The broad stock market made an attempt to rally this morning but then turned abruptly down in the afternoon before closing the day with a heavy loss. The DOW was down 530 points, the S&P 500 down 64, and the NASDAQ down 228. It looks like a final corrective drop to the end of the current medium-term cycles in all three indices is underway. Our current, relatively weak general reversal zone continues into next Wednesday. It's possible we could see a cycle bottom by then, but the corrective drop could continue longer into the end of the month and land inside our next strong reversal zone April 22 - May 3. We will remain on the sidelines of this market until we see signs that a bottom is in.
Gold and silver may be topping out today as both tested and then closed below round number resistance levels (gold at $2300 and silver at $27). As I mentioned in yesterday's blog, it's a good time for prices to roll over as we are in the center of a general reversal zone as well as inside a potential "pivot point" for precious metals through Friday (and possibly next Monday). For these reasons, we sold our long positions in both gold and silver yesterday, and we are now on the sidelines of both metals. We may look to go long again after any significant corrective drop over the next week or two.
The U.S. Dollar Index has been falling and is now testing its 15-day and 45-day moving averages (near 104) in the center of our current reversal zone. If it turns back up over the next several trading days, it could put downward pressure on both gold and silver and trigger the downward correction we are anticipating in both these metals.
Crude oil prices edged a bit higher today and briefly exceeded $87 before closing at $86.59 (May contract price). It is late in the current medium-term cycle, and a final top is now due that should be followed by a sharp correction down to the final cycle bottom. As with gold and silver, today's high is in the center of our general reversal zone as well as inside a potential "pivot point" for crude. A roll over in prices could be imminent. When it happens, we will be looking to buy at the bottom of any significant correction. For now, we remain on the sidelines of crude.