MARKETS UPDATE (6:30 pm EST)
Our trading decisions may get a little tricky when we enter the month March as we have several overlapping reversal zones to deal with. They are:
Feb. 26 - March 7 (broad stock market and precious metals)
March 12 - 21 (very strong - broad stock market and precious metals)
March 5 - 14 (crude oil)
We will keep in mind that in all of these reversal periods the most likely turning point is to be found in the center of the reversal. Remember that these reversals can be either a significant turn down from a top or a significant turn up from a bottom depending on what direction the market is moving.
Tomorrow is the last day of our current reversal period for equities, and it looks like this market does not want to touch our minimal targets for a top (26,200 in the DOW and 2,800 in the S&P 500). The broad stock market is turning down today so it's possible a high is in (from yesterday), and we could see a correction now with a bottom forming in next week's (or the following week's) reversal zone. But I am noting here that all three indices (DOW, S&P 500, NASDAQ) made new highs this week so we did not get any intermarket bearish divergence signal. We usually like to see that before a significant reversal. There is therefore still the possibility of this market pushing higher into the next reversal zone (Feb. 26 - March 7). If the top is in, we should see a sharp and steep correction down from here. If we don't, I am favoring the idea of a little more rallying over the next week or two. Because we're assuming this market is bullish, our primary trading strategy now is to buy the bottom of any significant correction. But a significant top over the next two or three weeks may also give us a good short-term shorting opportunity as the subsequent correction down could be steep. Stay tuned for trade alerts. Still on the sidelines of the broad stock market.
Today is the last day of our current reversal zone for precious metals. Yesterday silver made a new monthly high ($16.20) and on Tuesday gold made a new monthly high ($1346). This negated our bearish divergence signal from last week and early this week. Despite that, gold and silver prices are falling sharply today. As with the broad stock market, if prices continue to fall sharply into next week's reversal zone we will likely see a significant bottom to buy (maybe the final medium-term cycle bottom in both metals). But no bearish divergence signal this week also tells me that gold and silver's rally may not be over yet. If prices push higher next week, we may be looking for the final top in both metals and a possible shorting opportunity to ride a steep (but brief) correction down to the final cycle bottoms. Still on the sidelines of gold and silver.
The U.S. Dollar Index has been falling this week, but it may be finding support around 96.40. Yesterday's and today's lows tested that level then snapped back up. Significantly, Monday was the center point of a reversal zone specifically for currencies (that ends today) so we could see the greenback rally from here. If it does, that would put downward pressure on gold and silver and perhaps push prices down to their final cycle bottoms as discussed above.
Let me say here that despite any short-term bullishness in the U.S. dollar, the longer-term picture for the greenback is not looking very good. Many financial analysts now believe that the status of the U.S. Dollar as the world's reserve currency is in jeopardy. Supporting this idea is the fact that the dollar is probably in the late stages of a 16 year cycle that started in March 2008 and may have peaked in Jan. 2017 at 103. Unless the dollar soon surges above that 103 top, it is most likely headed down for several more years and could end up in the low 70s or even lower by 2025. The Federal Reserve's hawkish attitude last year certainly helped boost the U.S. Dollar, but recent dovish rhetoric from the Fed (seemingly to head off a collapse in equity markets) has at least temporarily taken the wind from the greenback's sails. Needless to say, if the dollar is ready to collapse as just described, it will be good news for precious metals. The wind that was driving the greenback could then drive gold and silver prices into an explosive long-term rally. This is one of the reasons I am so bullish on precious metals right now.
Crude oil prices also made a new high yesterday ($57.45 - April contract chart) and are down today. Crude prices could fall from here and make a sub-cycle low within the next two weeks which would give us a good spot to go long. If prices push higher next week, however, we may have to wait a bit longer for a significant sub-cycle correction. As I've stated in recent blogs, this market is looking quite bullish as it is just starting a new medium-term and probably longer-term (3 year) cycle. That means we are looking for a good entry point to buy as soon as possible. On the sidelines of crude oil for now.
Our trading decisions may get a little tricky when we enter the month March as we have several overlapping reversal zones to deal with. They are:
Feb. 26 - March 7 (broad stock market and precious metals)
March 12 - 21 (very strong - broad stock market and precious metals)
March 5 - 14 (crude oil)
We will keep in mind that in all of these reversal periods the most likely turning point is to be found in the center of the reversal. Remember that these reversals can be either a significant turn down from a top or a significant turn up from a bottom depending on what direction the market is moving.
Tomorrow is the last day of our current reversal period for equities, and it looks like this market does not want to touch our minimal targets for a top (26,200 in the DOW and 2,800 in the S&P 500). The broad stock market is turning down today so it's possible a high is in (from yesterday), and we could see a correction now with a bottom forming in next week's (or the following week's) reversal zone. But I am noting here that all three indices (DOW, S&P 500, NASDAQ) made new highs this week so we did not get any intermarket bearish divergence signal. We usually like to see that before a significant reversal. There is therefore still the possibility of this market pushing higher into the next reversal zone (Feb. 26 - March 7). If the top is in, we should see a sharp and steep correction down from here. If we don't, I am favoring the idea of a little more rallying over the next week or two. Because we're assuming this market is bullish, our primary trading strategy now is to buy the bottom of any significant correction. But a significant top over the next two or three weeks may also give us a good short-term shorting opportunity as the subsequent correction down could be steep. Stay tuned for trade alerts. Still on the sidelines of the broad stock market.
Today is the last day of our current reversal zone for precious metals. Yesterday silver made a new monthly high ($16.20) and on Tuesday gold made a new monthly high ($1346). This negated our bearish divergence signal from last week and early this week. Despite that, gold and silver prices are falling sharply today. As with the broad stock market, if prices continue to fall sharply into next week's reversal zone we will likely see a significant bottom to buy (maybe the final medium-term cycle bottom in both metals). But no bearish divergence signal this week also tells me that gold and silver's rally may not be over yet. If prices push higher next week, we may be looking for the final top in both metals and a possible shorting opportunity to ride a steep (but brief) correction down to the final cycle bottoms. Still on the sidelines of gold and silver.
The U.S. Dollar Index has been falling this week, but it may be finding support around 96.40. Yesterday's and today's lows tested that level then snapped back up. Significantly, Monday was the center point of a reversal zone specifically for currencies (that ends today) so we could see the greenback rally from here. If it does, that would put downward pressure on gold and silver and perhaps push prices down to their final cycle bottoms as discussed above.
Let me say here that despite any short-term bullishness in the U.S. dollar, the longer-term picture for the greenback is not looking very good. Many financial analysts now believe that the status of the U.S. Dollar as the world's reserve currency is in jeopardy. Supporting this idea is the fact that the dollar is probably in the late stages of a 16 year cycle that started in March 2008 and may have peaked in Jan. 2017 at 103. Unless the dollar soon surges above that 103 top, it is most likely headed down for several more years and could end up in the low 70s or even lower by 2025. The Federal Reserve's hawkish attitude last year certainly helped boost the U.S. Dollar, but recent dovish rhetoric from the Fed (seemingly to head off a collapse in equity markets) has at least temporarily taken the wind from the greenback's sails. Needless to say, if the dollar is ready to collapse as just described, it will be good news for precious metals. The wind that was driving the greenback could then drive gold and silver prices into an explosive long-term rally. This is one of the reasons I am so bullish on precious metals right now.
Crude oil prices also made a new high yesterday ($57.45 - April contract chart) and are down today. Crude prices could fall from here and make a sub-cycle low within the next two weeks which would give us a good spot to go long. If prices push higher next week, however, we may have to wait a bit longer for a significant sub-cycle correction. As I've stated in recent blogs, this market is looking quite bullish as it is just starting a new medium-term and probably longer-term (3 year) cycle. That means we are looking for a good entry point to buy as soon as possible. On the sidelines of crude oil for now.
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