I would ask any readers to please review my last blog on the broad stock market (Monday 3/8) to better understand today's analysis, as most of that analysis is still applicable with some changes that I will explain below.
Equity markets have been strong this week with substantial rallies in all three market indices (DOW, S&P 500, NASDAQ). The DOW's rally seems the strongest and is reinforcing our belief that it started a new medium-term cycle on Jan. 29 and is relatively young. In this labeling, last Thursday's low at 30,547 was probably the first sub-cycle correction, and this index is now quite bullish as it rallies to another sub-cycle peak. While it is a bit early for that peak, we are now inside a reversal zone for equities (March 9 - 18), so it could happen in this time frame.
In Monday's blog I wrote that the S&P 500 might also be in a new medium-term cycle:
" [The S&P 500]...could be a new and young medium-term cycle that started with last Thursday's low of 3,723. That, along with the young DOW cycle, would be a bullish sign and would suggest that a final top isn't here just yet. But if this index can't clear 3,950, it would be a bearish sign..."
Well, this index did break above 3,950 today, but it closed a bit below there. Although it looks like a new medium-term cycle has started in this index as of last Thursday, we can't be certain until there's a clear break above that 3,950 high from mid-February.
Last Friday's low in the NASDAQ (12,397) is holding, and this index has rallied strongly from there suggesting that the NASDAQ has also started a new medium-term cycle from that bottom. That would mean this index is bullish...BUT...we need to pay attention to the reversal zone we are now in through at least next Thursday (and possibly a bit longer). A significant top could form anytime in this time frame.
So to sum up the current situation in the broad stock market, it appears that all three market indices have likely started new medium-term cycles recently. Cycles are usually bullish in their early stage as all three of these seem to be (for now). Despite this bullishness, the market is rising strongly into our current reversal zone, and this suggests that some sort of top is imminent. We also still have a strong bearish divergence signal as the DOW and S&P 500 have made new all-time highs this week, but the NASDAQ has not. I doubt the NASDAQ will make a new high tomorrow (as it would have to rise over 600 points to do so). I am tempted to sell short here because of the bearish divergence signal, but if our labeling is correct, it is VERY early in the new S&P 500 and NASDAQ cycles, and also very early in the DOW's new sub-cycle rally. I think I will wait to see if this bearish divergence between the NASDAQ and the other two indices can hold into next week, and especially into the end of our current reversal zone (next Thursday). If so, we might have an excellent spot to sell short. But if the NASDAQ manages to break above 14,167, we may need to wait even longer for a significant top to sell. Let's stay on the sidelines for now.
Gold prices rallied a bit this week but not that strongly, and they may be rolling over now. There is a possibility that gold started a new medium-term cycle with Monday's low at $1677, but it needs to rally strongly now to confirm that. If gold turns back down and breaks below $1677, it means an older cycle is still finding a bottom. If that is the case, we could see that bottom in the next reversal zone for the precious metals coming up March 17 - 26, and it could be a good spot to buy.
Silver also rallied this week, but like gold, prices may turn back down in our current reversal zone. It is still not clear if silver started a new medium-term cycle from its low on Jan.18 ($24.28) or is still completing a much older cycle from its low way back on Sept. 24 ($21.75). If prices move below $24.28, we will go with the older cycle and look to buy its final bottom. As with gold, that might happen ideally in the upcoming March 17 - 26 reversal zone.
We are staying on the sidelines of both metals for now.
Crude oil's medium-term cycle may have made its final top on Monday at $67.98 (April contract chart). Monday, however, was just outside our current reversal zone for equities (also applicable to crude) - March 9 - 18. We are in the center of that reversal zone now as crude prices are pushing up again, so it is possible Monday's high could be exceeded. Let's see if that happens. If it does this by next Thursday, we may attempt to go short in crude. On the sidelines of crude for now.