It looks like the broad stock market found at least a temporary bottom in the middle of last week and closed the week with a slight uptrend (especially the NASDAQ). Medium-term momentum signals, however, remain bearish for the DOW, S&P 500 and NASDAQ, and there are several technical and cycle factors in place right now suggesting the correction can go further down. A likely scenario here would be for a brief rally into the middle or end of this week and then a resumption of the correction down to significantly lower levels. If the market does rally, we don't want to see it break too far above 15,250 in the DOW or 1700 in the S&P 500 as this would indicate it is turning bullish and the
correction is over. These levels may be used as general stop loss points for our current short position in the broad stock market. My strategy, therefore, is to hold my short position over the next several days and ride out any brief rally (assuming momentum remains bearish) in expectation of a lower bottom. Maintaining our short positions for now.
Gold and silver also rallied into the end of last week with both making new weekly highs. Because this last week of August is likely to see major reversals in market direction, these metals could turn down now, especially as they approach resistance levels around $1420 in gold and $24.50 in silver. Should they do so, we will be ready to go long again as such a correction would present a very good buying opportunity. Still standing aside gold and silver.
Crude oil prices are also rising steeply as we enter the final week of August, so we could see a sharp reversal here as well. Because of political turmoil in the Middle East, I consider it too risky to short sell this market right now. Momentum in crude oil is now both medium and long-term bullish, so if any correction unfolds, we will be looking to go long at the bottom. We are still standing aside this market.