BROAD STOCK MARKET TRADE ALERT and MARKETS UPDATE (2:15 pm EDT)
In my last blog on Tuesday I wrote: " Any rally in the DOW should encounter resistance in the 16,500 area, and if that is breached, there is extremely strong resistance at 17,000. A rebound rally should not get beyond these points, and if approached they may be turning points for a reversal and a resumption of the correction. (Similar resistance is at 1980 and 2050 in the S&P 500.)" We are reaching those lower resistance areas today, and it looks like a good time for the market to turn over again and fall some more. The 15,370 DOW bottom on Monday was technically within our current reversal zone (but was a bit early); however, we are now in the dead center of it so another reversal is possible. But wait, doesn't it look like the correction is over and we are now recovering? No, it does not. These markets have already broken below critical support levels, and the cycle structures are pointed down for at least seven more weeks. Volatility increases dramatically when a market is unstable and breaking down, and this is why we are seeing such large price moves right now. The current rally appears to be a "dead cat bounce", also known as a "sucker rally".
If you are a long-term investor who doesn't want to sell short or trade short-term, this is probably a good point to get out of the stock market if you haven't done so already. Other traders may sell short here (or add on to existing short positions). Stop losses can be placed above 17,000 in the DOW and above 2040 in the S&P 500. Holding my short position in the broad stock market and adding new short positions today.
Gold and silver are a little tricky to call at the moment as we are getting mixed technical signals in this market.
Now through next week is a strong reversal zone for gold (and especially today and tomorrow), and prices are falling strongly into it which suggests an imminent turn up. Nevertheless, the gold and silver cycles seem to be pointed down, and a strong bearish signal appeared in silver charts yesterday making its directional momentum now 100% bearish (gold is still mixed bullish and bearish). I'm thinking that we might get one final push up in gold prices that may or may not exceed the recent high ($1170). If this happens, especially into the end of next week, we could have another good opportunity to sell short. On the sidelines of gold and silver for now.
The U.S. Dollar Index is surging up with the broad stock market this week and is now pushing against resistance at 96. If the stock market turns back down, the dollar will likely reverse as well, and this might trigger a surge in gold as suggested above. It should be noted, however, that any rally in gold would probably be short-term, and the precious metals could easily start to fall with the broad stock market (as they did in the 2008-2009 crash).
Crude oil prices are finally starting to rise as a cycle bottom (and the start of a new cycle) is due this week. Monday's low at $37.75 could be that bottom. Normally I would be looking to buy this bottom, but the broad stock market's ongoing correction and volatility is making me reluctant to do so. If this is the start of a new medium-term cycle in crude and prices rally, they may not get that far before turning down again. Directional momentum in this market remains strongly bearish. I am going to stay out of crude oil for now.
In my last blog on Tuesday I wrote: " Any rally in the DOW should encounter resistance in the 16,500 area, and if that is breached, there is extremely strong resistance at 17,000. A rebound rally should not get beyond these points, and if approached they may be turning points for a reversal and a resumption of the correction. (Similar resistance is at 1980 and 2050 in the S&P 500.)" We are reaching those lower resistance areas today, and it looks like a good time for the market to turn over again and fall some more. The 15,370 DOW bottom on Monday was technically within our current reversal zone (but was a bit early); however, we are now in the dead center of it so another reversal is possible. But wait, doesn't it look like the correction is over and we are now recovering? No, it does not. These markets have already broken below critical support levels, and the cycle structures are pointed down for at least seven more weeks. Volatility increases dramatically when a market is unstable and breaking down, and this is why we are seeing such large price moves right now. The current rally appears to be a "dead cat bounce", also known as a "sucker rally".
If you are a long-term investor who doesn't want to sell short or trade short-term, this is probably a good point to get out of the stock market if you haven't done so already. Other traders may sell short here (or add on to existing short positions). Stop losses can be placed above 17,000 in the DOW and above 2040 in the S&P 500. Holding my short position in the broad stock market and adding new short positions today.
Gold and silver are a little tricky to call at the moment as we are getting mixed technical signals in this market.
Now through next week is a strong reversal zone for gold (and especially today and tomorrow), and prices are falling strongly into it which suggests an imminent turn up. Nevertheless, the gold and silver cycles seem to be pointed down, and a strong bearish signal appeared in silver charts yesterday making its directional momentum now 100% bearish (gold is still mixed bullish and bearish). I'm thinking that we might get one final push up in gold prices that may or may not exceed the recent high ($1170). If this happens, especially into the end of next week, we could have another good opportunity to sell short. On the sidelines of gold and silver for now.
The U.S. Dollar Index is surging up with the broad stock market this week and is now pushing against resistance at 96. If the stock market turns back down, the dollar will likely reverse as well, and this might trigger a surge in gold as suggested above. It should be noted, however, that any rally in gold would probably be short-term, and the precious metals could easily start to fall with the broad stock market (as they did in the 2008-2009 crash).
Crude oil prices are finally starting to rise as a cycle bottom (and the start of a new cycle) is due this week. Monday's low at $37.75 could be that bottom. Normally I would be looking to buy this bottom, but the broad stock market's ongoing correction and volatility is making me reluctant to do so. If this is the start of a new medium-term cycle in crude and prices rally, they may not get that far before turning down again. Directional momentum in this market remains strongly bearish. I am going to stay out of crude oil for now.
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