On Friday the broad stock market closed with the DOW below our stop loss line of 25,100, but the S&P 500 closed a bit above our stop loss of 2,700 (at 2,706). Some traders may have covered their long positions, but I chose to remain short. It still looks like these indices started new medium-term cycles on Dec. 26, which makes them young and bullish, but we are in the time band for a sub-cycle correction, and the market seems to be hesitating at resistance lines in the current reversal zone (that ends on Wednesday). Let's see if this market turns down early next week and gives us a better entry point to cover our shorts and go long. An ideal target now for a correction in the DOW would be around 23,600, but if this market is really bullish, it may only test the 15-day moving average (now around 24,500) before resuming its rally. The S&P 500 would ideally go near 2,550, but it too could only dip to its 15-day moving average (now around 2,650). We will keep these numbers in mind as we watch for some sort of correction next week. On the sidelines of the broad stock market for now.
Gold and silver seem to be moving through the final sub-cycle of their current medium-term cycle which means they are close to their cycle highs which should be followed by a steep correction down to their medium-term cycle bottoms. OK, that's a little confusing, but the bottom line here is that we are looking for a top in the current medium-term cycle (in both metals) and then a sharp correction down to this cycle's final bottom. Prices seem to be falling from last week's highs in both gold and silver, but that was a little too early for a sub-cycle peak, and prices did not get to our target areas (around $1340 in gold and $17 in silver). If prices don't fall too far this week, they could rebound and get closer to those targets over the next week or two. If they do, we may look to sell short at the top. Once the final correction is in, we will look to buy. Still on the sidelines of gold and silver.
Crude oil is also close to making a sub-cycle peak (the first one in its new medium-term cycle that started on Dec. 24 at $42.67 - March contract chart). Friday's high at $55.66 may have been it, and if so a correction back down to $50 would be a good target to buy. We will watch for that. If prices push higher before turning down, we may raise that target, but the sub-cycle bottom is due any time over the next three weeks so we shouldn't have to wait long to go long. On the sidelines of crude but waiting to buy soon.