MARKETS UPDATE (5:00 pm EDST)
The broad stock market continues its at least short-term trend down this week, but our three indices (DOW, S&P 500, NASDAQ) are approaching support areas near their June 16-17 lows. Today the DOW and S&P 500 made new weekly lows, but the NASDAQ did not, and all three are closing in the upper part of today's range. This gives us a bullish divergence signal (unless the NASDAQ breaks below 10,852 tomorrow). We could see some sort of corrective bounce now, but we won't take it too seriously until the DOW and S&P 500 can break above their June 28 highs (31,885 and 3,945, respectively) and the NASDAQ breaks above its high from July 8 (11,690). Until that happens, these indices could fall lower.
So our "lines in the sand" are clear right now. Breaking above the highs just mentioned means the market is bullish and will probably rally some more, but breaking below the June 16-17 lows (29,653, 3,637, and 10,565 in the DOW, S&P 500, and NASDAQ, respectively) means the market is bearish. In the latter case, these indices are either new medium-term cycles that are turning bearish early and will be down for some time or they are older cycles that will soon be hitting their final cycle bottoms. We will remain on the sidelines for now.
(We should remember that even if this market turns bullish now, any rallying will probably be short-term and will likely not make new all-time highs. We should plan on selling short the top of any major rallies now that do not exceed the all-time highs from last November in the NASDAQ and January this year in the DOW and S&P 500.)
Gold and silver prices also continued to push lower today as both made new weekly lows. We are definitely not getting any relief rallies to sell short, so we will probably just wait for a final medium-term cycle bottom in gold and consider a long position then. A good target for that bottom may be around $1675. Silver could form a significant bottom anywhere between $17 and $19. There is a reversal zone specifically for the precious metals coming up July 20-29, so that would be a good time for a significant bottom to form in both metals. We will watch for that as a potential buy spot. For now, we remain on the sidelines of gold and silver.
Perhaps taking their cue from the broad stock market, crude oil prices have also moved sharply down this week. Today crude plunged briefly down to $90.56 (Aug. contract chart) but it quickly snapped back and is now closing around $96.50. In my last blog on crude I wrote:
"...last week's sharp drop may have turned the current medium-term cycle bearish. That cycle is getting old and could be due to bottom sometime in August. In the meantime, we may see prices trading in a range defined by last week's low ($95) and $115. If prices can hold above $95 and then break and close above $115, we could be back on track for a bullish run to the $145 - $150 area. But a break below $95 would be a bearish sign that could negate that idea."
All of this still applies as today's break below $95 was intraday and the market closed above there. There's a reversal zone specifically for crude coming up July 25 - Aug. 2. We can watch for a significant price reversal in that time frame, but right now it's not clear if it will be a top or bottom. Let's stay on the sidelines of this market for now.
The broad stock market continues its at least short-term trend down this week, but our three indices (DOW, S&P 500, NASDAQ) are approaching support areas near their June 16-17 lows. Today the DOW and S&P 500 made new weekly lows, but the NASDAQ did not, and all three are closing in the upper part of today's range. This gives us a bullish divergence signal (unless the NASDAQ breaks below 10,852 tomorrow). We could see some sort of corrective bounce now, but we won't take it too seriously until the DOW and S&P 500 can break above their June 28 highs (31,885 and 3,945, respectively) and the NASDAQ breaks above its high from July 8 (11,690). Until that happens, these indices could fall lower.
So our "lines in the sand" are clear right now. Breaking above the highs just mentioned means the market is bullish and will probably rally some more, but breaking below the June 16-17 lows (29,653, 3,637, and 10,565 in the DOW, S&P 500, and NASDAQ, respectively) means the market is bearish. In the latter case, these indices are either new medium-term cycles that are turning bearish early and will be down for some time or they are older cycles that will soon be hitting their final cycle bottoms. We will remain on the sidelines for now.
(We should remember that even if this market turns bullish now, any rallying will probably be short-term and will likely not make new all-time highs. We should plan on selling short the top of any major rallies now that do not exceed the all-time highs from last November in the NASDAQ and January this year in the DOW and S&P 500.)
Gold and silver prices also continued to push lower today as both made new weekly lows. We are definitely not getting any relief rallies to sell short, so we will probably just wait for a final medium-term cycle bottom in gold and consider a long position then. A good target for that bottom may be around $1675. Silver could form a significant bottom anywhere between $17 and $19. There is a reversal zone specifically for the precious metals coming up July 20-29, so that would be a good time for a significant bottom to form in both metals. We will watch for that as a potential buy spot. For now, we remain on the sidelines of gold and silver.
Perhaps taking their cue from the broad stock market, crude oil prices have also moved sharply down this week. Today crude plunged briefly down to $90.56 (Aug. contract chart) but it quickly snapped back and is now closing around $96.50. In my last blog on crude I wrote:
"...last week's sharp drop may have turned the current medium-term cycle bearish. That cycle is getting old and could be due to bottom sometime in August. In the meantime, we may see prices trading in a range defined by last week's low ($95) and $115. If prices can hold above $95 and then break and close above $115, we could be back on track for a bullish run to the $145 - $150 area. But a break below $95 would be a bearish sign that could negate that idea."
All of this still applies as today's break below $95 was intraday and the market closed above there. There's a reversal zone specifically for crude coming up July 25 - Aug. 2. We can watch for a significant price reversal in that time frame, but right now it's not clear if it will be a top or bottom. Let's stay on the sidelines of this market for now.
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