UPDATES on the BROAD STOCK MARKET and CRUDE OIL (9:30 pm EST)
The steep rally in the broad stock market may be waning. Although the DOW surged to a new high today, both the S&P 500 and NASDAQ did not exceed yesterday's highs, and the NASDAQ closed with a loss. The DOW also broke above its summer high while the S&P 500 and NASDAQ have not gone above their summer highs (yet), and that gives us another bearish divergence signal. The new medium-term cycles in all three indices (starting from their Oct. 26 - 27 lows) are now ripe for a sub-cycle correction. Although we won't see a strong general reversal zone until Dec. 12 - 21, we just entered a minor and weak reversal zone centered around next Monday (Nov. 29 - Dec. 8). We would normally ignore a very weak reversal signal, but because other factors are suggesting a top, this one may be significant.
As I mentioned in my previous blog (Monday) on the broad stock market:
"In a bullish market, a normal sub-cycle correction would at least test the 15-day moving average (now around 13,972 in the DOW and 4,472 in the S&P 500, both rising). We may look to buy if these indices test or push a bit below these levels this week or next. If instead equity markets continue to push higher, we may have to wait a little longer for a significant sub-cycle correction."
This still applies, and at least the S&P 500 and NASDAQ may be starting their turn-down today. If this market is very bullish, however, the rally could push higher into that Dec.12 - 21 reversal zone before making any significant correction. We will wait to buy a corrective low near or below those 15-day moving averages whether it happens sooner or later. We remain on the sidelines for now.
Yesterday crude oil managed to close above its 15-day moving average, but today prices are back below it again. A baseline of support seems to be forming at $75.
We're still not sure if the current medium-term cycle in crude began with the low of $76.75 (Jan. 2024 contract chart) on Aug. 24 or the low of $78.93 on Oct. 6. Either way, the medium-term cycle's trend is bearish, but if the cycle is old (Aug. 24 start), it is getting close to its final bottom. We have a reversal zone specifically for crude oil coming up Dec. 5 - 13 that overlaps with our general reversal zone Dec. 12 - 21. That could be a good time frame for the final bottom of an older cycle and a possible spot to buy.
On the other hand, if the medium-term cycle started on Oct. 6 (younger), its final bottom isn't due for at least seven more weeks at a price that could be substantially lower than $72.37. Let's stay on the sidelines and wait to see if next week's reversal corresponds to a low or high before we make any trading decisions.
The steep rally in the broad stock market may be waning. Although the DOW surged to a new high today, both the S&P 500 and NASDAQ did not exceed yesterday's highs, and the NASDAQ closed with a loss. The DOW also broke above its summer high while the S&P 500 and NASDAQ have not gone above their summer highs (yet), and that gives us another bearish divergence signal. The new medium-term cycles in all three indices (starting from their Oct. 26 - 27 lows) are now ripe for a sub-cycle correction. Although we won't see a strong general reversal zone until Dec. 12 - 21, we just entered a minor and weak reversal zone centered around next Monday (Nov. 29 - Dec. 8). We would normally ignore a very weak reversal signal, but because other factors are suggesting a top, this one may be significant.
As I mentioned in my previous blog (Monday) on the broad stock market:
"In a bullish market, a normal sub-cycle correction would at least test the 15-day moving average (now around 13,972 in the DOW and 4,472 in the S&P 500, both rising). We may look to buy if these indices test or push a bit below these levels this week or next. If instead equity markets continue to push higher, we may have to wait a little longer for a significant sub-cycle correction."
This still applies, and at least the S&P 500 and NASDAQ may be starting their turn-down today. If this market is very bullish, however, the rally could push higher into that Dec.12 - 21 reversal zone before making any significant correction. We will wait to buy a corrective low near or below those 15-day moving averages whether it happens sooner or later. We remain on the sidelines for now.
Yesterday crude oil managed to close above its 15-day moving average, but today prices are back below it again. A baseline of support seems to be forming at $75.
We're still not sure if the current medium-term cycle in crude began with the low of $76.75 (Jan. 2024 contract chart) on Aug. 24 or the low of $78.93 on Oct. 6. Either way, the medium-term cycle's trend is bearish, but if the cycle is old (Aug. 24 start), it is getting close to its final bottom. We have a reversal zone specifically for crude oil coming up Dec. 5 - 13 that overlaps with our general reversal zone Dec. 12 - 21. That could be a good time frame for the final bottom of an older cycle and a possible spot to buy.
On the other hand, if the medium-term cycle started on Oct. 6 (younger), its final bottom isn't due for at least seven more weeks at a price that could be substantially lower than $72.37. Let's stay on the sidelines and wait to see if next week's reversal corresponds to a low or high before we make any trading decisions.
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