Our decision to reenter our short position in the broad stock market (on Nov.9) has been a good one. The markets fell sharply last week, but we are now approaching our second target range in the S&P 500 (1950 - 2000) and we should be thinking about taking profits and even going long as a subcycle bottom is due this week or next to be followed by another rally. We are also entering a time period (this week and next, but especially Nov.19 - 25) when a major market reversal is likely. A "wildcard" factor in the markets right now is the atrocious terrorist attack on Paris last Friday. A geopolitical event of this magnitude can easily panic equity markets. Many financial analysts have for some time been expecting some sort of "black swan" event to be the pin that "pops the bubble" of the grotesquely overbought (and jittery) stock market. We will have to wait and see how this is going to affect the markets on Monday. We might see the S&P 500 push further down toward our lower target quickly. Last week directional momentum in the S&P 500 and the NASDAQ changed from bullish to mixed bullish and bearish (the DOW remains bullish) so this could be a sign that the market's trend is changing again (to bearish). These are crazy, volatile times and we need to be flexible and nimble in our trading and not get too attached to one position. We will watch this technical situation carefully. I am going to hold my short position in the broad stock market for now, but I will be looking for a bottom this week or early next week to take profits and possibly switch to a long position.
Gold and silver are both in the late stages of their current medium-term cycles which means that a bottom is due in each. We have been hoping for a brief relief rally before prices fall to their final medium-term cycle bottoms at the end of the month or into early December. That is still a strong possibility. There are several technical signals now indicating the potential for a strong short-term rally to start in the precious metals this week. The alternative (less likely) is for gold and silver prices to continue falling directly to their cycle bottoms. The Paris attacks may have the effect of temporarily boosting gold and silver (geopolitical instability can sometimes drive nervous investors into "safe haven" investments like gold), but we won't really know until the markets open on Monday. We will continue with our strategy of waiting to sell short the top of a brief rally. If we get no rally next week and precious metal prices continue to fall, we will look to buy the final medium-term cycle bottom which will likely come at the end of this month or into early December. On the sidelines of gold and silver for now.