Today silver is breaking slightly below my suggested stop loss point of $23, and it may close below there. While round numbers like $23 often act as psychological support (or resistance) in trader psychology, they don't always hold. Closer examination of silver's chart shows another support level around $22.50, and that is still within our target range for a sub-cycle corrective low that is overdue in this market now. Furthermore, today through next Tuesday (the day after Memorial Day) is a potential "pivot point" for both gold and silver, so that overdue low could be imminent. For these reasons, I'm going to stay long in silver for now and base my stop loss for this trade on timing, that is, on prices moving lower after next Tuesday. Very risk adverse traders could move their stop loss down to a close below $22.50.
Gold is trading below the support level of $1950 today, but we recently (last Thursday) lowered our stop loss for our long position in gold to a close below $1900. This was based on our entry into the very strong reversal zone for the precious metals that started last week and continues through next Tuesday. As with silver, a sub-cycle corrective low is now due (overdue) in gold. Prices could get to $1900, but a more ideal target range would be around $1940 - $1962. We are in that range today. I am still holding my long position in gold for now.
Wall Street jitters over the ongoing debt-ceiling crisis in Washington D.C. pushed the broad stock market down steeply over the last three days, but today equity markets seem to be snapping back up, perhaps buoyed by the approaching Memorial Day week-end (stock markets often rally into holidays) and optimism that the crisis will be resolved soon. The DOW took the biggest hit and today plummeted to 32,586. This is within a good target range (31,850 - 33,000) for a significant sub-cycle low that is due now or next week. The S&P 500, however, made a low yesterday at 4,104, and it is rallying strongly today. That low is far above the ideal target of 3,868 - 4,028 for a sub-cycle bottom in the S&P 500. This suggests this index could fall lower (as could the DOW) tomorrow or even next week. The most bullish index right now - the NASDAQ - barely took a shallow two-day dip on Tuesday and Wednesday (not enough to qualify as a sub-cycle correction) and "gapped-up" today almost to a new weekly high.
We are getting a lot of mixed signals in these equity markets right now. The DOW is making new weekly and monthly lows. The S&P 500 is making a new weekly low but not a new monthly low, and the NASDAQ is not making any new lows. This gives us a bullish divergence signal. On the other hand, the NASDAQ and S&P 500 are both making new YEARLY highs, but the DOW has not, and this gives us a bearish divergence signal. Which signal is correct? We can't tell yet. We have been expecting a steep sub-cycle corrective low this week or next. We got it in the DOW, but not the other two indices. It's possible the S&P 500 and NASDAQ will bypass any steep correction. If that's the case, we could see a strong rally now in all three indices. But there's still time for these indices to drop lower into next week, and if the debt-ceiling crisis continues unresolved, that may indeed happen (the "deadline" to avoid a default seems to be June 2). In that situation, we would look for a good buy spot - as long as the corrections don't go TOO low. For now, we remain on the sidelines of the broad stock market.