In Friday's blog on gold and silver I wrote:
"Gold and silver prices are indeed dropping into this new reversal zone (Nov. 28 - Dec. 6). Silver has broken below its Oct. 6 low while gold is still above its $1,262 from Oct. 6 so we also have an intermarket bullish divergence signal in the middle of this reversal zone. We should be looking to go long now, but silver's directional momentum just turned 100% bearish today which makes me a bit reluctant to buy."
While silver's directional momentum is now bearish, gold's directional momentum is still nearly 100% bullish so it looks like this reversal zone (which ends on Wednesday) could be a turning point for these metals, even if silver drops a bit lower early this week. What we can do here is go long in gold with a close stop loss based on gold closing below its Oct. 6 low (let's say below $1,260), and hold off for now on buying silver. If silver prices drop lower and can hold above $16 (especially after Wednesday), we will look to buy it as well. Entering a long position in gold for Monday's market open, but still out of silver.
Amazingly, the U.S. Congress succeeded in passing the tax reform bill early Saturday morning. This means that we could see strong rallying in the broad stock market this week. As I stated in Friday's blog:
"We are now at the center of a reversal zone that extends through next Wednesday. If the tax reform bill passes with no delays, we could see these markets rally some more into next week; however, if the DOW and/or S&P 500 make new highs next week with the NASDAQ remaining below its high from Tuesday, we will have an intermarket bearish divergence set-up and a good signal to sell short. If all three indices make new highs next week, we may have to wait until the end of December for a cycle peak and another good shorting opportunity."
We may get that "Santa Claus rally" after all and see these markets rally into Christmas, but if the NASDAQ can't make a new high by Wednesday, we will still consider selling short (perhaps with a stop loss based on the NASDAQ making a new high after Wednesday). Still on the sidelines of the broad stock market.
We are now entering a period of potential high volatility in all markets for the entire month of December.
We will need to be especially alert and nimble and we may engage in more short-term trading than usual.