MARKETS UPDATE (3:00 pm EDT)
On Friday all three of our broad stock market indices (DOW, S&P 500, NASDAQ) closed with losses. Because there are only two days left in our reversal zone, there's a good chance they are headed lower, although we can't rule out a secondary top on Monday and Tuesday. What we don't want to see now are these indices rising to new highs past Tuesday, and that is our stop loss parameter for our current short position in the S&P 500, which we are holding for now.
Gold and silver prices rallied dramatically on Friday. Gold broke and closed well above its 15-day and 45-day moving averages which suggests that a new medium-term cycle started with the October 6 low of $1812. Silver prices closed above the 15-day moving average but below the 45-day moving average. Silver may have also started a new medium-term cycle from its low of $20.70 on Oct. 3, but we still can't be sure prices won't fall back below that low for an older cycle bottom. Both gold and silver are making these new highs within our general reversal zone and also inside strong "pivot point" time frames for both metals (which all end on Monday) so, yes, prices can still turn sharply down from here. Sometimes (infrequently), however, a rally into a reversal zone can correspond to a breakout instead of a reversal, and we may be getting that now as we were anticipating a strong rally in gold in October. If this is a breakout, we may have missed a good buy spot at those Oct. 3 and 6 lows. Let's wait and see if prices can move back down next week and possibly give us another buying opportunity. If not, we may have to refrain from trading until the trend of any new cycles are established. We will stay on the sidelines of both metals for now.
Oddly, the U.S. Dollar Index surged higher last Thursday and Friday, even as gold and silver prices took off. Normally, the greenback moves opposite these metals, although there are times when both move in tandem. The dollar made a significant low last Thursday near the center of our general reversal zone, so unless it turns down from an isolated high this Monday or Tuesday (the end of the reversal zone), it will likely continue higher. That would normally put downward pressure on precious metal prices, but all markets are now being affected by the Israel/Palestine conflict, so we can't count on normal market behavior right now.
And speaking of the Israel/Palestine conflict, we know that any conflicts in the Middle East often cause volatile price movements in crude oil. We consider these conflicts as "wild cards" in the game of trading crude. After "gapping up" on Monday last week, crude seemed to be resuming its sharp correction back down Tuesday-Thursday, but then it surged back up again on Friday, closing just above its 15-day and 45-day moving averages. We recently labeled the current medium-term cycle as an older one coming to an end with a 2-5 week steep drop to the final cycle low due inside our current reversal zone (which ends Tuesday) or possibly in our next reversal zone for crude coming up Oct. 26 - Nov. 30. That could still happen if prices turn back down over the next several days, but if the Israel/Palestine conflict escalates and drives prices even higher, we may have to relabel the current cycle. For now, we will remain on the sidelines of crude, which is probably the best place to be during a Middle East crisis.
On Friday all three of our broad stock market indices (DOW, S&P 500, NASDAQ) closed with losses. Because there are only two days left in our reversal zone, there's a good chance they are headed lower, although we can't rule out a secondary top on Monday and Tuesday. What we don't want to see now are these indices rising to new highs past Tuesday, and that is our stop loss parameter for our current short position in the S&P 500, which we are holding for now.
Gold and silver prices rallied dramatically on Friday. Gold broke and closed well above its 15-day and 45-day moving averages which suggests that a new medium-term cycle started with the October 6 low of $1812. Silver prices closed above the 15-day moving average but below the 45-day moving average. Silver may have also started a new medium-term cycle from its low of $20.70 on Oct. 3, but we still can't be sure prices won't fall back below that low for an older cycle bottom. Both gold and silver are making these new highs within our general reversal zone and also inside strong "pivot point" time frames for both metals (which all end on Monday) so, yes, prices can still turn sharply down from here. Sometimes (infrequently), however, a rally into a reversal zone can correspond to a breakout instead of a reversal, and we may be getting that now as we were anticipating a strong rally in gold in October. If this is a breakout, we may have missed a good buy spot at those Oct. 3 and 6 lows. Let's wait and see if prices can move back down next week and possibly give us another buying opportunity. If not, we may have to refrain from trading until the trend of any new cycles are established. We will stay on the sidelines of both metals for now.
Oddly, the U.S. Dollar Index surged higher last Thursday and Friday, even as gold and silver prices took off. Normally, the greenback moves opposite these metals, although there are times when both move in tandem. The dollar made a significant low last Thursday near the center of our general reversal zone, so unless it turns down from an isolated high this Monday or Tuesday (the end of the reversal zone), it will likely continue higher. That would normally put downward pressure on precious metal prices, but all markets are now being affected by the Israel/Palestine conflict, so we can't count on normal market behavior right now.
And speaking of the Israel/Palestine conflict, we know that any conflicts in the Middle East often cause volatile price movements in crude oil. We consider these conflicts as "wild cards" in the game of trading crude. After "gapping up" on Monday last week, crude seemed to be resuming its sharp correction back down Tuesday-Thursday, but then it surged back up again on Friday, closing just above its 15-day and 45-day moving averages. We recently labeled the current medium-term cycle as an older one coming to an end with a 2-5 week steep drop to the final cycle low due inside our current reversal zone (which ends Tuesday) or possibly in our next reversal zone for crude coming up Oct. 26 - Nov. 30. That could still happen if prices turn back down over the next several days, but if the Israel/Palestine conflict escalates and drives prices even higher, we may have to relabel the current cycle. For now, we will remain on the sidelines of crude, which is probably the best place to be during a Middle East crisis.
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