Our decision to take profits in our short positions on Monday was a good one as the broad stock market is rallying strongly this week. The DOW, S&P 500 and NASDAQ are all breaking through strong resistance levels, and many short-term chart signals are looking bullish right now. Another bullish factor for this market could be the upcoming U.S. Thanksgiving holiday next Thursday as equities tend to rise into holiday weekends. So does this mean the broad stock market will rally into next week? Maybe, but we are now approaching the center of a strong reversal zone for this market (Nov.23-24) so a top and a turn down are possible at any time (although the reversal zone could extend into next Thursday). We are moving towards the end of the current medium-term cycle in all three market indices (which will likely be in December) so we are still expecting a downward correction into that time. Our challenge now is to identify a top to sell short into that correction. The lows of Monday seem to be the start of a new subcycle, and if so, we should now be watching for that final top before the correction to the cycle bottom likely in December. I should note here that the final top and subsequent bottom could both be in December if the current rally can sustain itself through Dec. 10. Directional momentum is currently mixed bullish and bearish in all three market indices so we need to stay alert and be flexible in our trading strategy as this market is volatile and can make strong moves both up and down. Remaining on the sidelines of the broad stock market for now.
In last Sunday's blog on gold and silver I wrote: "We will continue with our strategy of waiting to sell short the top of a brief rally. If we get no rally next week and precious metal prices continue to fall, we will look to buy the final medium-term cycle bottom which will likely come at the end of this month or into early December." Gold and silver prices dropped steeply on Monday and Tuesday but are now rising again. That sharp rally we've been waiting for could be starting now, but directional momentum in gold is still 100% bearish so prices could still head lower into next week. We will wait and see how prices move into the first three days of next week before making any trade decisions. On the sidelines of gold and silver.
Today crude oil made a new monthly low at $39.89. We are now in the center of a reversal zone for crude so any new low over the next several days could be a subcycle bottom from which a rally should follow. Directional momentum remains 100% bearish in this market so we will continue with our strategy of trying to sell short the top of any minor rally. We may see such a top in early December (the next reversal zone). On the sidelines of crude oil for now.