As we begin the new year we can identify our first strong general reversal zone coming up tomorrow (Jan. 5-13), and a second (weaker) one Jan. 17-26. A significant sub-cycle low in the broad stock market is due this week, unless it already happened with last Wednesday's 10,207 low in the NASDAQ and the Nov. 22 lows in the DOW and S&P 500 (32,573 and 3,764, respectively). Ideally, I would like to see these indices fall further into this week's reversal zone and see at least one go below its previous low. That would probably be a good spot to buy. An alternate scenario would have these indices rallying into the new reversal zone. If that happens, and the indices can test or break slightly above their 45-day moving averages, then we may have to assume that the sub-cycle lows are in and that a new sub-cycle high could be forming with an imminent reversal down to follow. That would likely be an opportunity to sell short. So this market could go either way at the moment. We will need to wait at least a few more days to see which scenario is likely to play out, so we remain on the sidelines of the broad stock market for now.
(Note that any equity buying now would be for a short-term - but possibly steep - rally and applicable to mostly shorter-term investors. We are still favoring our longer-term view that a possible major long-term 90-year cycle in the broad stock market peaked in January 2022 (DOW and S&P 500) and November 2021 (NASDAQ). If this is true, we will not see those all-time highs exceeded (36,953 in the DOW, 4,819 in the S&P 500, and 16,212 in the NASDAQ) for some time in all three indices (we may see one - probably the DOW - challenge or slightly exceed its all-time high). In other words, the top of the 90 year cycle is probably in, and the markets are now likely falling to the 90-year cycle bottom due sometime around 2024 - 2025 with a final corrective low at least 50% (possibly much more) down from the all-time highs. The only thing that would negate this view now would be ALL THREE stock market indices breaking above those all-time highs in the first half of this year. Right now, only the DOW seems close enough to do this. Longer-term investors are now advised to be out of all equity markets or in short positions, or ready to sell short soon.)
That new Jan. 5-13 reversal zone is also applicable to the precious metals. We are expecting a sharp sub-cycle correction in gold's medium-term cycle and a sharp correction to the final bottom of the medium-term cycle in silver - both very soon. Gold's sub-cycle corrective low is due anytime now by Jan. 21. Silver's bottom is due anytime by Jan. 28. The Jan. 5-13 reversal zone would be a good time frame for these bottoms. Gold and silver prices have been rising this week, but they may be peaking now. Gold accelerated to a new weekly high today at $1864, and silver hit a new high yesterday at $24.52. Both metals seem to be pulling back from those highs, so a sharp correction down into this new reversal zone (which starts tomorrow) could be imminent.
A good target for a corrective drop from today's high in gold would be around $1766. We're still looking at $21 - $22 as a good target for silver's cycle bottom. Even if these metals push a bit higher into the reversal zone, we could have two reversals - a top and a bottom - in the same time frame. We will stay on the sidelines of both metals as we wait for those corrective drops.
There are several possible ways to label the current medium-term cycle in crude oil - it could be a new or old cycle. Regardless of the cycle labeling, the new reversal zone that starts tomorrow (Jan. 5-13) is also applicable to crude, and today prices are plummeting sharply and rapidly towards that $70 low from Dec. 9. It looks like we may be headed for a significant cycle or sub-cycle low inside this new reversal zone - a low that could test or even break below $70. That could turn out to be a good place to buy, so we will watch for it. We will remain on the sidelines of crude oil for now.