MARKETS UPDATE (3:00 pm EST)
In Monday's blog I wrote:
"Both the S&P 500 and NASDAQ made "gap-ups" today which created "bullish island reversal" patterns in their charts, but strong resistance could turn these indices back down and negate that pattern (or not)."
Indeed, both indices did turn down and closed those gaps to negate those "bullish" island reversals. Could this market turn back up? Yes. Could it continue down? Yes. We have no reversal zones coming up until the last week of this month (Jan. 22 - 30), so this market could progress extensively in either direction for two more weeks without pausing and forming a major turning point. I'm remaining on the sidelines of this indecisive market for now.
As with the broad stock market, gold is also a bit tricky to call at the moment. It appears that the Nov. 14 low of $2541 was not only the start of a new medium-term cycle, but also most likely the start of a new longer-term (50 week) cycle as well. If true, gold could be very bullish and ready to rally strongly. But the rally so far has not been strong. In fact, the first sub-cycle peak in this new medium-term cycle was on Dec. 12 at $2724 which was well below the previous cycle's peak at $2790 (on Oct. 30). This means the current cycle's trend could be turning bearish. Prices need to start rallying above $2724 to negate this idea. Because gold's directional trend is not clear, I am staying on the sidelines of this metal for now.
There is some evidence that silver is also turning bearish. I've been labeling the "double-bottom" lows in silver on Nov. 14 ($29.73) and Nov. 29 ($29.70) as the start of a new medium-term cycle. If that labeling is correct, the cycle trend has already turned bearish because after prices rose to test $32 in the second week of December, they then fell to $29 in the last week of December (i.e. well below the start of the cycle). Prices are now rising from that first sub-cycle bottom, but if the trend is bearish, they should not get very far and could roll over soon. However, If prices keep rising and they can get above $32.31, I may have to change my labeling of the current cycle and consider a more bullish view. Until then, silver looks bearish and I am remaining on the sidelines of this metal.
It looks like crude oil started a new medium-term cycle with its low of $66.71 on Dec. 6 (Feb. contract chart). Prices have been rising sharply from there and they broke through a congestion zone ($66 - $72) last Friday. This week the price is testing strong resistance at $74. A sub-cycle crest and corrective dip can be expected anytime now over the next few weeks, so this resistance line would be a good place for it to happen. Any correction that does not go below $66.71 may be a good place to buy, but for now we will remain on the sidelines of this market.
In Monday's blog I wrote:
"Both the S&P 500 and NASDAQ made "gap-ups" today which created "bullish island reversal" patterns in their charts, but strong resistance could turn these indices back down and negate that pattern (or not)."
Indeed, both indices did turn down and closed those gaps to negate those "bullish" island reversals. Could this market turn back up? Yes. Could it continue down? Yes. We have no reversal zones coming up until the last week of this month (Jan. 22 - 30), so this market could progress extensively in either direction for two more weeks without pausing and forming a major turning point. I'm remaining on the sidelines of this indecisive market for now.
As with the broad stock market, gold is also a bit tricky to call at the moment. It appears that the Nov. 14 low of $2541 was not only the start of a new medium-term cycle, but also most likely the start of a new longer-term (50 week) cycle as well. If true, gold could be very bullish and ready to rally strongly. But the rally so far has not been strong. In fact, the first sub-cycle peak in this new medium-term cycle was on Dec. 12 at $2724 which was well below the previous cycle's peak at $2790 (on Oct. 30). This means the current cycle's trend could be turning bearish. Prices need to start rallying above $2724 to negate this idea. Because gold's directional trend is not clear, I am staying on the sidelines of this metal for now.
There is some evidence that silver is also turning bearish. I've been labeling the "double-bottom" lows in silver on Nov. 14 ($29.73) and Nov. 29 ($29.70) as the start of a new medium-term cycle. If that labeling is correct, the cycle trend has already turned bearish because after prices rose to test $32 in the second week of December, they then fell to $29 in the last week of December (i.e. well below the start of the cycle). Prices are now rising from that first sub-cycle bottom, but if the trend is bearish, they should not get very far and could roll over soon. However, If prices keep rising and they can get above $32.31, I may have to change my labeling of the current cycle and consider a more bullish view. Until then, silver looks bearish and I am remaining on the sidelines of this metal.
It looks like crude oil started a new medium-term cycle with its low of $66.71 on Dec. 6 (Feb. contract chart). Prices have been rising sharply from there and they broke through a congestion zone ($66 - $72) last Friday. This week the price is testing strong resistance at $74. A sub-cycle crest and corrective dip can be expected anytime now over the next few weeks, so this resistance line would be a good place for it to happen. Any correction that does not go below $66.71 may be a good place to buy, but for now we will remain on the sidelines of this market.
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