MARKETS UPDATE (11:30 pm EDT)
The DOW, S&P 500 and NASDAQ all made new highs on Monday (the center of a reversal zone) and have been falling from those highs, but not strongly. We leave this reversal zone tomorrow but enter another one next week (Aug. 23 - 30). If these markets now rally and break above Monday's highs into next week, we could see another top and reversal with a more serious correction in all three indices. An alternative scenario could see equities continuing lower into next week and finding a bottom in the next reversal zone from which a new rally starts. As I've been saying in recent blogs, I don't think any corrections over the next month or two will be serious as it is likely the Federal Reserve and establishment politicians wish to keep markets buoyant into the upcoming U.S. presidential election. Let's hold on to our long position in the broad stock market for now and watch how these indices move into next week's reversal zone.
Monday was also the center of a reversal zone for precious metals (which ends today). Gold made a new weekly high on Tuesday but silver did not which creates a potential case of intermarket bearish divergence in a reversal zone. Nevertheless, these metal prices seem reluctant to fall. I had hoped to see a stronger correction towards our target prices ($1,300 in gold and $19 in silver) in the first half of this week, but that didn't happen. We could still see prices move lower into next week's reversal zone, especially silver because its medium-term cycle bottom is now due (overdue) and should go at least to the $19 level (or lower). We will remain with our trading strategy of looking to buy both metals once silver has made its medium-term cycle bottom, which should be soon. Still on the sidelines of both gold and silver.
It is likely precious metal prices were being buoyed this week by a sharply falling U.S. dollar. The U.S. Dollar Index took a hit this week when the minutes of the recent Federal Reserve meeting were released and showed that the FOMC members were divided over whether to raise interest rates soon. This was in contrast to recent comments from the Fed that had suggested the possibility of a rate hike as soon as September. The U.S. Dollar Index is now approaching a strong support zone around 93 - 94. If this support holds, we could see a bounce which might help push gold and silver prices down.
This week's falling dollar also gave a boost to crude oil prices which soared today to just over $48 (September contract chart). I have been kicking myself all week for not buying crude close to its Aug. 2 low (around $39) which appears to be the start of a new medium-term cycle. Of course, hindsight is always 20/20. My reluctance to buy at that time was due to the fact that directional momentum in crude charts had turned strongly bearish, and a strong reversal zone specifically relevant to crude in the last week of August seemed to be a better time for a cycle bottom. That reversal zone starts next week and might now correspond to a top instead of a bottom. If crude prices push higher into next week, we could see a significant top and an opportunity to sell short. Any corrections, though, could be short-term as it is still early in the new cycle and the overall trend in crude looks bullish. On the sidelines of crude for now.
The DOW, S&P 500 and NASDAQ all made new highs on Monday (the center of a reversal zone) and have been falling from those highs, but not strongly. We leave this reversal zone tomorrow but enter another one next week (Aug. 23 - 30). If these markets now rally and break above Monday's highs into next week, we could see another top and reversal with a more serious correction in all three indices. An alternative scenario could see equities continuing lower into next week and finding a bottom in the next reversal zone from which a new rally starts. As I've been saying in recent blogs, I don't think any corrections over the next month or two will be serious as it is likely the Federal Reserve and establishment politicians wish to keep markets buoyant into the upcoming U.S. presidential election. Let's hold on to our long position in the broad stock market for now and watch how these indices move into next week's reversal zone.
Monday was also the center of a reversal zone for precious metals (which ends today). Gold made a new weekly high on Tuesday but silver did not which creates a potential case of intermarket bearish divergence in a reversal zone. Nevertheless, these metal prices seem reluctant to fall. I had hoped to see a stronger correction towards our target prices ($1,300 in gold and $19 in silver) in the first half of this week, but that didn't happen. We could still see prices move lower into next week's reversal zone, especially silver because its medium-term cycle bottom is now due (overdue) and should go at least to the $19 level (or lower). We will remain with our trading strategy of looking to buy both metals once silver has made its medium-term cycle bottom, which should be soon. Still on the sidelines of both gold and silver.
It is likely precious metal prices were being buoyed this week by a sharply falling U.S. dollar. The U.S. Dollar Index took a hit this week when the minutes of the recent Federal Reserve meeting were released and showed that the FOMC members were divided over whether to raise interest rates soon. This was in contrast to recent comments from the Fed that had suggested the possibility of a rate hike as soon as September. The U.S. Dollar Index is now approaching a strong support zone around 93 - 94. If this support holds, we could see a bounce which might help push gold and silver prices down.
This week's falling dollar also gave a boost to crude oil prices which soared today to just over $48 (September contract chart). I have been kicking myself all week for not buying crude close to its Aug. 2 low (around $39) which appears to be the start of a new medium-term cycle. Of course, hindsight is always 20/20. My reluctance to buy at that time was due to the fact that directional momentum in crude charts had turned strongly bearish, and a strong reversal zone specifically relevant to crude in the last week of August seemed to be a better time for a cycle bottom. That reversal zone starts next week and might now correspond to a top instead of a bottom. If crude prices push higher into next week, we could see a significant top and an opportunity to sell short. Any corrections, though, could be short-term as it is still early in the new cycle and the overall trend in crude looks bullish. On the sidelines of crude for now.
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