Last Monday (Aug. 20), I wrote on the broad stock market:
"We are now watching for a top in this new reversal zone (Aug. 20 - 28) and especially for a top where one or two, but not all three indices make a new high....Any significant top now could be followed by a very severe correction as it is late in several longer-term cycles for the broad stock market, and the final top for these cycles is due anytime over the next six or seven weeks (and most likely in one of our reversal zones)."
Last week we did get bearish divergence as the NASDAQ and S&P 500 made new all-time highs while the DOW did not. We could get a reversal down now, but last week's market closed with other technical signals that were at least short-term bullish. If the DOW can stay below its all-time high (26,617) through Tuesday, we will consider a short position early this week. If all three indices make new highs after Tuesday, and especially if the DOW exceeds its all-time high of 26,617, we may have to wait until the broad stock market's next reversal zone coming up Sept. 7 - 17 for a good shorting opportunity. Still on the sidelines of the broad stock market.
Despite last week's update on gold's longer-term cycle which could still be bottoming and thus bearish, we are now watching for a medium-term cycle bottom to buy. (Yes, we can have a significant rally within a longer-term downtrend). Gold and silver's behavior on Friday was bullish so it is possible those Aug. 15 lows in both metals were the cycle bottoms and the start of new medium-term cycles. We're in a reversal zone for the precious metals through Wednesday, however, so prices could still reverse down to new lows (hopefully in one metal and not the other - i.e. bullish divergence) to give us a better signal to buy. If instead we see prices rallying past Wednesday (without falling first) with gold exceeding $1240 and silver above $15, then we may have to assume new medium-term cycles already started on Aug. 15. On the sidelines of gold and silver.
Crude oil most likely made a significant sub-cycle bottom on Aug. 16 at $63.89 (October contract chart). Unless prices turn down sharply this week, we should see a rally to the next cycle high which will challenge and maybe exceed the $71.29 high of June 29. There is considerable resistance in the $70 - 72 area. If crude stalls in this range, it may be a good opportunity to sell short, especially early this week. If prices stay flat or edge lower this week, we will wait for a top to sell short in the next reversal zone for crude coming up Sept. 5 - 13. On the sidelines of crude oil.