The U.S. jobs report released on Friday was very positive (economists had predicted only a 215,000 increase in non-farm jobs, but the Dept.of Labor reported nearly 300,000 new jobs in December), but that didn't seem to halt the carnage on Wall Street as the DOW lost 167 more points bringing the total loss for the week to a whopping 1,059 points. The DOW closed the week at 16,346 which is a bit below our target of 16,400, but we are now in the center of a strong reversal zone and near the end of this market's current medium-term cycle so we could see a bottom and reversal next week. If investor panic continues into next week, however, the broad stock market could drop a lot lower. Despite last week's plunge, directional momentum in the DOW (as well as in the S&P 500 and NASDAQ) remains mixed bullish and bearish which allows for at least the possibility of a reversal now. We will continue to watch for signs of a bottom and reversal. On the sidelines of the broad stock market.
We took profits and sold our long positions in both gold and silver last Thursday. Last week's strong rally in gold confirms early December as the start of a new medium-term cycle in gold, but silver's weaker rally indicates that its new cycle may not have started yet and that its older cycle could still be bottoming. If this is the case, silver could break below its December lows soon which could create another buying opportunity. If this happens and if gold prices move back towards $1080, it may be a good spot to buy both metals. There is also the possibility of these metals surging higher next week which may give us a cycle top to sell short. Technical signals indicate that gold and silver could be very volatile next week so we need to be especially careful in making any trading decisions. Our stable sideline position now will make it easier to trade next week should we decide to do so. Until we see gold and silver show signs of a strong "breakout", we are going to assume that any rallying now will be short-term and that prices are headed to new lows over the next month or two. I will write more about my longer term view of this market soon.
Currently out of both gold and silver.
Next week may also present us with a good buying opportunity in crude oil. Crude is making record new lows and is extremely oversold. The current medium-term cycle in crude is nearly complete, and next week is a strong reversal zone. We will therefore be watching for signs of a cycle bottom to buy. A good target price would be around $28 - $29. On the sidelines of crude for now.