Our short positions in the broad stock market have been looking good this week as the market has been falling in line with our expectations for a correction. A few more bearish technical signals have appeared this week and the DOW, S&P 500 and NASDAQ are now all medium-term bearish. We need to keep in mind, however, that we are entering a time period (now through the first few days of September) where significant reversals in market directions can occur. The DOW, S&P 500 and NASDAQ are all approaching support levels in their charts from which they could now turn up, but a break below these supports could push these indices lower into next week. Tomorrow's market behavior may give us a clue as to whether we are making a bottom here or if the correction can go further. Holding our short positions for now.
Gold and silver have been relatively flat since we abandoned our long positions on Monday, but short-term momentum is still bearish and there is still time for prices to correct down as we move into next week. As I stated in Monday's blog, my intention here is to buy any short-term correction now that holds above the $1300 area in gold and $20 in silver. Standing aside gold and silver for now.
Crude oil's correction seems to be reasserting itself as the price has been falling steeply this week, but it is finding some support yesterday and today in the $104 area. As with the broad stock market, I would like to see a deeper correction into next week to be more confident of a significant bottom, but another possibility here is for a brief relief rally into next week (and possibly the first few days of September) and then a resumption of the correction from that high (this applies to the broad stock market as well). My strategy at this point is to go long at the bottom of the correction, especially since the ongoing political/social turmoil in Egypt and Syria make any short positions in crude oil risky at best. Still on the sidelines of this market.
I am going to be traveling all day tomorrow and will not have access to the markets until late evening. Because Friday could see some major turning points in the markets, I will be posting another blog by Sunday that may include some trade alerts to establish at Monday's market opening.