BROAD STOCK MARKET and GOLD UPDATE and SILVER TRADE ALERT (11:30 pm EST)
Financial markets have now had about a week to process Donald Trump's election win, and the one market that seems to be cheering this the most is the U.S. Dollar Index. It seems the prospect of a four year Trump Administration has boosted faith in U.S. currency. The greenback was slumping to a low of 103.37 on Nov. 5; but it shot straight up the day after the election, and today it hit 107 - a new high for the year. The broad stock market also surged to new all-time highs last week following the election, although this week equities seem to be taking a small breather near strong resistance lines. But is all this bullishness "irrational exuberance" or is it justifiable rational exuberance? The answer might depend on one's political views. Rational or not, the question is how long will this bullishness last, and to answer that question, we look mostly at cycle patterns.
My view for some time has been that equity markets are likely to make new highs into the first half of 2025, but at some point, several longer-term cycles would come to a peak leading to a steep correction (16% - 26%) due by August at the latest. Longer-term cycle corrections are sometimes preceded by steep, parabolic rises, so it may be worth buying at the bottom of any significant corrections in the broad stock market now to ride any potential rallies into the new year.
It is still not certain if last week's lows in the DOW and S&P 500 were the final bottoms of their medium-term cycles and the start of new ones. We like to see a 2-5 week decline from a crest to the final bottom of a medium-term cycle, and last week's lows qualify for these two indices (but not for the NASDAQ which made its low the week before with only a one day decline). If the DOW and S&P 500 have started new cycles, they should be very bullish now. But if they are still older medium-term cycles, they are due for another 2-5 week correction down. Since we've just entered another fairly strong general reversal zone (Nov. 13 - 20), we could see either a significant bottom by next Wednesday (a possible buy spot) or another all-time high in any or all three indices. We will remain on the sidelines for now to see how this plays out.
Not surprisingly, with the election results boosting the U.S. dollar, gold and silver prices have been falling. Anyone reading this blog knows we were anticipating a sharp correction in both metals, and we're getting it now. Because we are now near the center of a reversal zone specifically for the precious metals, we should be looking for good spots to buy. Silver has arrived at a good target for a bottom at a support line near $30. I am going to put in an order to buy silver at tomorrow's market open now. Traders may also buy silver tomorrow as long as it doesn't break and close too far below $30. Gold prices could drop further but may find a support line at $2500. Let's stay on the sidelines of gold for now.
Financial markets have now had about a week to process Donald Trump's election win, and the one market that seems to be cheering this the most is the U.S. Dollar Index. It seems the prospect of a four year Trump Administration has boosted faith in U.S. currency. The greenback was slumping to a low of 103.37 on Nov. 5; but it shot straight up the day after the election, and today it hit 107 - a new high for the year. The broad stock market also surged to new all-time highs last week following the election, although this week equities seem to be taking a small breather near strong resistance lines. But is all this bullishness "irrational exuberance" or is it justifiable rational exuberance? The answer might depend on one's political views. Rational or not, the question is how long will this bullishness last, and to answer that question, we look mostly at cycle patterns.
My view for some time has been that equity markets are likely to make new highs into the first half of 2025, but at some point, several longer-term cycles would come to a peak leading to a steep correction (16% - 26%) due by August at the latest. Longer-term cycle corrections are sometimes preceded by steep, parabolic rises, so it may be worth buying at the bottom of any significant corrections in the broad stock market now to ride any potential rallies into the new year.
It is still not certain if last week's lows in the DOW and S&P 500 were the final bottoms of their medium-term cycles and the start of new ones. We like to see a 2-5 week decline from a crest to the final bottom of a medium-term cycle, and last week's lows qualify for these two indices (but not for the NASDAQ which made its low the week before with only a one day decline). If the DOW and S&P 500 have started new cycles, they should be very bullish now. But if they are still older medium-term cycles, they are due for another 2-5 week correction down. Since we've just entered another fairly strong general reversal zone (Nov. 13 - 20), we could see either a significant bottom by next Wednesday (a possible buy spot) or another all-time high in any or all three indices. We will remain on the sidelines for now to see how this plays out.
Not surprisingly, with the election results boosting the U.S. dollar, gold and silver prices have been falling. Anyone reading this blog knows we were anticipating a sharp correction in both metals, and we're getting it now. Because we are now near the center of a reversal zone specifically for the precious metals, we should be looking for good spots to buy. Silver has arrived at a good target for a bottom at a support line near $30. I am going to put in an order to buy silver at tomorrow's market open now. Traders may also buy silver tomorrow as long as it doesn't break and close too far below $30. Gold prices could drop further but may find a support line at $2500. Let's stay on the sidelines of gold for now.
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