Even though the U.S. Labor Dept. jobs report last Friday gave conflicting information (a much better than expected increase in the number of jobs created but also a slight increase in the unemployment rate) the DOW responded positively with a 100 point gain early in the day. It then abruptly added another 60 points near closing time. This belated surge was likely the result of Ben Bernanke's late afternoon speech in which he commented that there is still an "awful lot of slack" in the labor market and suggested that there is plenty of room for the jobless rate to fall further. Such a comment, of course, suggests a continuation of the Fed's stimulus program and a delay in QE tapering. A giddy surge in the DOW was therefore not surprising.
Despite the DOW's bullishness, I am still expecting some sort of correction in the broad stock market to begin early next week, and I will look for the low of this correction as an entry point to go long in this market as long as directional momentum remains bullish (at the moment it is 100% bullish). As I mentioned in a recent blog, it is looking like the major correction in the broad stock market that I had been expecting this year is being pushed into early 2014. We may get a healthy "Santa Claus" rally first, and so I am now on the lookout for a good entry point into a long position. On the sidelines for now.
An ideal short sell in crude oil may be setting up now if prices continue to rise into next week and momentum remains bearish. As I mentioned last week, many markets could significantly change direction in this week's Monday-Wednesday time frame, and for crude oil this reversal zone could extend into Friday. I will therefore be looking for a top by the end of the week to sell this market short. Still on the sidelines here.
The bearish behavior of precious metals last week has put our long positions in jeopardy (short-term) as gold and silver prices are challenging our stop loss areas. Timing factors, however, point to a reversal in prices this week so I am hoping for some sort of bounce here. There could be a lot of volatility this week in markets accompanied by false technical signals, and this may challenge my decision to "ride out" the current correction. The price levels we don't want to see breached now are the lows from October 15 because this would indicate the short-term cycles turning bearish. Those supports would be $1250 in gold and $20.50 in silver. One short-term bullish indicator for gold right now is the fact that the U.S. Dollar Index appears to be making a short-term "blow-off" top against a strong resistance level at 81.5. If this is true and the dollar backs down, it could trigger an upward bounce in gold and silver. We will have to wait and see how this plays out over the next five days. Still holding long positions in gold and silver.