This week could be an exceptionally volatile one for all financial markets. We may also see setups for good trading opportunities in several markets as the middle of this month is a timing window when significant directional reversals can occur in all of them.
Momentum in the broad stock market is now strongly bullish, but it looks like this market is ready to take a short-term correction which could give us a good opportunity to go long. If the DOW moves down to the 16,800 - 17,000 area this week and holds, it will be an ideal buy spot for a reversal from that bottom support. An alternate scenario would be for these markets to continue to rise into this (and possibly the following) week. If that happens, there could be a reversal from a top instead of a bottom and I may consider selling short. Even in this second scenario the correction would probably be brief and we would be looking to cover any shorts and go long at its bottom.
Both gold and silver prices surged up after touching new bottoms on Friday. (We predicted this and covered our short gold positions on Thursday). Momentum in the precious metals market is still strongly bearish so I am expecting any rally now to be short-lived and turn back down, possibly this week. The cycle pattern in the charts of these two metals, however, is ambiguous at the moment and allows for another interpretation which is much more bullish. It is possible that last week's lows were gold and silver's long-term cycle bottoms, and if so, these metals could turn bullish and soon break upside to new highs. To keep my bearish view, I don't want to see gold prices break clearly through resistance in the $1180 - $1210 area. If that resistance can hold back any rally, I will be looking to sell this market short again, maybe this week. Any break above that resistance and/or the appearance of bullish momentum signals may instead have me looking for a place to go long.
The price of crude oil may also find a bottom this week (unless it already formed on Nov.4 at $75.84) and begin a new cycle. This could give us a good spot to go long (the start of a new cycle is usually bullish), but this market seems very bearish right now which makes me wary of buying. Any rally now could be small and brief unless directional momentum can start to turn bullish. It may be best to avoid trading this market until we can identify a clear cycle bottom.