UPDATE ON GOLD, SILVER, and the BROAD STOCK MARKET (7:30pm EDST)
The broad stock market is giving us mixed signals right now. I wrote on April 7:
"We are now pretty certain that all three of our broad stock market indices (DOW, S&P 500, NASDAQ) are new (young) medium-term cycles that started with the Feb. 24 lows of the DOW and S&P 500, and the Feb. 24 and March 14 (double-bottom) lows in the NASDAQ. Because these cycles are in their early stage, they could be quite bullish now and ready to rally and test new all-time highs. But there's also a chance they could peak early and then turn down dramatically for a long bearish ride down to their final bottoms."
So far these new cycles have been bullish. All three rose steeply from their Feb. 24 lows to significant sub-cycle highs on March 29. They then fell and corrected to sub-cycle lows on April 11 (DOW) and April 18 (S&P 500 and NASDAQ). Those lows were in a reversal zone, and at least for the DOW and S&P 500 they seem to be be turning points for another rally up. The NASDAQ, however, fell sharply today and broke below its April 18 low. The DOW and S&P 500 fell too, but the DOW broke briefly above its March 29 high before falling while the S&P 500 and NASDAQ remained well below their March 29 highs. This gives us a strong intermarket bearish divergence signal. My thoughts here are that these sub-cycle corrections want to go lower, perhaps into our rather weak reversal zone coming up next week (April 26 - May 8). If they do go lower, we may get another opportunity to buy for a potential rally to challenge the all-time highs over the next several weeks. But if these indices fall below their Feb. 24 lows, that would be bearish, and we would probably be on track for a much deeper correction. We will stay on the sidelines for now.
The recent rally in gold and silver seems to have peaked on Monday (with silver breaking above its March 24 high and negating our bearish divergence signal). Both metal prices are falling this week. Despite the canceling of our bearish divergence signal, silver looks like it could be falling into the final bottom of an older medium-term cycle. We didn't get to sell it short, so we will now wait to see how low it goes. A downside target could be around $22.50 - $23.
Gold may be a new medium-term cycle that started with its low of $1892 on March 29. If so, it may be taking its first sub-cycle correction now. That correction seems much weaker than silver's correction suggesting it could rally again to new highs. If silver finds a bottom in the target zone stated above ($22.50 - $23) and gold stays above $1892, we may get a good set-up to buy both metals as silver would be starting a new medium-term cycle and gold may be poised to challenge its all-time high of $2070. If $2070 cannot be exceeded, however, we want to be ready to sell this market short soon. Let's stay on the sidelines of both gold and silver for now.
The broad stock market is giving us mixed signals right now. I wrote on April 7:
"We are now pretty certain that all three of our broad stock market indices (DOW, S&P 500, NASDAQ) are new (young) medium-term cycles that started with the Feb. 24 lows of the DOW and S&P 500, and the Feb. 24 and March 14 (double-bottom) lows in the NASDAQ. Because these cycles are in their early stage, they could be quite bullish now and ready to rally and test new all-time highs. But there's also a chance they could peak early and then turn down dramatically for a long bearish ride down to their final bottoms."
So far these new cycles have been bullish. All three rose steeply from their Feb. 24 lows to significant sub-cycle highs on March 29. They then fell and corrected to sub-cycle lows on April 11 (DOW) and April 18 (S&P 500 and NASDAQ). Those lows were in a reversal zone, and at least for the DOW and S&P 500 they seem to be be turning points for another rally up. The NASDAQ, however, fell sharply today and broke below its April 18 low. The DOW and S&P 500 fell too, but the DOW broke briefly above its March 29 high before falling while the S&P 500 and NASDAQ remained well below their March 29 highs. This gives us a strong intermarket bearish divergence signal. My thoughts here are that these sub-cycle corrections want to go lower, perhaps into our rather weak reversal zone coming up next week (April 26 - May 8). If they do go lower, we may get another opportunity to buy for a potential rally to challenge the all-time highs over the next several weeks. But if these indices fall below their Feb. 24 lows, that would be bearish, and we would probably be on track for a much deeper correction. We will stay on the sidelines for now.
The recent rally in gold and silver seems to have peaked on Monday (with silver breaking above its March 24 high and negating our bearish divergence signal). Both metal prices are falling this week. Despite the canceling of our bearish divergence signal, silver looks like it could be falling into the final bottom of an older medium-term cycle. We didn't get to sell it short, so we will now wait to see how low it goes. A downside target could be around $22.50 - $23.
Gold may be a new medium-term cycle that started with its low of $1892 on March 29. If so, it may be taking its first sub-cycle correction now. That correction seems much weaker than silver's correction suggesting it could rally again to new highs. If silver finds a bottom in the target zone stated above ($22.50 - $23) and gold stays above $1892, we may get a good set-up to buy both metals as silver would be starting a new medium-term cycle and gold may be poised to challenge its all-time high of $2070. If $2070 cannot be exceeded, however, we want to be ready to sell this market short soon. Let's stay on the sidelines of both gold and silver for now.
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