The strong impact of yesterday's Fed statement on financial markets is continuing into today's market as the dollar plunges some more and the precious metals surge higher. Our stop loss at $15.80 for our short position in silver has been broken so we are now stopped out of this trade. We are still in a strong reversal period for gold and silver that could easily extend into next week so it is possible we are being "whipsawed" out of a good short trade (which is the risk we take with tight stop losses in a volatile market). In last Sunday's blog I wrote:
"Gold and silver are both due (overdue) for a significant corrective dip as they are near the end of their current medium-term cycles, but their current bullishness could push prices higher over the next week or two before dropping."
As short-term traders we will still watch for a strong signal to go short as the medium-term cycles in both metals are due to bottom soon. Longer-term traders may wish to stay on the sidelines and wait for these cycles to bottom and then buy. The depth of this correction will determine how bullish the precious metals market will be over the next several months. We are now out of both gold and silver.
The broad stock market also continues to rally, but remains within a strong reversal zone through next week. We will therefore also be watching this market for a top and reversal into what may be a modest correction but one that could turn serious if markets start to panic (possible if the effect of the Fed's slightly dovish policy statement starts to wear off next week). Still on the sidelines here.