MARKETS UPDATE (11:30 pm EST)
There was a lot of significant action in financial markets today (Thursday). Most dramatic of course was the 225 point drop in the DOW that some are attributing to positive reports on the economy which may be raising (once again) fears of early QE tapering. Technical analysis and cycles have been pointing to a significant downturn in August/September and this could very well be it. Today's plunge was accompanied by some more bearish technical signals (most notably the appearance of medium-term bearish momentum in the S&P 500 chart following the recent appearance of a similar signal in the DOW ; the NASDAQ, however, is still bullish). Also significant today was the DOW closing below its 50-day moving average (a bearish sign). These and other signals were enough for me to enter short positions in the broad stock market today as there is plenty of potential for more downside correction. We need to keep in mind that the last week of August is a major pivot point for all markets - a likely time for major reversals up or down - so a likely scenario right now is for this market to fall into that time period to form a bottom and then turn back up to resume its rally.
Gold and silver both rallied strongly today with gold finally breaking and closing above the $1350 mark and silver just clearing $23. This is giving us a decent short-term profit in our long positions (especially silver), but technical studies may be pointing to an imminent short-term reversal as we are approaching our upper target prices for this rally. Although the rally could accelerate into the last week of August to form a peak before turning down, it could also turn down now and instead form a bottom at August's end. Based on this information it may be wise to unload our long positions soon (maybe tomorrow). Should gold and silver correct down into the last week of August, it would set up an excellent buying opportunity, and we would likely go long again (more heavily) in both metals. Traders who are not comfortable with the short-term trading we've been doing recently with precious metals may take heart in knowing we will soon be more confident in gold and silver's final long-term cycle bottoms and I can then recommend holding long-term bullish positions in these metals (see Brief Overview of Financial Markets for Second Half of 2013).
The increasing political instability in Egypt (as well as the ongoing civil war in Syria) has been driving up the price of crude oil since last week, and this seems to have truncated the correction that crude prices had been taking in the first week of August. Nevertheless, medium-term momentum is still bearish and the rising price is now approaching resistance at $108, so the downturn may reassert itself. If prices break though the double top at $108-$109 then we could see more rallying into that reversal zone in the last week of August before any serious correction. Otherwise, crude should turn here and resume its correction down. Due to the current "wildcard" effect of the Middle East on oil prices, I am remaining on the sidelines of this market for now.
There was a lot of significant action in financial markets today (Thursday). Most dramatic of course was the 225 point drop in the DOW that some are attributing to positive reports on the economy which may be raising (once again) fears of early QE tapering. Technical analysis and cycles have been pointing to a significant downturn in August/September and this could very well be it. Today's plunge was accompanied by some more bearish technical signals (most notably the appearance of medium-term bearish momentum in the S&P 500 chart following the recent appearance of a similar signal in the DOW ; the NASDAQ, however, is still bullish). Also significant today was the DOW closing below its 50-day moving average (a bearish sign). These and other signals were enough for me to enter short positions in the broad stock market today as there is plenty of potential for more downside correction. We need to keep in mind that the last week of August is a major pivot point for all markets - a likely time for major reversals up or down - so a likely scenario right now is for this market to fall into that time period to form a bottom and then turn back up to resume its rally.
Gold and silver both rallied strongly today with gold finally breaking and closing above the $1350 mark and silver just clearing $23. This is giving us a decent short-term profit in our long positions (especially silver), but technical studies may be pointing to an imminent short-term reversal as we are approaching our upper target prices for this rally. Although the rally could accelerate into the last week of August to form a peak before turning down, it could also turn down now and instead form a bottom at August's end. Based on this information it may be wise to unload our long positions soon (maybe tomorrow). Should gold and silver correct down into the last week of August, it would set up an excellent buying opportunity, and we would likely go long again (more heavily) in both metals. Traders who are not comfortable with the short-term trading we've been doing recently with precious metals may take heart in knowing we will soon be more confident in gold and silver's final long-term cycle bottoms and I can then recommend holding long-term bullish positions in these metals (see Brief Overview of Financial Markets for Second Half of 2013).
The increasing political instability in Egypt (as well as the ongoing civil war in Syria) has been driving up the price of crude oil since last week, and this seems to have truncated the correction that crude prices had been taking in the first week of August. Nevertheless, medium-term momentum is still bearish and the rising price is now approaching resistance at $108, so the downturn may reassert itself. If prices break though the double top at $108-$109 then we could see more rallying into that reversal zone in the last week of August before any serious correction. Otherwise, crude should turn here and resume its correction down. Due to the current "wildcard" effect of the Middle East on oil prices, I am remaining on the sidelines of this market for now.
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