We are now entering a new reversal zone for the broad stock market (July 4 - 13), and we will have to wait and see if this reversal will be a turn up from a new low or a turn down from a new high. (At this moment it looks like it could be either one.) Not much has changed since my blog on this market last Sunday. If we get a good rally into next week, we will probably look to sell short. But if this market turns south and drops down to test or even break below last week's lows in next week's reversal zone, we will look to buy what could be a final medium-term cycle bottom for all three market indices - DOW, S&P 500 and NASDAQ. Still on the sidelines here.
Gold and silver prices dropped dramatically early this week with gold making a new low at $1238 and silver a new low at $15.78. Prices have been rising from those lows, but they are rising into a new reversal zone for the precious metals that began yesterday (July 4 - 13). Thus this rally may not get very far before turning down again. It would not be unreasonable to say these bottoms occurred just a bit early (a day or two) in the reversal period (reversal date ranges do not represent absolute cut off points for a reversal - they are just areas of high probability for a reversal) and so these may be significant lows. Nevertheless, prices could still rise into the center or end of the reversal next week, and we could get two reversals in one reversal zone (sorry if this is confusing). The bottom line here is that I think we are now seeing a brief corrective sub-cycle bounce in both metals that will be followed by a reversal back down to lower lows. If silver rallies to the $16.20 - $16.40 area next week and stalls, it may be a good spot to sell short. Gold reaching the $1270 - $1280 area next week may also be a good place for a short position. An intermarket bearish divergence signal (i.e. one metal making a new weekly high but not the other) would also encourage us to short these metals next week. Remaining on the sidelines of both metals for now.
We are still very early in the current medium-term cycle of crude oil which started with the June 17 low of $63.40 (August contract chart). Since we entered a long position in crude on June 5 near that level, the price has soared to over $75 this week (Tuesday) so we have been doing well with this trade. Today prices are dropping a bit below $73 as this rally takes a breather. Tuesday's top was just outside a new reversal zone for crude (July 4- 13 - same as for the broad stock market and precious metals) so it is possible prices could push higher into next week for a more significant top. If that happens, we will take profits and sell our long position. Another possibility is a new weekly low in next week's reversal zone. As long as that low stays fairly close to $70, we will hold our long position for more rallying, possibly to the $78 area or even a bit higher. Holding my long position in crude for now.