MARKETS UPDATE (4:30 pm EST)
We are about to enter another significant reversal zone for the broad stock market (May 25 - June 5), and it is still not clear if equities will fall or rise into it. This market rallied a bit early in the week but now may be falling again. We are getting close to our target for a sub-cycle bottom in the DOW in the 24,400 - 24,500 area. A good target for the S&P 500 would be 2,650 - 2,700. We are close to those areas now and could easily enter them as we head into next week's reversal. That seems to be the path unfolding, but there is still time for this market to rally and make new highs into next week so we need to be aware of that possibility as well. A low in those target areas would be a buy spot whereas new highs (especially with bullish divergence) would be another opportunity to sell short. Longer term, we can say that if April 2 was the start of a new medium-term cycle in the DOW then we are still on track for possible new all-time highs this summer to be followed by a very severe correction Still on the sidelines of the broad stock market.
Gold made a new monthly low on Monday at $1282 and prices are rallying from there. That low could have been the end of the old medium-term cycle and the start of a new one, but it didn't happen in a reversal zone, and we are now entering a reversal zone for precious metals (May 24 - June 2). If prices continue their rally into next week, there is a good chance we will see a top and some sort of pullback. We are looking to buy the bottom of this new cycle, but let's wait and see what kind of pullback we get (if any) next week. Silver is also rallying so it too could see a pullback next week. Silver may have started a new medium-term cycle with its $16.06 low on May 1. If so, it is bullish now and any correction shouldn't dip below that mark. A modest dip in silver next week would give us a good buy spot (especially if gold makes a new low and silver does not). We will watch for this. Still on the sidelines of gold and silver but looking to go long soon.
The U.S. Dollar Index, which has been rallying strongly since mid-April, is now encountering a strong resistance area around 94. We are at the end of a reversal zone for currencies (May 16 - 25), but this could carry over next week into our other reversal zones. A sub-cycle top and correction could be imminent. We will watch this carefully as the dollar's behavior will influence price movements in the precious metals.
Crude oil prices are edging up to new highs as we approach the center of a reversal zone specifically relevant to crude (May 23 - June 1). We are late in the medium-term cycle of crude so we should be watching for a cycle top to be followed by a significant correction down to the final cycle bottom. The price range for that top is wide and could be as low as $70 (we are there) or as high as $78. We will wait for a signal to sell short tomorrow or next week somewhere between those prices. On the sidelines of crude oil for now.
We are about to enter another significant reversal zone for the broad stock market (May 25 - June 5), and it is still not clear if equities will fall or rise into it. This market rallied a bit early in the week but now may be falling again. We are getting close to our target for a sub-cycle bottom in the DOW in the 24,400 - 24,500 area. A good target for the S&P 500 would be 2,650 - 2,700. We are close to those areas now and could easily enter them as we head into next week's reversal. That seems to be the path unfolding, but there is still time for this market to rally and make new highs into next week so we need to be aware of that possibility as well. A low in those target areas would be a buy spot whereas new highs (especially with bullish divergence) would be another opportunity to sell short. Longer term, we can say that if April 2 was the start of a new medium-term cycle in the DOW then we are still on track for possible new all-time highs this summer to be followed by a very severe correction Still on the sidelines of the broad stock market.
Gold made a new monthly low on Monday at $1282 and prices are rallying from there. That low could have been the end of the old medium-term cycle and the start of a new one, but it didn't happen in a reversal zone, and we are now entering a reversal zone for precious metals (May 24 - June 2). If prices continue their rally into next week, there is a good chance we will see a top and some sort of pullback. We are looking to buy the bottom of this new cycle, but let's wait and see what kind of pullback we get (if any) next week. Silver is also rallying so it too could see a pullback next week. Silver may have started a new medium-term cycle with its $16.06 low on May 1. If so, it is bullish now and any correction shouldn't dip below that mark. A modest dip in silver next week would give us a good buy spot (especially if gold makes a new low and silver does not). We will watch for this. Still on the sidelines of gold and silver but looking to go long soon.
The U.S. Dollar Index, which has been rallying strongly since mid-April, is now encountering a strong resistance area around 94. We are at the end of a reversal zone for currencies (May 16 - 25), but this could carry over next week into our other reversal zones. A sub-cycle top and correction could be imminent. We will watch this carefully as the dollar's behavior will influence price movements in the precious metals.
Crude oil prices are edging up to new highs as we approach the center of a reversal zone specifically relevant to crude (May 23 - June 1). We are late in the medium-term cycle of crude so we should be watching for a cycle top to be followed by a significant correction down to the final cycle bottom. The price range for that top is wide and could be as low as $70 (we are there) or as high as $78. We will wait for a signal to sell short tomorrow or next week somewhere between those prices. On the sidelines of crude oil for now.
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