MARKETS UPDATE (5:00 pm EST)
Several cycle patterns, timing factors, and technical signals are coming together now in all the markets we follow, and this will help us navigate the direction of our trading over the next several weeks. Our focal point for timing is now the first week of March (+/- several days on both sides) which is an important reversal zone for all markets.
The broad stock market made an important low on Feb.2, and this bottom was likely the start of new cycles in the DOW and S&P 500. These two indices have been rising since then and are now approaching their all-time highs (18,103 in the DOW and 2093 in the S&P 500). The NASDAQ is making a new yearly high today, so if either one (or both) of the other two indices cannot break their high(s), then we will have a case of intermarket bearish divergence and the market could turn down and start to fall steeply into March. However, since we are no longer in a reversal zone for this market, it seems more likely that all three indices will make new highs into early March at which time I will consider selling short. I also may consider buying any significant pullback to the 17,600 area over the next several days for a rally into early March (assuming directional momentum remains bullish). Still on the sidelines.
Gold prices have dropped down to our stop loss level of $1220 which seems to be holding. This situation is a bit of a nail-biter now as this support level is at the "neckline" of a chart pattern know as an "inverted head and shoulders formation". This pattern is bullish unless it "aborts" by breaking significantly below that neckline. $1220 is therefore an important support area, but there is also support at $1210 and $1200. What we want to see now is a rally into early March, but we need to be aware that there is a possibility of prices falling into that time frame instead. Silver has still not made a new weekly low while gold has, so we still have a case of intermarket bullish divergence which is supporting the idea of a rally now. Holding my long position in gold. Still out of silver.
Crude oil's low on Jan. 29 at $43.58 was a bit early in terms of timing for a significant cycle bottom; however, the high on Feb.3 at $54.24 was in the center of a reversal zone for oil. This suggests that prices could still fall to a new bottom (or double bottom to $43.58) from that Feb.3 high. If this happens, then the first week of March would be an ideal time for a final bottom to the long-term oil cycle and could be a good time to go long. If instead prices push higher into early March (especially if they reach $60 or higher), we will look to sell short as the market could start to turn very bearish again. Still on the sidelines.
The U.S. Dollar Index seems to be leveling off in the 94-95 area and short-term technical signals are suggesting a correction now. The dollar is extremely overbought and way overdue for a significant correction so this may start now. Such a correction would help fuel a rally in gold and silver. I should point out here that the normal inverse relationship between the movements of the dollar and the price of gold may not be as strong now as gold and the U.S. dollar are recently being perceived as safe haven investments by nervous investors worried about a collapsing global economy. For this reason we may start to see gold and the dollar rising together, at least short-term.
I haven't talked much about the Swiss franc for some time now as this currency was flat or declining for most of 2014. It appears, though, that the Swiss franc may be making a long-term cycle bottom now, and since the dollar may be about to take a significant correction, it could be a good time to buy. Switzerland's decision in mid-January to remove the cap on the value of the Swiss franc against the Euro has obviously increased the value and appeal of Swiss currency. This could drive a strong rally at the start of the new cycle in the Swiss franc. I will comment more on this in a future blog.
Several cycle patterns, timing factors, and technical signals are coming together now in all the markets we follow, and this will help us navigate the direction of our trading over the next several weeks. Our focal point for timing is now the first week of March (+/- several days on both sides) which is an important reversal zone for all markets.
The broad stock market made an important low on Feb.2, and this bottom was likely the start of new cycles in the DOW and S&P 500. These two indices have been rising since then and are now approaching their all-time highs (18,103 in the DOW and 2093 in the S&P 500). The NASDAQ is making a new yearly high today, so if either one (or both) of the other two indices cannot break their high(s), then we will have a case of intermarket bearish divergence and the market could turn down and start to fall steeply into March. However, since we are no longer in a reversal zone for this market, it seems more likely that all three indices will make new highs into early March at which time I will consider selling short. I also may consider buying any significant pullback to the 17,600 area over the next several days for a rally into early March (assuming directional momentum remains bullish). Still on the sidelines.
Gold prices have dropped down to our stop loss level of $1220 which seems to be holding. This situation is a bit of a nail-biter now as this support level is at the "neckline" of a chart pattern know as an "inverted head and shoulders formation". This pattern is bullish unless it "aborts" by breaking significantly below that neckline. $1220 is therefore an important support area, but there is also support at $1210 and $1200. What we want to see now is a rally into early March, but we need to be aware that there is a possibility of prices falling into that time frame instead. Silver has still not made a new weekly low while gold has, so we still have a case of intermarket bullish divergence which is supporting the idea of a rally now. Holding my long position in gold. Still out of silver.
Crude oil's low on Jan. 29 at $43.58 was a bit early in terms of timing for a significant cycle bottom; however, the high on Feb.3 at $54.24 was in the center of a reversal zone for oil. This suggests that prices could still fall to a new bottom (or double bottom to $43.58) from that Feb.3 high. If this happens, then the first week of March would be an ideal time for a final bottom to the long-term oil cycle and could be a good time to go long. If instead prices push higher into early March (especially if they reach $60 or higher), we will look to sell short as the market could start to turn very bearish again. Still on the sidelines.
The U.S. Dollar Index seems to be leveling off in the 94-95 area and short-term technical signals are suggesting a correction now. The dollar is extremely overbought and way overdue for a significant correction so this may start now. Such a correction would help fuel a rally in gold and silver. I should point out here that the normal inverse relationship between the movements of the dollar and the price of gold may not be as strong now as gold and the U.S. dollar are recently being perceived as safe haven investments by nervous investors worried about a collapsing global economy. For this reason we may start to see gold and the dollar rising together, at least short-term.
I haven't talked much about the Swiss franc for some time now as this currency was flat or declining for most of 2014. It appears, though, that the Swiss franc may be making a long-term cycle bottom now, and since the dollar may be about to take a significant correction, it could be a good time to buy. Switzerland's decision in mid-January to remove the cap on the value of the Swiss franc against the Euro has obviously increased the value and appeal of Swiss currency. This could drive a strong rally at the start of the new cycle in the Swiss franc. I will comment more on this in a future blog.
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