MARKETS UPDATE (3:00 pm EST)
As we approach the Christmas holiday (this Monday), we are not seeing a strong "Santa Claus" rally, but equity markets aren't falling strongly either. Wall Street may be a little nervous before President Trump actually signs the tax reform bill that was approved by Congress yesterday as there is a possibility he will delay the signing into the new year to avoid the implementation of immediate drastic spending cuts in early 2018 (those cuts could be delayed into 2019 if the bill is not passed this month). We will wait and see if a holiday rally can pick up next week as we move towards New Year's Day. Rally or not, we are still watching for a case of intermarket bearish divergence where one or two- but not all three- stock market indices (DOW, S&P 500, NASDAQ) make new highs. If this happens next week, it will be in a strong reversal zone and it will be a good signal to sell this market short again. On the sidelines of the broad stock market for now.
It's still not clear whether or not gold and silver started new medium-term cycles on Dec. 12. If they did, this market could be turning very bullish. The strong rally in prices since last week supports this idea. The only problem is that these metals are rising into a reversal zone this week and a very strong one next week. This means this market could still turn down and plunge below those Dec. 12 lows and make the final bottom to an older medium-term cycle. The alternative to this would be for gold and silver to "break out" to the upside in this reversal zone. This sometimes happens in reversal zones, but it's not common (which is why we call these periods "reversals"). The bottom line here is we are looking to go long in the precious metals soon once we can determine the start of a new medium -term cycle in both metals. Still on the sidelines of gold and silver.
The U.S. Dollar Index has been edging down this week, and it is making a new weekly low today right at the center of a reversal zone specifically for currencies (all this week). We could thus see this index turn up now. If it does, it would likely push gold and silver prices down.
Like the precious metals, crude oil may have started a new medium-term cycle in early December (Dec. 7), but it could also turn down in the current reversal zone and complete the final bottom of an older cycle below that Dec. 7 low ($55.88 - Feb. contract chart). Crude prices have been rising, but they still haven't breached the $58.94 high of Nov. 24. If crude exceeds that high it gives more weight to the idea of a new cycle starting Dec. 7. As long as prices are rising in this reversal zone, though, it is too risky to go long. We will remain on the sidelines of crude oil for now.
As we approach the Christmas holiday (this Monday), we are not seeing a strong "Santa Claus" rally, but equity markets aren't falling strongly either. Wall Street may be a little nervous before President Trump actually signs the tax reform bill that was approved by Congress yesterday as there is a possibility he will delay the signing into the new year to avoid the implementation of immediate drastic spending cuts in early 2018 (those cuts could be delayed into 2019 if the bill is not passed this month). We will wait and see if a holiday rally can pick up next week as we move towards New Year's Day. Rally or not, we are still watching for a case of intermarket bearish divergence where one or two- but not all three- stock market indices (DOW, S&P 500, NASDAQ) make new highs. If this happens next week, it will be in a strong reversal zone and it will be a good signal to sell this market short again. On the sidelines of the broad stock market for now.
It's still not clear whether or not gold and silver started new medium-term cycles on Dec. 12. If they did, this market could be turning very bullish. The strong rally in prices since last week supports this idea. The only problem is that these metals are rising into a reversal zone this week and a very strong one next week. This means this market could still turn down and plunge below those Dec. 12 lows and make the final bottom to an older medium-term cycle. The alternative to this would be for gold and silver to "break out" to the upside in this reversal zone. This sometimes happens in reversal zones, but it's not common (which is why we call these periods "reversals"). The bottom line here is we are looking to go long in the precious metals soon once we can determine the start of a new medium -term cycle in both metals. Still on the sidelines of gold and silver.
The U.S. Dollar Index has been edging down this week, and it is making a new weekly low today right at the center of a reversal zone specifically for currencies (all this week). We could thus see this index turn up now. If it does, it would likely push gold and silver prices down.
Like the precious metals, crude oil may have started a new medium-term cycle in early December (Dec. 7), but it could also turn down in the current reversal zone and complete the final bottom of an older cycle below that Dec. 7 low ($55.88 - Feb. contract chart). Crude prices have been rising, but they still haven't breached the $58.94 high of Nov. 24. If crude exceeds that high it gives more weight to the idea of a new cycle starting Dec. 7. As long as prices are rising in this reversal zone, though, it is too risky to go long. We will remain on the sidelines of crude oil for now.
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