MARKETS UPDATE (10:30 pm EDT)
We are now entering the next reversal zone for the broad stock market (Oct. 25 - Nov. 2). The S&P 500 and NASDAQ appear to be falling into this reversal from new highs early in the week. The DOW made a new high on Tuesday and is edging downwards but seems more reluctant to fall than the other two indices (it looks like it wants to push higher). The NASDAQ 100 (Dec. contract chart) has also been falling and never exceeded its high from last week so we still have an intermarket bearish divergence signal relative to the other indices. If all these indices fall steeply into next week, we could see a bottom to buy. The other possibility would be for one (perhaps just the DOW) or more (but not all four) of these indices to make a new weekly high next week. This might give us an opportunity to short the market for a brief (but sharp) correction into the third or fourth week of November. We will stay on the sidelines until we see how the market moves into next week.
Gold and silver prices plunged lower today, and it appears that there is a good chance they will fall into next week's reversal zone for the precious metals (Oct. 27 - Nov. 6). If they do, it could be an excellent spot to go long in both metals. We will watch for this. On the sidelines of gold and silver for now.
On Oct. 16 I wrote about the U.S. Dollar Index:
"There are also some chart patterns in the U.S. Dollar Index suggesting that a strong rally in the dollar could be imminent. Such a rally could really take off if the dollar can break above resistance in the 94 area. Needless to say, this would put downward pressure on the precious metals if it happens."
It looks like this is happening as the dollar surged and broke above 94 today, closing around 94.80. This is what pushed precious metal prices down today. The question now is how long will the dollar rally last and how high will it go? Apparently European Central Bank President Mario Dracula (oops, I mean Draghi - Halloween on my mind!) made some "dovish" comments on economic policy today that sank the euro and boosted the dollar. This kind of overreaction to a news story often dies down quickly. Because next week is a reversal zone not only for gold and silver but for currencies as well, I suspect the dollar's surge will be short-lived. We will watch for signs of a top in the dollar (and a bottom in the metals) next week. Some analysts are projecting the dollar to go as high as 97. Nevertheless, the chart of the U.S. Dollar Index is still quite quite bearish looking, and it is possible this dollar surge could turn out to be a "swansong rally" before the greenback really starts to break down. We shall wait and see how this plays out next week.
Crude oil prices continue to edge higher as we now enter another reversal zone for crude (Oct. 25 - Nov. 2). Prices are again challenging that Sept. 28 high at $53.11 (Dec. contract chart) so they could easily be making another double top or even a new high in this reversal period. We will now watch for signs of a high to sell short, possibly next week. Still on the sidelines of crude oil.
We are now entering the next reversal zone for the broad stock market (Oct. 25 - Nov. 2). The S&P 500 and NASDAQ appear to be falling into this reversal from new highs early in the week. The DOW made a new high on Tuesday and is edging downwards but seems more reluctant to fall than the other two indices (it looks like it wants to push higher). The NASDAQ 100 (Dec. contract chart) has also been falling and never exceeded its high from last week so we still have an intermarket bearish divergence signal relative to the other indices. If all these indices fall steeply into next week, we could see a bottom to buy. The other possibility would be for one (perhaps just the DOW) or more (but not all four) of these indices to make a new weekly high next week. This might give us an opportunity to short the market for a brief (but sharp) correction into the third or fourth week of November. We will stay on the sidelines until we see how the market moves into next week.
Gold and silver prices plunged lower today, and it appears that there is a good chance they will fall into next week's reversal zone for the precious metals (Oct. 27 - Nov. 6). If they do, it could be an excellent spot to go long in both metals. We will watch for this. On the sidelines of gold and silver for now.
On Oct. 16 I wrote about the U.S. Dollar Index:
"There are also some chart patterns in the U.S. Dollar Index suggesting that a strong rally in the dollar could be imminent. Such a rally could really take off if the dollar can break above resistance in the 94 area. Needless to say, this would put downward pressure on the precious metals if it happens."
It looks like this is happening as the dollar surged and broke above 94 today, closing around 94.80. This is what pushed precious metal prices down today. The question now is how long will the dollar rally last and how high will it go? Apparently European Central Bank President Mario Dracula (oops, I mean Draghi - Halloween on my mind!) made some "dovish" comments on economic policy today that sank the euro and boosted the dollar. This kind of overreaction to a news story often dies down quickly. Because next week is a reversal zone not only for gold and silver but for currencies as well, I suspect the dollar's surge will be short-lived. We will watch for signs of a top in the dollar (and a bottom in the metals) next week. Some analysts are projecting the dollar to go as high as 97. Nevertheless, the chart of the U.S. Dollar Index is still quite quite bearish looking, and it is possible this dollar surge could turn out to be a "swansong rally" before the greenback really starts to break down. We shall wait and see how this plays out next week.
Crude oil prices continue to edge higher as we now enter another reversal zone for crude (Oct. 25 - Nov. 2). Prices are again challenging that Sept. 28 high at $53.11 (Dec. contract chart) so they could easily be making another double top or even a new high in this reversal period. We will now watch for signs of a high to sell short, possibly next week. Still on the sidelines of crude oil.
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