MARKETS UPDATE (2:10 pm EST)
All three broad stock market indices (DOW, S&P 500 and NASDAQ) have been falling this week, and we are now in a major reversal zone for many markets that ends tomorrow. All three indices have made new monthly lows today, and at the time of this writing (2:00 pm EST) seem to be rising. We are also near the end of the medium-term cycles of all three indices. Could today's low be the cycle bottom we've been waiting to buy? Yes, but there are some bearish signs that should make us cautious right now. Directional momentum in the S&P 500 and NASDAQ turned 100% bearish yesterday (the DOW remains mixed bullish and bearish), and the markets have been very volatile. In such a nervous market it is probably a good idea to use the S&P 500 to gauge our trading rather than the DOW which can move more erratically when markets are jittery. Right now there is strong support in the S&P 500 all the way down to 1800. If the market continues to panic and this index starts to make new lows into next week, we could see the final bottom to the medium-term cycle around the second week of February. If the cycle bottoms this week (i.e. today or tomorrow), we could instead see a strong rally into that time frame. We will remain on the sidelines until this pattern becomes more clear or we get a stronger buy signal. On the sidelines of the broad stock market for now.
Crude oil may have made its medium-term cycle bottom on Tuesday at $29.93, a little above our target of $28 - $29, but I am not seeing any short-term buy signals in crude oil charts, and it still has another day (Friday) within this reversal zone to make a new low. We are still looking to buy crude as it is very oversold, and the start of any new cycle is at least short-term bullish. The situation here is similar to that of the broad stock market. It would be best if crude's medium-term cycle bottoms this week, but investor panic could bring both markets lower into next week. If that happens, crude may also find its cycle bottom in early February. Still on the sidelines of crude oil.
Gold and silver prices have also been very volatile this week with prices trending down but also moving up and down in roller coaster fashion. I am going to maintain my recent long position in gold as long as we don't see prices break and close below $1070 (see Tuesday's blog on gold). Gold prices are dropping close to that level as I write this. If gold can hold above there while silver makes a new monthly low (below $13.62 in the March contract chart) it will be a strong case of intermarket bullish divergence. This could happen tomorrow as silver is already down to $13.74, and this would still be within the current reversal zone for a bottom and subsequent rally. Holding my long position in gold but on the sidelines of silver.
All three broad stock market indices (DOW, S&P 500 and NASDAQ) have been falling this week, and we are now in a major reversal zone for many markets that ends tomorrow. All three indices have made new monthly lows today, and at the time of this writing (2:00 pm EST) seem to be rising. We are also near the end of the medium-term cycles of all three indices. Could today's low be the cycle bottom we've been waiting to buy? Yes, but there are some bearish signs that should make us cautious right now. Directional momentum in the S&P 500 and NASDAQ turned 100% bearish yesterday (the DOW remains mixed bullish and bearish), and the markets have been very volatile. In such a nervous market it is probably a good idea to use the S&P 500 to gauge our trading rather than the DOW which can move more erratically when markets are jittery. Right now there is strong support in the S&P 500 all the way down to 1800. If the market continues to panic and this index starts to make new lows into next week, we could see the final bottom to the medium-term cycle around the second week of February. If the cycle bottoms this week (i.e. today or tomorrow), we could instead see a strong rally into that time frame. We will remain on the sidelines until this pattern becomes more clear or we get a stronger buy signal. On the sidelines of the broad stock market for now.
Crude oil may have made its medium-term cycle bottom on Tuesday at $29.93, a little above our target of $28 - $29, but I am not seeing any short-term buy signals in crude oil charts, and it still has another day (Friday) within this reversal zone to make a new low. We are still looking to buy crude as it is very oversold, and the start of any new cycle is at least short-term bullish. The situation here is similar to that of the broad stock market. It would be best if crude's medium-term cycle bottoms this week, but investor panic could bring both markets lower into next week. If that happens, crude may also find its cycle bottom in early February. Still on the sidelines of crude oil.
Gold and silver prices have also been very volatile this week with prices trending down but also moving up and down in roller coaster fashion. I am going to maintain my recent long position in gold as long as we don't see prices break and close below $1070 (see Tuesday's blog on gold). Gold prices are dropping close to that level as I write this. If gold can hold above there while silver makes a new monthly low (below $13.62 in the March contract chart) it will be a strong case of intermarket bullish divergence. This could happen tomorrow as silver is already down to $13.74, and this would still be within the current reversal zone for a bottom and subsequent rally. Holding my long position in gold but on the sidelines of silver.
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