The broad stock market indices (DOW, S&P 500, NASDAQ) all peaked on Tuesday (Nov. 19) with new all-time highs (no bearish divergence) before correcting down Wednesday and today. The lows on Wednesday did not get to our target areas (27,100 - 27,500 in the DOW and 3,020 - 3,080 in the S&P 500), and they were only one day after the peak so they do not really qualify as a normal sub-cycle correction. Tuesday's peak was also technically just outside our reversal zone (Nov. 20 - 27), and we like to see significant tops (or bottoms) within a reversal zone. Let's wait and see if equities can move lower into our target ranges over the next four trading days and give us a good spot to buy. If instead this market rallies higher tomorrow and into early next week, we may look to sell short (especially if one or two but not all three indices make new highs next week - i.e. bearish divergence) for what could be a brief but sharp corrective dip. Still on the sidelines of the broad stock market.
Gold and silver prices have been relatively flat this week with gold making a new weekly high yesterday and silver a new weekly high today. Both metals closed down a bit today at the lower end of their daily range (bearish). We are now entering a reversal zone specifically for the precious metals (Nov. 20 -27, same as for equities) so today's high could be a top and turning point; however, there is still plenty of time for either metal to make a new high by next Wednesday. The cycle pattern is still unclear for both gold and silver so we will just wait and see if we get a significant low or high in this new reversal zone. I should point out here that while precious metal prices may be temporarily "stuck" in a narrow trading range (or possibly setting up for another corrective drop), we have not abandoned our longer-term bullish outlook. At the moment it looks like gold could potentially drop into the $1380 - $1400 range, and silver down to $15.25 - $15.50. If those levels hold, they could be ideal buy spots for another major run up in both metals. A significant break below those levels, however, would likely force us to abandon our bullish view. Still on the sidelines of gold and silver.
After making a high of $58.17 on Monday (Jan. contract chart), crude oil prices dropped to a low of $54.85 on Wednesday then rocketed back up to a new high of $58.67 today. Whew! This volatile roller coaster ride has caught us a little off guard. We were looking for a corrective dip to buy in the $54 - $55 range. We got that on Wednesday, but it was only a two day correction ( we like to see at least 3 corrective days), and it was only the first day of the new reversal zone. Did we miss the dip? Maybe. But I think it's more likely the sub-cycle top is still forming (or just formed today) and will be in (or is in) before next Wednesday. If this is correct, we may get a second chance to buy that corrective dip. Let's watch for it. On the sidelines of crude oil for now.