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Trading Blog           Thursday,  May 15,  2014

5/15/2014

 
MARKETS  UPDATE  (6:15 pm EST)

The broad stock market fell sharply today, and we are entering a time zone where significant market reversals are likely (May 14-28).  Could this be the start of the significant correction we've been expecting?   Maybe, but some short-term technical indicators are suggesting that this market could push up a bit more into the middle of next week before taking a deeper correction.  There is support now for the DOW in the 16,420 -16,450 area which seems to be holding today's plunge.  If the DOW breaks and closes below that support tomorrow (Friday) we could see a steep fall into next week.  I would prefer to see another top into early next week and then a fall, as this would be the ideal set-up to sell short.  Right now directional momentum is still bullish in the DOW and S&P 500 charts and still bearish in some (but not all) of the NASDAQ charts.  Strong bearish signals in the DOW and S&P charts will alert us if and when a serious correction is underway.  Still on the sidelines.

Over the last several days it had appeared that gold and silver were mounting a significant rally into the second half of this month, but gold seems reluctant to break above the $1300 level, and silver has barely touched its resistance at $20.  Both metals are down sharply today.  If they continue to fall into next week we could see a significant low to buy into.  A significant development in silver charts this week was the appearance of a strong bullish directional signal which now makes directional momentum in both gold and silver mixed bullish and bearish (it had been 100% bearish in silver). 
This is a good sign that we are nearing a bottom in the precious metals.  If instead of falling, prices continue to rally into next week, we could see a reversal then and an extended correction into mid-June.  At the moment it appears more likely prices will make a low next week.  On the sidelines and waiting to buy.  

Crude oil prices backed down today after a strong surge yesterday and closed the day near $101.50.  As with the broad stock market, cycle analysis is suggesting an imminent correction in crude.  This correction could start now and bottom into next week; however, if prices instead make new highs into next week, we could see the correction begin then.  Because of the likelihood of an imminent correction, I am attempting to "ride out" this week's price surge with my short position even though it has broken through my stop loss zone at $100 - $101.  The danger here is the possibility of a strong price surge into next week (perhaps fueled by more turmoil in Ukraine), but today's downturn has moderated prices a bit, and we are still close to our short sell price near $100.  I am therefore maintaining my short position for now in anticipation of a correction soon.  Momentum remains mixed bullish and bearish in this market.







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