MARKETS UPDATE (3:30 pm EDST)
We are now just past the middle of the current reversal zone for the broad stock market (it ends next week on Monday). All three indices (DOW, S&P 500, NASDAQ) fell sharply this week on Monday but remained relatively flat Tuesday - Wednesday. Today the DOW dropped early in the morning but is now recovering sharply, the NASDAQ is continuing its rally from a its Monday low, and the S&P 500 is snapping back from its drop this morning. Of all three indices, only the NASDAQ has made a new weekly low so far so we may have a bullish divergence signal here. Could this be the start of a reversal back up? Yes, it could, and if so we will have to look to the next reversal zone (Aug. 20 - 28) for another top to sell short. But there are still two days left in the current reversal zone and time for one or two of these indices to make a new high and give us a bearish divergence signal to sell. So the ambiguity continues, and we shall remain on the sidelines for now.
In Monday's blog on the precious metals I wrote:
"The recent lows in both metals on July 19 ($1212 in gold, $15.18 in silver) could be significant bottoms, but July 19 was not in any reversal zone so there is a good chance prices could go lower before a strong rally starts. If one metal breaks below its July 19 low but not the other this week or early next week, we will have a bullish divergence signal and may look to buy."
Today gold is close to breaking its low, but silver is still a bit above its low. There are still three days left in the current reversal zone for precious metals (it ends next Tuesday). Let's see if gold breaks below $1212 with silver holding above $15.18 before next Wednesday. We should note here that we are also now in a reversal zone for currencies that continues through next Thursday, and the U.S. Dollar Index is rising into it. If the dollar makes a new top and reverses down, it would likely trigger a rally in the precious metals. Still on the sidelines of gold and silver.
Crude oil made a new weekly low today at $66.92 (Sept. contract chart). It is getting late in the reversal zone for crude (it also ends on Monday) but today's low is not a valid sub-cycle bottom because that low needs to be below $66.29. If prices can drop below there by next Tuesday (and stay above $63), we will consider going long in crude. Otherwise, we may have to consider Monday's high of $70.43 as the top in this reversal zone and look for a bottom in crude's next reversal zone (Aug. 15 -23). Out of crude oil for now.
We are now just past the middle of the current reversal zone for the broad stock market (it ends next week on Monday). All three indices (DOW, S&P 500, NASDAQ) fell sharply this week on Monday but remained relatively flat Tuesday - Wednesday. Today the DOW dropped early in the morning but is now recovering sharply, the NASDAQ is continuing its rally from a its Monday low, and the S&P 500 is snapping back from its drop this morning. Of all three indices, only the NASDAQ has made a new weekly low so far so we may have a bullish divergence signal here. Could this be the start of a reversal back up? Yes, it could, and if so we will have to look to the next reversal zone (Aug. 20 - 28) for another top to sell short. But there are still two days left in the current reversal zone and time for one or two of these indices to make a new high and give us a bearish divergence signal to sell. So the ambiguity continues, and we shall remain on the sidelines for now.
In Monday's blog on the precious metals I wrote:
"The recent lows in both metals on July 19 ($1212 in gold, $15.18 in silver) could be significant bottoms, but July 19 was not in any reversal zone so there is a good chance prices could go lower before a strong rally starts. If one metal breaks below its July 19 low but not the other this week or early next week, we will have a bullish divergence signal and may look to buy."
Today gold is close to breaking its low, but silver is still a bit above its low. There are still three days left in the current reversal zone for precious metals (it ends next Tuesday). Let's see if gold breaks below $1212 with silver holding above $15.18 before next Wednesday. We should note here that we are also now in a reversal zone for currencies that continues through next Thursday, and the U.S. Dollar Index is rising into it. If the dollar makes a new top and reverses down, it would likely trigger a rally in the precious metals. Still on the sidelines of gold and silver.
Crude oil made a new weekly low today at $66.92 (Sept. contract chart). It is getting late in the reversal zone for crude (it also ends on Monday) but today's low is not a valid sub-cycle bottom because that low needs to be below $66.29. If prices can drop below there by next Tuesday (and stay above $63), we will consider going long in crude. Otherwise, we may have to consider Monday's high of $70.43 as the top in this reversal zone and look for a bottom in crude's next reversal zone (Aug. 15 -23). Out of crude oil for now.
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