MARKETS UPDATE (3:30 pm EST)
The broad stock market continues to be difficult to call as we move into the second half of the current reversal zone for equities (Nov.13 - 22). Earlier this week it looked like these indices were headed down to a corrective bottom, but today's strong rally has changed that picture. The NASDAQ is surging to a new all-time high, and while the DOW and S&P 500 are also rallying, they are still below last week's highs (so far) so we have an intermarket bearish divergence signal (until those highs are broken). If this bearish divergence continues into early next week, I will consider entering a short position, but right now I am staying on the sidelines of this volatile market. Directional momentum in the S&P 500 and NASDAQ are still 100% bullish, but the DOW yesterday turned mixed bullish and bearish which could be a sign of an imminent correction. Please note that these markets are extremely overbought and susceptible to a strong correction which is why it is worth selling short at tops within reversal zones; however, equities are also currently being fueled by an "irrational exuberance" that seems to be a continuation of Wall Street's "Trumphoria" from early this year. This bullish energy could minimize corrections and push equity markets to new highs for at least several more weeks. It is not an easy market to trade. We are watching this situation very carefully and will try to buy or sell short when appropriate.
Yesterday gold and silver prices rallied strongly in the morning but then fell to close the day much lower. Gold prices came close to $1,290, but could not exceed it so the picture is still ambiguous for both metals (see Tuesday's blog). Gold did manage to make a new weekly high while silver did not so we now have an intermarket bearish divergence signal which is suggesting lower prices. But, as with the broad stock market, volatility is high right now so we can't rule out more rallying. Remaining on the sidelines of precious metals until we see clearer directional movement.
Crude oil prices may be finding support now around $55 (Dec. contract chart) as last week's alarm over the news of an anti-corruption crackdown in Saudi Arabia subsides. That bit of news from the Middle-East sent prices tumbling from a high near $58 on Nov. 8 to today's low just above $55. We are in the middle of a reversal zone for crude so we could now see prices reverse back up to challenge or exceed that $58 high. If that happens in this reversal zone or the next one (Nov. 29 - Dec. 6) it could be a good spot to sell short as it would likely be the final top to the current medium-term cycle in crude (see Tuesday's blog on crude). Still on the sidelines of crude oil.
The broad stock market continues to be difficult to call as we move into the second half of the current reversal zone for equities (Nov.13 - 22). Earlier this week it looked like these indices were headed down to a corrective bottom, but today's strong rally has changed that picture. The NASDAQ is surging to a new all-time high, and while the DOW and S&P 500 are also rallying, they are still below last week's highs (so far) so we have an intermarket bearish divergence signal (until those highs are broken). If this bearish divergence continues into early next week, I will consider entering a short position, but right now I am staying on the sidelines of this volatile market. Directional momentum in the S&P 500 and NASDAQ are still 100% bullish, but the DOW yesterday turned mixed bullish and bearish which could be a sign of an imminent correction. Please note that these markets are extremely overbought and susceptible to a strong correction which is why it is worth selling short at tops within reversal zones; however, equities are also currently being fueled by an "irrational exuberance" that seems to be a continuation of Wall Street's "Trumphoria" from early this year. This bullish energy could minimize corrections and push equity markets to new highs for at least several more weeks. It is not an easy market to trade. We are watching this situation very carefully and will try to buy or sell short when appropriate.
Yesterday gold and silver prices rallied strongly in the morning but then fell to close the day much lower. Gold prices came close to $1,290, but could not exceed it so the picture is still ambiguous for both metals (see Tuesday's blog). Gold did manage to make a new weekly high while silver did not so we now have an intermarket bearish divergence signal which is suggesting lower prices. But, as with the broad stock market, volatility is high right now so we can't rule out more rallying. Remaining on the sidelines of precious metals until we see clearer directional movement.
Crude oil prices may be finding support now around $55 (Dec. contract chart) as last week's alarm over the news of an anti-corruption crackdown in Saudi Arabia subsides. That bit of news from the Middle-East sent prices tumbling from a high near $58 on Nov. 8 to today's low just above $55. We are in the middle of a reversal zone for crude so we could now see prices reverse back up to challenge or exceed that $58 high. If that happens in this reversal zone or the next one (Nov. 29 - Dec. 6) it could be a good spot to sell short as it would likely be the final top to the current medium-term cycle in crude (see Tuesday's blog on crude). Still on the sidelines of crude oil.
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