MARKETS UPDATE (5:30 pm EDT)
In last Sunday's blog I wrote:
"On Friday the DOW dropped below 17,580 and made a new weekly low, but the S&P 500 did not break below its previous week's low of 2,039 (it came close) so we have a potential case of intermarket bullish divergence in effect (until the S&P 500 breaches 2,039). Other technical signals are bearish, however, so if that 2,039 support breaks we could see the broad stock market tumble some more into the end of this month (or possibly longer)."
That 2,039 level in the S&P 500 broke today so our bullish divergence signal is negated, and it looks like these markets are headed lower into next week's reversal zone (which could start as early as next Tuesday). Equity market movements had been indecisive until the minutes of the last Federal Reserve meeting were released yesterday and showed that most Fed members are ready to lift interest rates in June. This made Wall Street nervous and pushed equity prices down. We will have to wait and see if this is just a temporary reaction. Cycle patterns in the broad stock market allow for a steep drop now, but next week's reversal zone suggests that a correction won't get very far. In either case our strategy will be to look for a bottom to buy. As I've mentioned before, I think the Fed (and others) would like to keep stock markets buoyant into the U.S. presidential election so we may not see a normal market correction until late this year or early 2017. On the sidelines of the broad stock market for now.
While the prospect of an early interest rate hike frightened equity markets, it gave a boost to the U.S. Dollar Index which had already been rallying strongly from a bottom on May 2 at the critical support level of 93. The dollar surge forced an indecisive gold and silver market to finally make a move. In Sunday's blog I wrote:
"Gold and silver charts also continue to give us mixed signals. Directional momentum in both metals is now strongly bullish as are other technical indicators, but the COT (Commitment of Traders) charts still show the Commercial positions (smart money) to be strongly bearish. There are some technical signals suggesting a strong price move next week, but it is not clear whether it will be up or down."
Well, it looks like that move is going to be down. Both metals are now making new lows for the month and could be headed lower into next week's reversal zone. We will probably be looking to buy sometime next week as the longer-term trend for gold and silver still looks bullish. The depth of any correction now will tell us if we need to temper that bullish view. On the sidelines of gold and silver.
Crude oil prices made a new yearly high on Wednesday at $48.95 (June contract chart). That may have been a significant top, and if so we could see a sharp drop into next week's reversal zone; however, it is a little too far away from our target of $50 (or higher) so we could still see prices edge up into next week. If they do get closer to $50 next week, we will look to sell short. If instead prices fall into next week then we will look to buy a bottom as next week's reversal zone is especially relevant to crude. Out of crude for now.
In last Sunday's blog I wrote:
"On Friday the DOW dropped below 17,580 and made a new weekly low, but the S&P 500 did not break below its previous week's low of 2,039 (it came close) so we have a potential case of intermarket bullish divergence in effect (until the S&P 500 breaches 2,039). Other technical signals are bearish, however, so if that 2,039 support breaks we could see the broad stock market tumble some more into the end of this month (or possibly longer)."
That 2,039 level in the S&P 500 broke today so our bullish divergence signal is negated, and it looks like these markets are headed lower into next week's reversal zone (which could start as early as next Tuesday). Equity market movements had been indecisive until the minutes of the last Federal Reserve meeting were released yesterday and showed that most Fed members are ready to lift interest rates in June. This made Wall Street nervous and pushed equity prices down. We will have to wait and see if this is just a temporary reaction. Cycle patterns in the broad stock market allow for a steep drop now, but next week's reversal zone suggests that a correction won't get very far. In either case our strategy will be to look for a bottom to buy. As I've mentioned before, I think the Fed (and others) would like to keep stock markets buoyant into the U.S. presidential election so we may not see a normal market correction until late this year or early 2017. On the sidelines of the broad stock market for now.
While the prospect of an early interest rate hike frightened equity markets, it gave a boost to the U.S. Dollar Index which had already been rallying strongly from a bottom on May 2 at the critical support level of 93. The dollar surge forced an indecisive gold and silver market to finally make a move. In Sunday's blog I wrote:
"Gold and silver charts also continue to give us mixed signals. Directional momentum in both metals is now strongly bullish as are other technical indicators, but the COT (Commitment of Traders) charts still show the Commercial positions (smart money) to be strongly bearish. There are some technical signals suggesting a strong price move next week, but it is not clear whether it will be up or down."
Well, it looks like that move is going to be down. Both metals are now making new lows for the month and could be headed lower into next week's reversal zone. We will probably be looking to buy sometime next week as the longer-term trend for gold and silver still looks bullish. The depth of any correction now will tell us if we need to temper that bullish view. On the sidelines of gold and silver.
Crude oil prices made a new yearly high on Wednesday at $48.95 (June contract chart). That may have been a significant top, and if so we could see a sharp drop into next week's reversal zone; however, it is a little too far away from our target of $50 (or higher) so we could still see prices edge up into next week. If they do get closer to $50 next week, we will look to sell short. If instead prices fall into next week then we will look to buy a bottom as next week's reversal zone is especially relevant to crude. Out of crude for now.
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