MARKETS UPDATE (11:00 pm EDT)
In Monday's blog on the broad stock market I wrote:
"The broad stock market's steep fall last week is reinforcing our bearish view of the current medium-term cycles in all three market indices (DOW, S&P 500, NASDAQ). In other words, we expect them to fall further. We may be getting a bullish divergence signal today as the S&P 500 and NASDAQ are making new weekly lows but the DOW is not (at the time of this writing). We could get a small relief bounce here after last week's plunge, but I don't expect it to get far before turning down again."
All of this has played out. The DOW had a two day bounce on Tuesday and Wednesday while the S&P 500 and NASDAQ both had one day bounces on Tuesday, but all three are now headed down again with the DOW making a new weekly low today which negates the bullish divergence signal from earlier in the week. The current medium-term cycles for all three indices are officially bearish and most likely pointed down until at least the end of November, but possibly longer. We expect the final bottom to these cycles to happen somewhere between Nov. 20 and early January. A good final target for the DOW would be in the 31,000 - 32,000 range, and the S&P 500 could get down to 3,700 - 3,800.
Of course, these indices won't move straight down over the next two to three months. There will be relief rallies along the way, and because we are now entering a strong general reversal zone (Oct. 25 - Nov. 1), we should be on the lookout for a sub-cycle bottom and a possible rally off that bottom. A second even stronger general reversal zone (Oct. 31 - Nov. 9) is overlapping the first one, and that leaves a big time frame for a sub-cycle bottom to happen. We may even get a bottom followed by a brief rally up and then a reversal back down all within this Oct. 25 - Nov. 9 window (i.e. two reversals). But I'm getting ahead of myself here. For now, we'll keep holding our short positions in this market. If we do see signs of an imminent sub-cycle bottom, we may take some profits and cover our positions and then jump back in (go short) again at the top of any brief relief rally. Or perhaps we'll just stay short until these medium-term cycles reach their final bottoms near the end of this year or in early January 2024. We are holding our short position in the broad stock market.
We have been looking to buy gold and/or silver on any significant corrective dips. Gold edged down to $1958 on Tuesday and has been rising a bit from there. Silver has been moving straight down since last Friday's high and is making a new weekly low today. There is a possibility of both metals starting a strong rally early next week, but I would like to see gold make another isolated low first. If gold makes a new weekly low on Monday next week without silver doing the same (bullish divergence), we could have an ideal scenario for buying both metals. We will remain on the sidelines of gold and silver for now.
We have also been looking to buy a corrective dip in crude oil. Prices have been falling since last Friday, and they made an isolated low yesterday at $82.08 (Dec. contract chart). We entered a reversal zone specifically for crude today (Oct. 26 - Nov. 3). There is time for crude to make a lower low closer to the center of this reversal zone. One thing that concerns me now is that prices are getting close to the Oct. 6 low ($80.20) that may have started a new medium-term cycle. If prices get below that, it could mean the new cycle is turning bearish. But it could also indicate the cycle is older and started with the low of $77.03 from Aug. 24. Let's wait and see if prices can go lower, and if so, how low they go. Any new low next week would probably be a good buy spot, as long as it stays above $77.03. We will stay on the sidelines of crude for now. I should note here that because the Israel/Palestine conflict continues to escalate and shows no signs of cooling off, we should expect high volatility in this market and will be very cautious in our trading.
In Monday's blog on the broad stock market I wrote:
"The broad stock market's steep fall last week is reinforcing our bearish view of the current medium-term cycles in all three market indices (DOW, S&P 500, NASDAQ). In other words, we expect them to fall further. We may be getting a bullish divergence signal today as the S&P 500 and NASDAQ are making new weekly lows but the DOW is not (at the time of this writing). We could get a small relief bounce here after last week's plunge, but I don't expect it to get far before turning down again."
All of this has played out. The DOW had a two day bounce on Tuesday and Wednesday while the S&P 500 and NASDAQ both had one day bounces on Tuesday, but all three are now headed down again with the DOW making a new weekly low today which negates the bullish divergence signal from earlier in the week. The current medium-term cycles for all three indices are officially bearish and most likely pointed down until at least the end of November, but possibly longer. We expect the final bottom to these cycles to happen somewhere between Nov. 20 and early January. A good final target for the DOW would be in the 31,000 - 32,000 range, and the S&P 500 could get down to 3,700 - 3,800.
Of course, these indices won't move straight down over the next two to three months. There will be relief rallies along the way, and because we are now entering a strong general reversal zone (Oct. 25 - Nov. 1), we should be on the lookout for a sub-cycle bottom and a possible rally off that bottom. A second even stronger general reversal zone (Oct. 31 - Nov. 9) is overlapping the first one, and that leaves a big time frame for a sub-cycle bottom to happen. We may even get a bottom followed by a brief rally up and then a reversal back down all within this Oct. 25 - Nov. 9 window (i.e. two reversals). But I'm getting ahead of myself here. For now, we'll keep holding our short positions in this market. If we do see signs of an imminent sub-cycle bottom, we may take some profits and cover our positions and then jump back in (go short) again at the top of any brief relief rally. Or perhaps we'll just stay short until these medium-term cycles reach their final bottoms near the end of this year or in early January 2024. We are holding our short position in the broad stock market.
We have been looking to buy gold and/or silver on any significant corrective dips. Gold edged down to $1958 on Tuesday and has been rising a bit from there. Silver has been moving straight down since last Friday's high and is making a new weekly low today. There is a possibility of both metals starting a strong rally early next week, but I would like to see gold make another isolated low first. If gold makes a new weekly low on Monday next week without silver doing the same (bullish divergence), we could have an ideal scenario for buying both metals. We will remain on the sidelines of gold and silver for now.
We have also been looking to buy a corrective dip in crude oil. Prices have been falling since last Friday, and they made an isolated low yesterday at $82.08 (Dec. contract chart). We entered a reversal zone specifically for crude today (Oct. 26 - Nov. 3). There is time for crude to make a lower low closer to the center of this reversal zone. One thing that concerns me now is that prices are getting close to the Oct. 6 low ($80.20) that may have started a new medium-term cycle. If prices get below that, it could mean the new cycle is turning bearish. But it could also indicate the cycle is older and started with the low of $77.03 from Aug. 24. Let's wait and see if prices can go lower, and if so, how low they go. Any new low next week would probably be a good buy spot, as long as it stays above $77.03. We will stay on the sidelines of crude for now. I should note here that because the Israel/Palestine conflict continues to escalate and shows no signs of cooling off, we should expect high volatility in this market and will be very cautious in our trading.
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