MARKETS UPDATE (3:30 pm EST)
In hindsight, it seems that I was a bit premature in my assessment of a declining broad stock market on Monday when I stated :
"The DOW and S&P 500 are clearly falling into the current reversal zone..."
I did, however, add afterwards :
"On the other hand, if these indices reverse now and rally strongly into the end of the week, we may consider selling short..."
The DOW and S&P 500 have indeed both been rising from last Friday's low, but neither one has made a new weekly high (yet). We are also not seeing new lows to buy so we will have to remain on the sidelines of this market for now. Tomorrow's jobs report may result in a significant high or low in these indices depending on how the market reacts.
A sharp drop in the U.S. Dollar Index today is pushing gold and silver prices higher, and both metals are making new weekly highs so we no longer have a case of bearish intermarket divergence. This could be a bullish sign; however, we are in a reversal zone, and the dollar is approaching a strong support line around 101 so it could stabilize and rebound which would likely push the precious metals back down. The bottom line here is that we are getting mixed signals in a volatile market that may react strongly to tomorrow's jobs report. Let's remain on the sidelines and see how these markets move tomorrow.
Crude oil made a new weekly low and a new weekly high on Tuesday and is thus still not giving us a clear buy or sell signal. As with the other markets, it is probably best to remain on the sidelines and see how crude reacts to tomorrow's jobs report. Because ideal turning points now would be near or above $55 (high) or near or below $49 (low), we may extend the current reversal zone into early next week to allow time for crude to move closer to those levels.
In hindsight, it seems that I was a bit premature in my assessment of a declining broad stock market on Monday when I stated :
"The DOW and S&P 500 are clearly falling into the current reversal zone..."
I did, however, add afterwards :
"On the other hand, if these indices reverse now and rally strongly into the end of the week, we may consider selling short..."
The DOW and S&P 500 have indeed both been rising from last Friday's low, but neither one has made a new weekly high (yet). We are also not seeing new lows to buy so we will have to remain on the sidelines of this market for now. Tomorrow's jobs report may result in a significant high or low in these indices depending on how the market reacts.
A sharp drop in the U.S. Dollar Index today is pushing gold and silver prices higher, and both metals are making new weekly highs so we no longer have a case of bearish intermarket divergence. This could be a bullish sign; however, we are in a reversal zone, and the dollar is approaching a strong support line around 101 so it could stabilize and rebound which would likely push the precious metals back down. The bottom line here is that we are getting mixed signals in a volatile market that may react strongly to tomorrow's jobs report. Let's remain on the sidelines and see how these markets move tomorrow.
Crude oil made a new weekly low and a new weekly high on Tuesday and is thus still not giving us a clear buy or sell signal. As with the other markets, it is probably best to remain on the sidelines and see how crude reacts to tomorrow's jobs report. Because ideal turning points now would be near or above $55 (high) or near or below $49 (low), we may extend the current reversal zone into early next week to allow time for crude to move closer to those levels.
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