MARKETS UPDATE (9:30 pm EST)
The broad stock market took a "breather" from its "Santa Claus" rally yesterday with a steep corrective dip off new weekly highs in all three of our indices (DOW, S&P 500, NASDAQ). Because we are technically out of our strong general reversal zone tomorrow, yesterday's highs may have been a significant top, and we might see more down-sliding into next week. On the other hand, the market seems to be recovering today as we move towards this holiday week-end, so we could see a rally continue into tomorrow or even into early next week. But can it push higher through next week into New Year's Day? Maybe, but a significant sub-cycle correction is now due (overdue), and we have a strong intermarket bearish divergence signal as long as the S&P 500 and/or NASDAQ remain below their all-time highs (see previous blog). A significant correction down to at least the 15-day moving averages of our three indices could happen any day now (if it didn't start already from yesterday's highs), and this might give us a deeper "dip" into next week. We are still looking to go long, ideally around 35,500 - 36,000 in the DOW. We are staying on the sidelines of this market for now.
Gold and silver prices seem to be stabilizing just above their 15-day moving averages, but are they getting ready to roll over or are they forming a baseline for another rally? Silver is making new weekly highs while gold hasn't yet exceeded its high from last week (bearish divergence), and this is the last day of a reversal zone specifically for these metals. A correction down could be imminent. If we don't get one now, prices could push higher into next week. As I stated in Monday's blog, we don't want to chase any rallies in these metals right now, but we may be interested in going long if they make significant corrective lows. Let's stay on the sidelines of both metals for now.
The U.S. Dollar Index is testing support around 102 today. If that breaks, the dollar could push lower, and that could trigger at least a temporary rally in the precious metals. We will continue to monitor this.
Crude oil prices are now testing a strong resistance line at $75 (February contract chart). They backed down a bit today but remained above the 15-day moving average (now around $72 and falling). We are holding a long position here and will not get concerned as long as the price remains above that average. For now, we are staying long in crude oil.
The broad stock market took a "breather" from its "Santa Claus" rally yesterday with a steep corrective dip off new weekly highs in all three of our indices (DOW, S&P 500, NASDAQ). Because we are technically out of our strong general reversal zone tomorrow, yesterday's highs may have been a significant top, and we might see more down-sliding into next week. On the other hand, the market seems to be recovering today as we move towards this holiday week-end, so we could see a rally continue into tomorrow or even into early next week. But can it push higher through next week into New Year's Day? Maybe, but a significant sub-cycle correction is now due (overdue), and we have a strong intermarket bearish divergence signal as long as the S&P 500 and/or NASDAQ remain below their all-time highs (see previous blog). A significant correction down to at least the 15-day moving averages of our three indices could happen any day now (if it didn't start already from yesterday's highs), and this might give us a deeper "dip" into next week. We are still looking to go long, ideally around 35,500 - 36,000 in the DOW. We are staying on the sidelines of this market for now.
Gold and silver prices seem to be stabilizing just above their 15-day moving averages, but are they getting ready to roll over or are they forming a baseline for another rally? Silver is making new weekly highs while gold hasn't yet exceeded its high from last week (bearish divergence), and this is the last day of a reversal zone specifically for these metals. A correction down could be imminent. If we don't get one now, prices could push higher into next week. As I stated in Monday's blog, we don't want to chase any rallies in these metals right now, but we may be interested in going long if they make significant corrective lows. Let's stay on the sidelines of both metals for now.
The U.S. Dollar Index is testing support around 102 today. If that breaks, the dollar could push lower, and that could trigger at least a temporary rally in the precious metals. We will continue to monitor this.
Crude oil prices are now testing a strong resistance line at $75 (February contract chart). They backed down a bit today but remained above the 15-day moving average (now around $72 and falling). We are holding a long position here and will not get concerned as long as the price remains above that average. For now, we are staying long in crude oil.
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