MARKETS UPDATE (4:30 pm EST)
The broad stock market continues to push higher and make record highs this week. The DOW made a new high early today, but the S&P 500 and NASDAQ are staying below their highs from Tuesday so it's possible that this rally is running out of steam. Fear of a government shutdown is now weighing heavily on Wall Street, and the U.S. Congress has until midnight on Friday to keep this from happening. Could a government shutdown trigger a market sell-off? Well, we are very late in the medium-term cycles of the DOW and S&P 500 so a top is overdue, and most analysts agree that this market is extremely overbought. At this point, just about anything could trigger a sell-off. On the other hand, if a government shutdown is averted, equities could soar higher next week. As I mentioned in my last blog, the next reversal zone for this market is Feb. 2 - 12. It's possible (even likely) that equities will top out then, but we are so late in the cycle that we could see a top at any time now. We will watch for an intermarket bearish divergence signal next week (assuming markets don't plunge tomorrow) and a possible opportunity to sell short. On the sidelines of the broad stock market.
This week gold and silver are taking a corrective dip, but silver's erratic behavior on Tuesday (prices plunging then surging) demonstrates some nervousness in this market right now. Silver has dropped into a support area around $17, but it looks like it could go lower. Gold is still a good distance away from our target of $1300 to buy. Let's see if prices drop lower tomorrow when we may consider going long in both metals. Still on the sidelines here.
Nervousness in the precious metals market may be due to the fact that the U.S. Dollar Index is now testing a critical support level around 90. If the dollar makes a significant break below that level, it could lead to a major breakdown, and that would almost surely send gold and silver prices flying upwards. The dollar touched 90.11 on Tuesday (technically within a reversal zone) so it's also possible for the dollar to now rally from this support and send the precious metals lower. We need to watch this situation carefully. Even if the dollar rallies now, it may not get very far before turning down again and challenging that support at 90. Overall, the chart for the dollar looks quite bearish while the charts for gold and silver are quite bullish.
Crude oil made a high on Monday at $64.81 (at the end of a reversal zone) and has been falling so it is likely making its first sub-cycle correction now. I would like to see this correction get close to $60, but there is a support level around $62 that could offer resistance to this. We are still looking to buy around $60 (Feb. contract chart) as this market continues to look bullish. On the sidelines of crude for now.
The broad stock market continues to push higher and make record highs this week. The DOW made a new high early today, but the S&P 500 and NASDAQ are staying below their highs from Tuesday so it's possible that this rally is running out of steam. Fear of a government shutdown is now weighing heavily on Wall Street, and the U.S. Congress has until midnight on Friday to keep this from happening. Could a government shutdown trigger a market sell-off? Well, we are very late in the medium-term cycles of the DOW and S&P 500 so a top is overdue, and most analysts agree that this market is extremely overbought. At this point, just about anything could trigger a sell-off. On the other hand, if a government shutdown is averted, equities could soar higher next week. As I mentioned in my last blog, the next reversal zone for this market is Feb. 2 - 12. It's possible (even likely) that equities will top out then, but we are so late in the cycle that we could see a top at any time now. We will watch for an intermarket bearish divergence signal next week (assuming markets don't plunge tomorrow) and a possible opportunity to sell short. On the sidelines of the broad stock market.
This week gold and silver are taking a corrective dip, but silver's erratic behavior on Tuesday (prices plunging then surging) demonstrates some nervousness in this market right now. Silver has dropped into a support area around $17, but it looks like it could go lower. Gold is still a good distance away from our target of $1300 to buy. Let's see if prices drop lower tomorrow when we may consider going long in both metals. Still on the sidelines here.
Nervousness in the precious metals market may be due to the fact that the U.S. Dollar Index is now testing a critical support level around 90. If the dollar makes a significant break below that level, it could lead to a major breakdown, and that would almost surely send gold and silver prices flying upwards. The dollar touched 90.11 on Tuesday (technically within a reversal zone) so it's also possible for the dollar to now rally from this support and send the precious metals lower. We need to watch this situation carefully. Even if the dollar rallies now, it may not get very far before turning down again and challenging that support at 90. Overall, the chart for the dollar looks quite bearish while the charts for gold and silver are quite bullish.
Crude oil made a high on Monday at $64.81 (at the end of a reversal zone) and has been falling so it is likely making its first sub-cycle correction now. I would like to see this correction get close to $60, but there is a support level around $62 that could offer resistance to this. We are still looking to buy around $60 (Feb. contract chart) as this market continues to look bullish. On the sidelines of crude for now.
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