IMPORTANT UPDATE and OVERVIEW of the BROAD STOCK MARKET and PRECIOUS METALS (5:30 pm EDT)
In Monday's blog on the broad stock market I wrote:
"... if these indices (DOW, S&P 500, NASDAQ) can break above those July 3 highs this week (that would be 21,563 in the DOW and 2,439 in the S&P 500) then we could see more rallying into next week. As I have discussed in recent blogs, we are keeping our eyes open for a significant top to sell short as a significant correction (possibly 8-10% or more) is expected soon based on technical and cycle patterns in these charts."
The DOW and S&P 500 did break those highs yesterday, and we are not in any major reversal zone until next week so this market could easily rally some more. We note, however, that while both indices are making new weekly highs, only the DOW has made a new all-time high (the S&P 500 is close to its all-time high of 2,454 and the NASDAQ is also approaching its all-time high of 6,342) so if the S&P 500 and/or NASDAQ cannot break their all-time highs, we will have an intermarket bearish divergence signal and the possibility of this market falling steeply into next week's reversal zone. That scenario is less likely now, but we need to see the S&P 500 and NASDAQ break above those highs before we discard it.
I suspect that my recent analysis of equity markets is getting a bit complex and confusing so let me try and give a general overview of the broad stock market right now:
We are now more than halfway through the medium-term cycles of the DOW, S&P 500, and NASDAQ which means that we should be watching for a top (high) from which a significant correction (to the end of the cycle) will follow. Technical studies are showing that this correction could be in the 8-10% range or possibly more. This top will most likely happen sometime between July 18 and August 23. Timing and reversal studies are pointing to July 21, July 26, Aug.3, and Aug. 21 as possible pivot points for a significant reversal. This means that the likelihood of a top and reversal down will be highest on or near any one of these dates. Our main trading strategy will therefore be to watch those dates for signs of a top and an opportunity to sell short. Note that if this market decides to rally and top near Aug. 21, that rally could be significant (possibly even a "blow-off" top) so we may also try to go long (before Aug. 21) at some point if the technical analysis supports it. At the moment we are still on the sidelines of the broad stock market.
This also seems like a good time to give a general overview of the precious metals market:
In recent blogs I have discussing how gold and silver's medium-term cycles have turned bearish. A cycle turns bearish when prices break below the price that starts the cycle. In the case of gold, the start of the cycle was at $1214 on May 9 and for silver it was $16.07 also on May 9. Last week gold and silver broke below those prices which means that they will likely go lower until the end of both current cycles. These cycles could end with a final low as early as the last week of this month, but they could also drag out into September or even October before hitting a final bottom. An important point I want to make here is that even though these metals are taking a bearish turn, once their final cycle bottoms are in it will be a very good spot to buy. This is because the longer-term charts for both metals still look quite bullish. Gold prices could get as low as $1150 - $1170 without upsetting the bullish chart pattern. Further support for a bullish gold and silver market is coming from the current COT (Commitment of Traders) charts which show that "smart money" investors have recently been increasing their long positions in both metals. The bottom line here is that even though we may attempt a short-term trade any time now to sell short gold or silver's drop to a final cycle bottom, our main strategy is to identify and buy the final cycle bottom in both metals. Still on the sidelines of both gold and silver.
In Monday's blog on the broad stock market I wrote:
"... if these indices (DOW, S&P 500, NASDAQ) can break above those July 3 highs this week (that would be 21,563 in the DOW and 2,439 in the S&P 500) then we could see more rallying into next week. As I have discussed in recent blogs, we are keeping our eyes open for a significant top to sell short as a significant correction (possibly 8-10% or more) is expected soon based on technical and cycle patterns in these charts."
The DOW and S&P 500 did break those highs yesterday, and we are not in any major reversal zone until next week so this market could easily rally some more. We note, however, that while both indices are making new weekly highs, only the DOW has made a new all-time high (the S&P 500 is close to its all-time high of 2,454 and the NASDAQ is also approaching its all-time high of 6,342) so if the S&P 500 and/or NASDAQ cannot break their all-time highs, we will have an intermarket bearish divergence signal and the possibility of this market falling steeply into next week's reversal zone. That scenario is less likely now, but we need to see the S&P 500 and NASDAQ break above those highs before we discard it.
I suspect that my recent analysis of equity markets is getting a bit complex and confusing so let me try and give a general overview of the broad stock market right now:
We are now more than halfway through the medium-term cycles of the DOW, S&P 500, and NASDAQ which means that we should be watching for a top (high) from which a significant correction (to the end of the cycle) will follow. Technical studies are showing that this correction could be in the 8-10% range or possibly more. This top will most likely happen sometime between July 18 and August 23. Timing and reversal studies are pointing to July 21, July 26, Aug.3, and Aug. 21 as possible pivot points for a significant reversal. This means that the likelihood of a top and reversal down will be highest on or near any one of these dates. Our main trading strategy will therefore be to watch those dates for signs of a top and an opportunity to sell short. Note that if this market decides to rally and top near Aug. 21, that rally could be significant (possibly even a "blow-off" top) so we may also try to go long (before Aug. 21) at some point if the technical analysis supports it. At the moment we are still on the sidelines of the broad stock market.
This also seems like a good time to give a general overview of the precious metals market:
In recent blogs I have discussing how gold and silver's medium-term cycles have turned bearish. A cycle turns bearish when prices break below the price that starts the cycle. In the case of gold, the start of the cycle was at $1214 on May 9 and for silver it was $16.07 also on May 9. Last week gold and silver broke below those prices which means that they will likely go lower until the end of both current cycles. These cycles could end with a final low as early as the last week of this month, but they could also drag out into September or even October before hitting a final bottom. An important point I want to make here is that even though these metals are taking a bearish turn, once their final cycle bottoms are in it will be a very good spot to buy. This is because the longer-term charts for both metals still look quite bullish. Gold prices could get as low as $1150 - $1170 without upsetting the bullish chart pattern. Further support for a bullish gold and silver market is coming from the current COT (Commitment of Traders) charts which show that "smart money" investors have recently been increasing their long positions in both metals. The bottom line here is that even though we may attempt a short-term trade any time now to sell short gold or silver's drop to a final cycle bottom, our main strategy is to identify and buy the final cycle bottom in both metals. Still on the sidelines of both gold and silver.
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