MARKETS UPDATE (10:30 pm EDT)
Today we enter a new strong reversal zone for crude oil, equities, precious metals, and currencies (June 6 - 14). This is the only major reversal we will see in the month of June, so let's see where we are in our market cycles.
All three of our broad stock market indices (DOW, S&P 500, NASDAQ) started new medium-term cycles with their lows in mid-April and are relatively young. After rising from there to new all-time highs on May 20 (DOW), May 23 (S&P 500), and May 28 (NASDAQ), these indices made their first sub-cycle correction with lows on May 30 (DOW) and May 31 (S&P 500 and NASDAQ).The DOW's correction was considerably longer and steeper than those for the S&P 500 and NASDAQ, and because of that the DOW's subsequent rally is still well below it's all-time high from May 20 (40,077). The S&P 500 and NASDAQ, however, are pushing ahead with new all-time highs. This means we now have a very strong case of intermarket bearish divergence between these indices, and it is happening as we rally into a strong reversal zone.
Unless the DOW can surge higher very quickly to a new all-time high, it looks like this market's trend could be turning bearish. The DOW still has not broken above its 15-day moving average and would need to climb over 1000 points to clear its 40,077 all-time high. It seems unlikely this will happen by the end of next week (the end of our reversal zone). A more likely scenario would see the DOW topping out sometime inside our reversal zone BELOW its 40,077 high and then turning down (with the other two indices) for another correction. If that happens, the DOW's medium-term cycle would be turning bearish, and it may lead the S&P 500 and NASDAQ into a bearish sell-off.
Based on all the above, we certainly do not want to be long in equities right now. In fact, if this market turns bearish, we could see a very severe correction unfold as we are near the end of a longer-term 4 year cycle in equities that is expected to bottom by the end of this year, probably sometime around September-October. That correction would likely be a 16 - 26% decline. If we are going to see the end of a 90 year cycle, the correction could be much more severe (i.e. major crash). It is still not clear if this 90 year cycle is going to unfold. I will discuss this in more detail in future blogs. For now, we are focused on a potential 16-26% decline into the end of a more clearly defined 4 year cycle by the end of this year.
We are still on the sidelines of the broad stock market, but we may be looking to sell short at some point if the market turns bearish.
It is near the end of the current medium-term cycles in both gold and silver, and we are still waiting for the final cycle bottoms. The final cycle top in gold was most likely on May 20 at $2449, and for silver it was $32.38 on May 21. We usually expect a 2-5 week decline from the top to the final bottom, and we are now in the 3rd week for both metals. We note that we are now entering a strong reversal zone that continues through the end of next week. This would be the ideal time for a final cycle bottom. Gold made an isolated low on Monday, silver did the same on Tuesday, and prices have been rising up from there.
Today both metals closed above their 15-day and 45-day moving averages, Did we just see the final cycle bottoms early this week? Maybe...but those lows were not inside a strong reversal zone (although Tuesday was a potential "pivot point" for gold). Our ideal target price for a bottom in gold would be around $2274. Monday's low was only $2315 - a bit high. Silver's ideal target range would be around $27 - $29. Tuesday's low got to $29.41 which was close, but still a little high. There's still time for these prices to push lower into the current reversal zone, so I am going to hold off buying for now. Let's remain on the sidelines of both metals for now.
Crude oil prices sank lower after we were stopped out of our long position on Monday, June 3. They got down to $72.48 (July contract chart) on Tuesday but are now rising again. Tuesday was not inside any reversal zone, but we have now entered a strong reversal zone for crude, equities and precious metals. If crude is forming a final medium-term cycle bottom (it is due/overdue), it would ideally be inside this new reversal zone (June 6 - 14). As with the precious metals, let's wait to see if prices can push lower over the next several trading days before we think about going long again. We will stay on the sidelines of crude for now.
Today we enter a new strong reversal zone for crude oil, equities, precious metals, and currencies (June 6 - 14). This is the only major reversal we will see in the month of June, so let's see where we are in our market cycles.
All three of our broad stock market indices (DOW, S&P 500, NASDAQ) started new medium-term cycles with their lows in mid-April and are relatively young. After rising from there to new all-time highs on May 20 (DOW), May 23 (S&P 500), and May 28 (NASDAQ), these indices made their first sub-cycle correction with lows on May 30 (DOW) and May 31 (S&P 500 and NASDAQ).The DOW's correction was considerably longer and steeper than those for the S&P 500 and NASDAQ, and because of that the DOW's subsequent rally is still well below it's all-time high from May 20 (40,077). The S&P 500 and NASDAQ, however, are pushing ahead with new all-time highs. This means we now have a very strong case of intermarket bearish divergence between these indices, and it is happening as we rally into a strong reversal zone.
Unless the DOW can surge higher very quickly to a new all-time high, it looks like this market's trend could be turning bearish. The DOW still has not broken above its 15-day moving average and would need to climb over 1000 points to clear its 40,077 all-time high. It seems unlikely this will happen by the end of next week (the end of our reversal zone). A more likely scenario would see the DOW topping out sometime inside our reversal zone BELOW its 40,077 high and then turning down (with the other two indices) for another correction. If that happens, the DOW's medium-term cycle would be turning bearish, and it may lead the S&P 500 and NASDAQ into a bearish sell-off.
Based on all the above, we certainly do not want to be long in equities right now. In fact, if this market turns bearish, we could see a very severe correction unfold as we are near the end of a longer-term 4 year cycle in equities that is expected to bottom by the end of this year, probably sometime around September-October. That correction would likely be a 16 - 26% decline. If we are going to see the end of a 90 year cycle, the correction could be much more severe (i.e. major crash). It is still not clear if this 90 year cycle is going to unfold. I will discuss this in more detail in future blogs. For now, we are focused on a potential 16-26% decline into the end of a more clearly defined 4 year cycle by the end of this year.
We are still on the sidelines of the broad stock market, but we may be looking to sell short at some point if the market turns bearish.
It is near the end of the current medium-term cycles in both gold and silver, and we are still waiting for the final cycle bottoms. The final cycle top in gold was most likely on May 20 at $2449, and for silver it was $32.38 on May 21. We usually expect a 2-5 week decline from the top to the final bottom, and we are now in the 3rd week for both metals. We note that we are now entering a strong reversal zone that continues through the end of next week. This would be the ideal time for a final cycle bottom. Gold made an isolated low on Monday, silver did the same on Tuesday, and prices have been rising up from there.
Today both metals closed above their 15-day and 45-day moving averages, Did we just see the final cycle bottoms early this week? Maybe...but those lows were not inside a strong reversal zone (although Tuesday was a potential "pivot point" for gold). Our ideal target price for a bottom in gold would be around $2274. Monday's low was only $2315 - a bit high. Silver's ideal target range would be around $27 - $29. Tuesday's low got to $29.41 which was close, but still a little high. There's still time for these prices to push lower into the current reversal zone, so I am going to hold off buying for now. Let's remain on the sidelines of both metals for now.
Crude oil prices sank lower after we were stopped out of our long position on Monday, June 3. They got down to $72.48 (July contract chart) on Tuesday but are now rising again. Tuesday was not inside any reversal zone, but we have now entered a strong reversal zone for crude, equities and precious metals. If crude is forming a final medium-term cycle bottom (it is due/overdue), it would ideally be inside this new reversal zone (June 6 - 14). As with the precious metals, let's wait to see if prices can push lower over the next several trading days before we think about going long again. We will stay on the sidelines of crude for now.
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