MARKETS UPDATE (3:30 pm EDST)
On Monday - the center of our current strong reversal zone (April 20 - 29) - we entered a short position in the broad stock market based on multiple bearish divergence signals between our three major indices (DOW, S&P 500, NASDAQ). I wrote:
"...All of these bearish divergence signals in the center of a strong reversal zone is creating a good spot for us to sell short. We can do this with a close stop loss based on ALL THREE indices making new ALL-TIME highs. That would mean the DOW breaking above 34,257, the S&P 500 above 4,195, and the NASDAQ above 14,168. "
Since Monday, the S&P 500 and NASDAQ have edged a bit higher to make new all-time highs, but, significantly, the DOW has not. This means we still have a strong bearish divergence signal (until that high in the DOW is broken). We are now at the end of our reversal zone, which we will extend into Friday. If the S&P 500 and/or the NASDAQ edge higher tomorrow with the DOW remaining below 34,257, we will maintain our short position. Holding my short position in the broad stock market for now.
Gold and silver prices have been relatively flat this week. This lack of directional trend doesn't tell us much about whether or not we are dealing with new medium-term cycles in these metals (silver made a weekly high AND low today), but if the cycles are new, prices should be rallying, and they are not. Let's remain on the sidelines of this market for now as we focus more on the broad stock market.
It looks like crude oil made a significant high ($64.38 - June contract chart) on April 20 in the first day of our April 20 - 29 reversal zone. Two days later it made an isolated low at $60.61 (also within the reversal zone). Today crude is rising to a new weekly high of $65.45 (the last day of the reversal zone). There are several ways to interpret this. If crude started a new medium-term cycle on March 23, the April 20 high and April 22 low could be the first sub-cycle peak and corrective dip in the new cycle. If so, prices should rally strongly now above today's high. But, of course, today's high is still in the reversal zone (which we will extend into Friday), and another significant peak could be forming here. It's a bit late to be chasing this rally, so we will remain on the sidelines and wait to see if another corrective dip is forthcoming.
The U.S. Dollar Index has been falling steeply over the last several weeks. I refer readers to my April 20 blog where I discussed the longer-term cycle of the U.S. dollar. In that post I wrote:
" We may be at a crossroads right now as to which pattern.....will unfold in the U.S. Dollar Index. This index is currently testing the 91 level. A definitive and sustained break below 90 would probably validate the idea of the greenback bottoming in 2024 - 2025 [in the 53 - 87 range] . If that doesn't happen, we should watch for a rally to test and possibly exceed the 103 -104 level over the next several years."
Well, the 91 level has broken, and the greenback seems to be headed down to test the strong support at 90. We are now in the last day of a reversal zone specifically for currencies (April 20 - 29, same as for equities). We will extend this into Friday. We may see a bottom and reversal back up today or tomorrow as there is very strong support for the dollar in this 90 - 91 area. Such a move could put downward pressure on precious metal prices. If instead we have a "breakdown" (also possible, but less likely, in a reversal zone), where the dollar breaks clearly below 90, that would be very bearish for the dollar and would support the idea of the greenback moving lower over the next several years as stated above.
On Monday - the center of our current strong reversal zone (April 20 - 29) - we entered a short position in the broad stock market based on multiple bearish divergence signals between our three major indices (DOW, S&P 500, NASDAQ). I wrote:
"...All of these bearish divergence signals in the center of a strong reversal zone is creating a good spot for us to sell short. We can do this with a close stop loss based on ALL THREE indices making new ALL-TIME highs. That would mean the DOW breaking above 34,257, the S&P 500 above 4,195, and the NASDAQ above 14,168. "
Since Monday, the S&P 500 and NASDAQ have edged a bit higher to make new all-time highs, but, significantly, the DOW has not. This means we still have a strong bearish divergence signal (until that high in the DOW is broken). We are now at the end of our reversal zone, which we will extend into Friday. If the S&P 500 and/or the NASDAQ edge higher tomorrow with the DOW remaining below 34,257, we will maintain our short position. Holding my short position in the broad stock market for now.
Gold and silver prices have been relatively flat this week. This lack of directional trend doesn't tell us much about whether or not we are dealing with new medium-term cycles in these metals (silver made a weekly high AND low today), but if the cycles are new, prices should be rallying, and they are not. Let's remain on the sidelines of this market for now as we focus more on the broad stock market.
It looks like crude oil made a significant high ($64.38 - June contract chart) on April 20 in the first day of our April 20 - 29 reversal zone. Two days later it made an isolated low at $60.61 (also within the reversal zone). Today crude is rising to a new weekly high of $65.45 (the last day of the reversal zone). There are several ways to interpret this. If crude started a new medium-term cycle on March 23, the April 20 high and April 22 low could be the first sub-cycle peak and corrective dip in the new cycle. If so, prices should rally strongly now above today's high. But, of course, today's high is still in the reversal zone (which we will extend into Friday), and another significant peak could be forming here. It's a bit late to be chasing this rally, so we will remain on the sidelines and wait to see if another corrective dip is forthcoming.
The U.S. Dollar Index has been falling steeply over the last several weeks. I refer readers to my April 20 blog where I discussed the longer-term cycle of the U.S. dollar. In that post I wrote:
" We may be at a crossroads right now as to which pattern.....will unfold in the U.S. Dollar Index. This index is currently testing the 91 level. A definitive and sustained break below 90 would probably validate the idea of the greenback bottoming in 2024 - 2025 [in the 53 - 87 range] . If that doesn't happen, we should watch for a rally to test and possibly exceed the 103 -104 level over the next several years."
Well, the 91 level has broken, and the greenback seems to be headed down to test the strong support at 90. We are now in the last day of a reversal zone specifically for currencies (April 20 - 29, same as for equities). We will extend this into Friday. We may see a bottom and reversal back up today or tomorrow as there is very strong support for the dollar in this 90 - 91 area. Such a move could put downward pressure on precious metal prices. If instead we have a "breakdown" (also possible, but less likely, in a reversal zone), where the dollar breaks clearly below 90, that would be very bearish for the dollar and would support the idea of the greenback moving lower over the next several years as stated above.
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