Our broad stock market indices (DOW, S&P 500, NASDAQ) are moving well below our target ranges for a sub-cycle bottom (32,000 - 33,000 for the DOW, 4,000 - 4,200 for the S&P 500. and 12,400 - 12,700 for the NASDAQ), but they are still well above the start of their medium-term cycles from June 16 (NASDAQ) and June 17 (DOW and S&P 500). Any sub-cycle low should be due this week. We are technically out of our reversal zone (it ended yesterday), but because we are moving into a major holiday week-end in the U.S. (Labor Day), I'm going to extend that reversal period into next Tuesday (the day after Labor Day). We may even see a bottom today as equity markets rebounded strongly from an early day slump. If we see just one or two of these indices (but not all three) make a new low early next week, that would be a bullish divergence signal that could lead to a reversal and rally. But if this correction goes down too far, the medium-term cycle could turn bearish. If that happens, we may not want to buy the low but instead wait for the top of what could be a modest rally to sell short. We are still on the sidelines of this market.
Gold and silver prices have been falling this week. If these are new medium-term cycles that started on July 21 (gold) and July 14 (silver), then they are turning bearish. Another possibility is that both metals are completing older cycles and are making their final bottoms now (with gold possibly making a double-bottom to its July 21 low). We have a bullish divergence signal now as silver has broken below it's July 14 low ($18.15) but gold is still just above its July 21 low ($1681), but that could be negated tomorrow if gold breaks a bit lower. We are cautious about buying now, and we will remain on the sidelines until we can be more certain of the current cycle pattern.
The U.S. Dollar Index today made a new 18 year high nearly touching 110. We are only one day out of a reversal zone specifically for currencies (Aug.23 - 31), so this could be another top, with a reversal to follow. If so, that would give a boost to precious metal prices. If the dollar "breaks out" instead and moves above 110, gold and silver could continue to fall.
Crude oil prices continued to plummet today. We had been watching for the possibility of crude making a final medium-term cycle bottom between Aug. 18 - Sept. 6, but last week's rally was making me think this wouldn't happen and that the low of Aug. 16 ($85.37 - Oct. contract chart) was the end of the medium-term cycle and start of a new one. But that low is now being challenged by today's drop to $85.98. This could be a "double-bottom" to the Aug. 16 low, or it could lower for a deeper bottom by Sept. 6 (next Tuesday). Let's wait until after Labor Day to see where the price is headed. In the meantime, we remain of the sidelines of crude.