momentum signal appeared last week in the chart for the U.S.Dollar Index, and the dollar's directional momentum is now mixed bearish and bullish (it had been 100% bullish). This suggests that we could see a further correction in the dollar, and that could help push the precious metal prices higher, at least short-term. There is support for the dollar in the 95 area so a possible scenario here would be for the dollar to drop towards 95 with gold and silver rising up to the price targets already mentioned. This could be followed by a dollar bounce which would trigger a reversal in the precious metals and gold and silver prices dropping to new lows. Many financial analysts are now speculating that China's devaluation of the Yuan last week increases the likelihood of the Federal Reserve delaying an interest rate hike. This kind of media "chatter" could at least temporarily weaken the dollar and strengthen the metals. We will see how this plays out over the next week or two.