The broad stock market seems to be following the first (bullish) scenario I outlined in my last blog, that is, it is rallying (so far), hopefully into the first week of February. As I stated on Monday, any rally into early February that stays below the all-time high in the DOW (18,103) will be a good opportunity to sell short. Unfortunately, markets could be very unstable and volatile over the next three weeks so we may see choppy index movements as we move into February. Because we are still in a time window for reversals (it ends tomorrow) it is possible for this market to turn down again today or tomorrow. If that happens we will again use the 17,200 level as a support area to watch. (Any new highs after Friday, however, would suggest the continuation of the rally into early February). As stated before, a break below 17,200 and especially a break below 17,000 would be a very bearish development and could lead to a steep fall in the markets. Still on the sidelines.
Gold and silver prices may be peaking now as several technical signals are suggesting a short-term correction.
If gold moves into the $1250 - $1270 area and silver into the $17 - $17.50 range, we will have good spots to enter long positions in these metals. If gold does correct now, we don't want to see the $1220 -$1240 area broken as that could mean the market is turning bearish again. On the sidelines and waiting to buy.
Crude oil prices continue to be stabile as they hover above $45. Nothing new to report here. We are still waiting for a sign to confirm that a cycle bottom is in. If prices don't start rising next week, we could see them move lower into the first week of February. $45 is an ideal target price for this bottom, but it is possible it could go as low as $40. If we can enter (buy) near the bottom of this cycle we, could see a rally to $60 or even higher before the market turns down again. On the sidelines and waiting to buy.
The U.S. Dollar Index continues to be amazingly bullish as it surged to just over 94 today. The fact that gold and silver are holding up so well now in spite of this dollar surge is strong testimony to the current underlying strength of the precious metals. The dollar is still overdue for a correction, but a little more rallying isn't out of the question which would help push gold and silver prices closer to our entry targets. We will continue to monitor the dollar's movement for its effect on precious metal prices.