MARKETS UPDATE (10:00 pm EST)
The broad stock market's "irrational exuberance" took a hit in the second half of last week as more worrisome news on the death toll from China's coronavirus rolled in. Both the S&P 500 and NASDAQ made new highs last week while the DOW did not, and this gives us another intermarket bearish divergence signal. All three indices MAY be taking significant corrections now, but last week's tops (S&P 500 and NASDAQ) did not happen in a major reversal zone, and next week IS a major reversal zone. It's possible this market could edge up higher next week for a final top. If it doesn't, that time frame of Feb. 24 - March 6 should slow down any market dive, and we would likely see a significant cycle bottom in there We are still not sure if the DOW and S&P 500 started new medium-term cycles on Jan. 31. If they did, any correction now should be minimal and these indices would be bullish. The NASDAQ is most likely still completing an older cycle. That means it could take a more serious correction (which may now be in progress unless it pushes a bit higher into next week's reversal zone). We may have gotten "whipsawed" out of our short position on Feb. 12 too early, but if markets rally next week and give us another bearish divergence signal, we may get another good opportunity to sell short. Let's stay on the sidelines for now.
It looks like crude oil started a new medium-term cycle on Feb. 4 with its low of $49.50 (Apil contract chart).This would normally be bullish (as early cycle stages usually are), but it looks like crude may be turning bearish after its sharp turn down from last Thursday's high at $54.66. We will know soon enough if prices drop below that $49.50 low (bearish). If prices push higher next week, it could support a more bullish view of crude. We will stay on the sidelines for now. The direction of the broad stock market and crude oil is being strongly influenced now by news concerning China's coronavirus. Severe worries over this epidemic could tank both markets.
The cycle pattern of gold is still nor clear, but this metal is certainly in a "breakout" mode after last week's strong rally and close above $1610. We are in a reversal zone for precious metals (Feb. 14 - 25) that is overlapping with a strong general reversal zone for all markets (Feb. 24 - March 6) so gold prices could top out now and take some sort of correction. Any pullback to the $1590 - $1620 area would have us looking to buy. We will watch for that.
Silver is also rallying strongly, but like gold, may be topping out soon to take a steep correction down (silver's current medium-term cycle is getting old and may be ready for its final correction to the cycle bottom). We will stay on the sidelines of both metals for now and wait for a corrective dip to buy. Both gold and silver are looking potentially very bullish in their longer-term cycles now.
The broad stock market's "irrational exuberance" took a hit in the second half of last week as more worrisome news on the death toll from China's coronavirus rolled in. Both the S&P 500 and NASDAQ made new highs last week while the DOW did not, and this gives us another intermarket bearish divergence signal. All three indices MAY be taking significant corrections now, but last week's tops (S&P 500 and NASDAQ) did not happen in a major reversal zone, and next week IS a major reversal zone. It's possible this market could edge up higher next week for a final top. If it doesn't, that time frame of Feb. 24 - March 6 should slow down any market dive, and we would likely see a significant cycle bottom in there We are still not sure if the DOW and S&P 500 started new medium-term cycles on Jan. 31. If they did, any correction now should be minimal and these indices would be bullish. The NASDAQ is most likely still completing an older cycle. That means it could take a more serious correction (which may now be in progress unless it pushes a bit higher into next week's reversal zone). We may have gotten "whipsawed" out of our short position on Feb. 12 too early, but if markets rally next week and give us another bearish divergence signal, we may get another good opportunity to sell short. Let's stay on the sidelines for now.
It looks like crude oil started a new medium-term cycle on Feb. 4 with its low of $49.50 (Apil contract chart).This would normally be bullish (as early cycle stages usually are), but it looks like crude may be turning bearish after its sharp turn down from last Thursday's high at $54.66. We will know soon enough if prices drop below that $49.50 low (bearish). If prices push higher next week, it could support a more bullish view of crude. We will stay on the sidelines for now. The direction of the broad stock market and crude oil is being strongly influenced now by news concerning China's coronavirus. Severe worries over this epidemic could tank both markets.
The cycle pattern of gold is still nor clear, but this metal is certainly in a "breakout" mode after last week's strong rally and close above $1610. We are in a reversal zone for precious metals (Feb. 14 - 25) that is overlapping with a strong general reversal zone for all markets (Feb. 24 - March 6) so gold prices could top out now and take some sort of correction. Any pullback to the $1590 - $1620 area would have us looking to buy. We will watch for that.
Silver is also rallying strongly, but like gold, may be topping out soon to take a steep correction down (silver's current medium-term cycle is getting old and may be ready for its final correction to the cycle bottom). We will stay on the sidelines of both metals for now and wait for a corrective dip to buy. Both gold and silver are looking potentially very bullish in their longer-term cycles now.
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