MARKETS UPDATE (5:15 pm EDT)
In Monday's blog I wrote about the broad stock market's lackluster reaction to Macron's win in the French presidential election:
"We may have a case of "buy the rumor, sell the news" here where the markets poured most of their enthusiasm for Macron into a strong rally after his lead over Le Pen was announced two weeks ago...so we can hope that "sell the news" is over and will not continue into this week's trading. Even if we see more selling (we are at the center of a minor reversal zone so it is possible), we won't worry too much as long as the DOW and S&P 500 remain above our stop loss points (20,379 in the DOW and 2,322 in the S&P 500)."
It appears that "sell the news" is not over and/or equities are forming a top (May 9th) in the center of our current (minor) reversal zone. We will watch this carefully, but so far this correction doesn't seem to have much downward momentum, and we are still comfortably above those stop loss points for the DOW and S&P 500. The end of next week is the center of another minor reversal zone so if equities continue to edge down, we may see a bottom and reversal back up then. Holding my long position in the broad stock market.
May 9th (Tuesday) could also be the bottom and reversal point for gold and silver prices. Both metals made new lows that day and prices are now rising. I am a little cautious here because it would have been better to see intermarket bullish divergence with these bottoms (i.e. one metal making a new weekly low but not the other), although silver's low was below its March low while gold's low was not. Today through Monday is also a time period where we could see a short-term but sharp reversal in gold (and possibly silver). Because prices are rising, we could see another sharp turn down. If that does happen, we could get that bullish divergence signal next week, which would be fine as long as we don't break below our stop loss points for our current long positions ($1195 in gold and $15.65 in silver). The bottom line here (pun intended) is that we are close to a medium-term cycle bottom in both gold and silver and are anticipating a turn up any time now. If it didn't happen Tuesday, we may see it in the second half of next week. Holding my long position in gold and silver for now.
As usual, the U.S. Dollar Index may have something to say about gold and silver prices. The dollar's rally this week has been quite strong, but it may be backing off now as it encounters strong resistance in the 100 area. Directional momentum in this market is currently nearly 100% bearish, but there are a few technical signals suggesting this rally could go higher. The dollar's strong rally was triggered by the euro's sharp selloff following Macron's election (following a very strong pre-election rally - "buy the rumor, sell the news"). For this reason, it may not last because the euro's post election selloff should be brief as pro-EU Macron is (theoretically, at least) good for the euro. If the dollar backs down, we should see gold and silver prices rise, but if the greenback continues its rally, the precious metals could go lower.
It looks like crude oil prices made a sub-cycle bottom last Friday and they are now rallying strongly into a reversal zone specifically for crude that lasts through next Thursday. The general trend of this market recently turned bearish so we should now be looking to sell short the top of any significant short-term rally. We will watch for a sell signal over the next several days. Still on the sidelines of crude oil.
In Monday's blog I wrote about the broad stock market's lackluster reaction to Macron's win in the French presidential election:
"We may have a case of "buy the rumor, sell the news" here where the markets poured most of their enthusiasm for Macron into a strong rally after his lead over Le Pen was announced two weeks ago...so we can hope that "sell the news" is over and will not continue into this week's trading. Even if we see more selling (we are at the center of a minor reversal zone so it is possible), we won't worry too much as long as the DOW and S&P 500 remain above our stop loss points (20,379 in the DOW and 2,322 in the S&P 500)."
It appears that "sell the news" is not over and/or equities are forming a top (May 9th) in the center of our current (minor) reversal zone. We will watch this carefully, but so far this correction doesn't seem to have much downward momentum, and we are still comfortably above those stop loss points for the DOW and S&P 500. The end of next week is the center of another minor reversal zone so if equities continue to edge down, we may see a bottom and reversal back up then. Holding my long position in the broad stock market.
May 9th (Tuesday) could also be the bottom and reversal point for gold and silver prices. Both metals made new lows that day and prices are now rising. I am a little cautious here because it would have been better to see intermarket bullish divergence with these bottoms (i.e. one metal making a new weekly low but not the other), although silver's low was below its March low while gold's low was not. Today through Monday is also a time period where we could see a short-term but sharp reversal in gold (and possibly silver). Because prices are rising, we could see another sharp turn down. If that does happen, we could get that bullish divergence signal next week, which would be fine as long as we don't break below our stop loss points for our current long positions ($1195 in gold and $15.65 in silver). The bottom line here (pun intended) is that we are close to a medium-term cycle bottom in both gold and silver and are anticipating a turn up any time now. If it didn't happen Tuesday, we may see it in the second half of next week. Holding my long position in gold and silver for now.
As usual, the U.S. Dollar Index may have something to say about gold and silver prices. The dollar's rally this week has been quite strong, but it may be backing off now as it encounters strong resistance in the 100 area. Directional momentum in this market is currently nearly 100% bearish, but there are a few technical signals suggesting this rally could go higher. The dollar's strong rally was triggered by the euro's sharp selloff following Macron's election (following a very strong pre-election rally - "buy the rumor, sell the news"). For this reason, it may not last because the euro's post election selloff should be brief as pro-EU Macron is (theoretically, at least) good for the euro. If the dollar backs down, we should see gold and silver prices rise, but if the greenback continues its rally, the precious metals could go lower.
It looks like crude oil prices made a sub-cycle bottom last Friday and they are now rallying strongly into a reversal zone specifically for crude that lasts through next Thursday. The general trend of this market recently turned bearish so we should now be looking to sell short the top of any significant short-term rally. We will watch for a sell signal over the next several days. Still on the sidelines of crude oil.
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