MARKETS UPDATE (5:00 pm EDST)
The broad stock market is taking a roller coaster ride this week as nervous investors continue to worry about the economy. Mixed signals from the Fed (hawkish, dovish, then hawkish again) as well as on again/off again "trade deal" negotiations and tariffs on China are making this market very volatile. Tuesday's announcement of new trade talks with China and a delay of tariffs on some Chinese goods excited Wall Street and the DOW into a 400 point rally. On Wednesday, however, pessimism and fear returned with an 800 point loss. Today the market seems to be taking a break and is relatively stable. The DOW, however, did make a new weekly low as the S&P 500 and NASDAQ remained above (but close to) their lows from last week. Thus we have bullish divergence, and we are only one day out of our reversal zone (Aug. 6 - 14). This may be a bottom forming, but if this market falls further tomorrow, I think it is more likely we will see a sub-cycle bottom (and possible buy spot) form in our next reversal zone which starts next week (Aug. 21-29). Alternatively, a bottom now and a rally into that reversal zone would give us a top to sell short instead (especially if that top is beneath the all-time highs). The market is still ambiguous as we remain on the sidelines for now.
Both gold and silver made new weekly highs on Tuesday (in our reversal zone) and thus negated the bearish divergence signal we saw on Monday. We are now out of that reversal time period so those highs may be significant turning points. A significant short-term correction is due in both metals which we are looking to buy. This market is very bullish now so it's possible prices could still push higher into next week's reversal zone (Aug. 21-29) before reversing (especially if one metal and not the other makes a new high - bearish divergence). But for now, let's watch for a possible correction from this week's highs. On the sidelines of gold and silver.
Even though we were "whipsawed" out of our long position in crude oil last Wednesday, I am getting some satisfaction out of the fact that the subsequent rally following our bail out has quickly encountered resistance and is now falling. The question now is whether or not that low from last week was a double bottom to the start of the current medium-term cycle on June 12 at $51.43 (Sept. contract chart). If it was, this market could still be bullish and ready for a significant rally. But such a large correction could also indicate that this cycle is turning bearish. If that interpretation is correct then any rally now will be short and weak, and prices could soon be headed much lower. A key determinant of crude's direction now may be the broad stock market. If equity markets are turning bearish, crude may follow suit. Let's stay on the sidelines of crude oil for now.
The broad stock market is taking a roller coaster ride this week as nervous investors continue to worry about the economy. Mixed signals from the Fed (hawkish, dovish, then hawkish again) as well as on again/off again "trade deal" negotiations and tariffs on China are making this market very volatile. Tuesday's announcement of new trade talks with China and a delay of tariffs on some Chinese goods excited Wall Street and the DOW into a 400 point rally. On Wednesday, however, pessimism and fear returned with an 800 point loss. Today the market seems to be taking a break and is relatively stable. The DOW, however, did make a new weekly low as the S&P 500 and NASDAQ remained above (but close to) their lows from last week. Thus we have bullish divergence, and we are only one day out of our reversal zone (Aug. 6 - 14). This may be a bottom forming, but if this market falls further tomorrow, I think it is more likely we will see a sub-cycle bottom (and possible buy spot) form in our next reversal zone which starts next week (Aug. 21-29). Alternatively, a bottom now and a rally into that reversal zone would give us a top to sell short instead (especially if that top is beneath the all-time highs). The market is still ambiguous as we remain on the sidelines for now.
Both gold and silver made new weekly highs on Tuesday (in our reversal zone) and thus negated the bearish divergence signal we saw on Monday. We are now out of that reversal time period so those highs may be significant turning points. A significant short-term correction is due in both metals which we are looking to buy. This market is very bullish now so it's possible prices could still push higher into next week's reversal zone (Aug. 21-29) before reversing (especially if one metal and not the other makes a new high - bearish divergence). But for now, let's watch for a possible correction from this week's highs. On the sidelines of gold and silver.
Even though we were "whipsawed" out of our long position in crude oil last Wednesday, I am getting some satisfaction out of the fact that the subsequent rally following our bail out has quickly encountered resistance and is now falling. The question now is whether or not that low from last week was a double bottom to the start of the current medium-term cycle on June 12 at $51.43 (Sept. contract chart). If it was, this market could still be bullish and ready for a significant rally. But such a large correction could also indicate that this cycle is turning bearish. If that interpretation is correct then any rally now will be short and weak, and prices could soon be headed much lower. A key determinant of crude's direction now may be the broad stock market. If equity markets are turning bearish, crude may follow suit. Let's stay on the sidelines of crude oil for now.
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