After some decent rallying in August, the DOW, S&P 500, and NASDAQ indices are all leveling off now and appear ready to take a correction, but so far there is no sign of a reversal in the broad stock market. This market is very overbought and a significant correction is very much overdue. Short-term cycle analysis of the DOW now points to at least a correction into the 16,800 area. There are still technical and cycle factors suggesting the possibility of a much stronger fall but, as I've discussed in recent blogs, current capital flow into equities from a collapsing European economy as well as direct market manipulation could be negating natural corrective cycles. There is resistance around 17,200 in the DOW and that is close to where I sold this market short on August 28, so I will use that as a general stop-loss point for the trade. This market must turn down early this week or we will have to cover our short position. Holding my short position for now.
There are technical signals that point to a strong move in gold and silver this coming week that would normally be bullish, but last week's price movements were bearish which is suggesting the move could be down instead of up. If prices do rally they may not get far before tuning down again. Mixed signals in this market are keeping me on the sidelines for now.
The U.S. Dollar Index also seems to be benefiting from European investor capital as evidenced by its steep rally since mid-July. Directional momentum in the dollar remains 100% bullish, but this market is severely overbought and some sort of pause or correction could come any day now. This could coincide with a rise in precious metal prices, but the dollar's strong bullish momentum may take the wind out of any gold and silver rally.
Crude oil prices may be forming a significant bottom now in the $92 - $93 area, but in terms of timing the next significant turning point in crude prices will likely be in the third week of September. This means the current cycle bottom could go lower over the next 2-3 weeks. It may be best to wait for that week before trading this market. Crude's directional momentum is still 100% bearish. Remaining out of this market for now.