MARKETS UPDATE (11:30 pm EST)
Before discussing the markets I would just like to mention that in my 10+ years of analyzing and trading the stock markets, gold, silver, oil and currencies, I have never encountered a more difficult trading environment than that of the last year or two with the last six months of this year being exceptionally frustrating. This is almost certainly the result of an increasing manipulation of the markets, the most obvious and overt example of this being the establishment of the Fed's QE policy during the 2008 global financial crisis. A more "covert" manipulation of gold prices was seen just last month when 800,000 ounces of gold were unloaded overnight on COMEX "coincidentally" just before the markets opened on the first day of the U.S. government shutdown (Oct.1). Market manipulation has a "wildcard" effect on normal technical analysis, and in the case of the broad stock market has resulted in an extra lift and buoyancy to rallies in stock indices while delaying and/or truncating any normal corrections. The Oct.1 gold sell order was a more short-term manipulation that seemed designed to sink the price for just one day and avert a gold breakout (possibly to deter a panic selloff in the broad stock market due to the government shutdown). We are living in volatile economic times when divisive political environments are also threatening the stability of markets. My point here is not to whine that "it ain't easy tradin' these days" but to suggest the need to keep these factors in mind when making trading decisions.
I would also like to mention the importance of not getting too frustrated with short-term trading and forgetting the bigger, medium and long-term picture in these markets. For gold and silver, that picture is still very bullish; for the broad stock market it is looking quite bullish (possibly a blow-off) medium-term, but not so good long-term (the market is, after all, being sustained by QE, i.e money created out of thin air).
The broad stock market had a very bullish rally last week fueled by Janet Yellen's promise of more QE if she is chosen to succeed Ben Bernanke as Federal Reserve chairwoman. The DOW, S&P 500 and NASDAQ all made record highs and broke some important resistance areas triggering many bullish signals. Our strategy now is to get long on any pullbacks (which may be very minor). If we get no pullback this week, there could be one coming up the following week based on cycle analysis. Standing aside and waiting to go long.
It looks like crude oil made a significant low last Thursday at $92.50 right in the middle of its reversal zone, which means we could see more rallying in this market (I had expected a reversal from a high). The rally may be short-term, though, as there is another time window for a reversal in the last week of November. There is some ambiguity in the cycle analysis of crude oil at the moment, but the extent of this rally over the next week or two should make this more clear. If directional momentum in crude remains strongly bearish (it is currently 100% bearish) then I will be looking to sell it short on any rally into the end of this month. There is also a possibility that Thursday's low was the start of a new cycle in crude, but this can't be confirmed yet. A new cycle would be bullish and would be confirmed by bullish momentum signals. We will have to wait and see how this unfolds over the next two weeks. Still on the sidelines here.
Gold and silver are showing mixed bullish and bearish signals at the moment, and our long positions are still at risk of a further correction. Because the longer-term picture of these metals is so bullish, the big question here is do we want to "ride out" any further corrections, or should we bail out now and reenter at a lower cycle bottom? If gold turns bearish again it could possibly bottom in the $1000-$1100 area, so traders can gage their risk aversion from those levels. There are some technical factors indicating these metals could be very volatile next week which makes calling this market very difficult right now. Gold still needs to clear the $1300 area and then $1350 to be really bullish. I am starting to think that the final bottoms are not in yet for gold and silver, but we could see a brief rally before the final downturn. An ideal pattern to see now would be a short rally off of last week's lows into the reversal zone in the last week of November and then a downturn to the final lows. I am staying long for now but am prepared to bail out next week if signals turn more bearish.
Before discussing the markets I would just like to mention that in my 10+ years of analyzing and trading the stock markets, gold, silver, oil and currencies, I have never encountered a more difficult trading environment than that of the last year or two with the last six months of this year being exceptionally frustrating. This is almost certainly the result of an increasing manipulation of the markets, the most obvious and overt example of this being the establishment of the Fed's QE policy during the 2008 global financial crisis. A more "covert" manipulation of gold prices was seen just last month when 800,000 ounces of gold were unloaded overnight on COMEX "coincidentally" just before the markets opened on the first day of the U.S. government shutdown (Oct.1). Market manipulation has a "wildcard" effect on normal technical analysis, and in the case of the broad stock market has resulted in an extra lift and buoyancy to rallies in stock indices while delaying and/or truncating any normal corrections. The Oct.1 gold sell order was a more short-term manipulation that seemed designed to sink the price for just one day and avert a gold breakout (possibly to deter a panic selloff in the broad stock market due to the government shutdown). We are living in volatile economic times when divisive political environments are also threatening the stability of markets. My point here is not to whine that "it ain't easy tradin' these days" but to suggest the need to keep these factors in mind when making trading decisions.
I would also like to mention the importance of not getting too frustrated with short-term trading and forgetting the bigger, medium and long-term picture in these markets. For gold and silver, that picture is still very bullish; for the broad stock market it is looking quite bullish (possibly a blow-off) medium-term, but not so good long-term (the market is, after all, being sustained by QE, i.e money created out of thin air).
The broad stock market had a very bullish rally last week fueled by Janet Yellen's promise of more QE if she is chosen to succeed Ben Bernanke as Federal Reserve chairwoman. The DOW, S&P 500 and NASDAQ all made record highs and broke some important resistance areas triggering many bullish signals. Our strategy now is to get long on any pullbacks (which may be very minor). If we get no pullback this week, there could be one coming up the following week based on cycle analysis. Standing aside and waiting to go long.
It looks like crude oil made a significant low last Thursday at $92.50 right in the middle of its reversal zone, which means we could see more rallying in this market (I had expected a reversal from a high). The rally may be short-term, though, as there is another time window for a reversal in the last week of November. There is some ambiguity in the cycle analysis of crude oil at the moment, but the extent of this rally over the next week or two should make this more clear. If directional momentum in crude remains strongly bearish (it is currently 100% bearish) then I will be looking to sell it short on any rally into the end of this month. There is also a possibility that Thursday's low was the start of a new cycle in crude, but this can't be confirmed yet. A new cycle would be bullish and would be confirmed by bullish momentum signals. We will have to wait and see how this unfolds over the next two weeks. Still on the sidelines here.
Gold and silver are showing mixed bullish and bearish signals at the moment, and our long positions are still at risk of a further correction. Because the longer-term picture of these metals is so bullish, the big question here is do we want to "ride out" any further corrections, or should we bail out now and reenter at a lower cycle bottom? If gold turns bearish again it could possibly bottom in the $1000-$1100 area, so traders can gage their risk aversion from those levels. There are some technical factors indicating these metals could be very volatile next week which makes calling this market very difficult right now. Gold still needs to clear the $1300 area and then $1350 to be really bullish. I am starting to think that the final bottoms are not in yet for gold and silver, but we could see a brief rally before the final downturn. An ideal pattern to see now would be a short rally off of last week's lows into the reversal zone in the last week of November and then a downturn to the final lows. I am staying long for now but am prepared to bail out next week if signals turn more bearish.
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