MARKETS UPDATE (3:30 pm EDST)
After rallying a bit on Monday and Tuesday, it looks like the broad stock market is headed down again. Today the DOW made a new weekly low, but the S&P 500 and NASDAQ did not (yet). This gives us a bullish divergence signal (until the S&P 500 and NASDAQ break last week's lows). Some sort of sub-cycle bottom could still be forming here (or early next week if all three indices do not make new lows then). There is a possible turning point for this market next Monday - Tuesday. If we don't see a sub-cycle bottom then, we may see one in the new strong general reversal zone coming up late next week (May 26 - June 3). Because this market looks very bearish now, we may avoid buying this bottom and just wait to short sell the top of any rally that follows. We remain on the sidelines of the broad stock market.
After floundering earlier this week, gold and silver prices are rallying strongly today. We were expecting a bounce in prices, and we'll watch now to see if they can rally to our targets for a sub-cycle top. That would be around $1900 in gold and $23 - $24 in silver. If we get to those levels next week, we will consider going short. We are on the sidelines of both metals for now.
Not surprisingly, today's surge in precious metal prices is happening as we see a drop in the U.S. Dollar Index. We have been anticipating a significant correction in the dollar, and that may be happening now. It is very late in the dollar's medium-term cycle, so it will likely fall now to it's final cycle bottom which is overdue and will likely happen within the next few weeks. We are very interested to see how far this bottom will go. If the correction is modest, there's a chance the greenback could rally back to rise again and break clearly above last week's top at $105. That would be very bullish for the dollar. But if this index makes a very deep correction now, it may not be able to get back above $105, and that would mean we would likely be back on track with our "normal" 15 -16 year long-term cycle that is due to bottom over the next few years, possibly as low as 55.
Crude oil prices have been falling this week, but they seem to be finding support near the 15-day and 45-day moving averages. We enter a new reversal zone specifically for crude today (May 19 - 27), so a sub-cycle bottom could be imminent. If prices continue to fall into next week, I may consider buying, although I am a bit reluctant to trade this market as the Russia/Ukraine conflict rages on and makes this market potentially very volatile. We will stay on the sidelines of crude for now.
After rallying a bit on Monday and Tuesday, it looks like the broad stock market is headed down again. Today the DOW made a new weekly low, but the S&P 500 and NASDAQ did not (yet). This gives us a bullish divergence signal (until the S&P 500 and NASDAQ break last week's lows). Some sort of sub-cycle bottom could still be forming here (or early next week if all three indices do not make new lows then). There is a possible turning point for this market next Monday - Tuesday. If we don't see a sub-cycle bottom then, we may see one in the new strong general reversal zone coming up late next week (May 26 - June 3). Because this market looks very bearish now, we may avoid buying this bottom and just wait to short sell the top of any rally that follows. We remain on the sidelines of the broad stock market.
After floundering earlier this week, gold and silver prices are rallying strongly today. We were expecting a bounce in prices, and we'll watch now to see if they can rally to our targets for a sub-cycle top. That would be around $1900 in gold and $23 - $24 in silver. If we get to those levels next week, we will consider going short. We are on the sidelines of both metals for now.
Not surprisingly, today's surge in precious metal prices is happening as we see a drop in the U.S. Dollar Index. We have been anticipating a significant correction in the dollar, and that may be happening now. It is very late in the dollar's medium-term cycle, so it will likely fall now to it's final cycle bottom which is overdue and will likely happen within the next few weeks. We are very interested to see how far this bottom will go. If the correction is modest, there's a chance the greenback could rally back to rise again and break clearly above last week's top at $105. That would be very bullish for the dollar. But if this index makes a very deep correction now, it may not be able to get back above $105, and that would mean we would likely be back on track with our "normal" 15 -16 year long-term cycle that is due to bottom over the next few years, possibly as low as 55.
Crude oil prices have been falling this week, but they seem to be finding support near the 15-day and 45-day moving averages. We enter a new reversal zone specifically for crude today (May 19 - 27), so a sub-cycle bottom could be imminent. If prices continue to fall into next week, I may consider buying, although I am a bit reluctant to trade this market as the Russia/Ukraine conflict rages on and makes this market potentially very volatile. We will stay on the sidelines of crude for now.
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