MARKETS UPDATE (8:00 pm EST)
In last Sunday's blog I wrote: " ...there are several technical factors suggesting more volatility over the next several weeks. We need to be especially careful with our trading as market movements in this environment could be erratic and unpredictable."
We are certainly seeing this in the broad stock market this week with wild, triple digit fluctuations in the DOW. The DOW attempted to close above 17,000 on Monday but couldn't, and then it plunged 272 points on Tuesday. On Wednesday, minutes of the September FOMC meeting were released in which the Federal Reserve reaffirmed its intent to be prudent in raising interest rates. This not only calmed Wall Street investors but made them jubilant, and the DOW soared 274 points. Today, however, the DOW is back down with a 334 point loss for the day. This is obviously an extremely nervous and unstable market right now which tells us to be cautious in our trading. We are moving into the end of this week's time period for a likely reversal in the the markets as the DOW makes new lows close to 16,600. We might be seeing a good buy spot here, but some short-term indicators are bearish and suggest the possibility of more downside. If prices continue to hold above 16,600 over the next few days I will consider going long for a short-term rally, especially if short-term technical indicators turn bullish. As I've been stating in recent blogs, a significant correction of 10% or more is overdue in equity markets. It could be in progress now if the DOW starts closing below 16,600, but I think it is more likely we will see another rally into late October-early November and either a new all-time high or a double top to the DOW's Sept 19 high followed by a major correction.
Out of the market for now.
We are now in the red with our crude oil long position, but if prices stay above the $84 - $85 area there is a good chance crude will be turning up by early next week from the currently forming cycle bottom. I entered my long position on Sept. 25 and at that time wrote in my blog that: " Because crude prices can be very volatile under the current circumstances I am investing only a moderate amount of money in this trade." The limited funds I applied to this trade is making it a bit easier to "ride out" the current price drop, but cycle and timing analysis point strongly to an imminent bottom now so we will look for this by early next week. Holding my long position in crude.
It is "so far, so good" with our long position in gold. We seem to be back on track for a rally in the precious metals. The analysts I follow are a bit divided in their opinions on gold at the moment. While some anticipate a major rally and possibly a "breakout" right now, others feel the current rally will be short-lived and followed by a deeper correction. I am leaning towards the latter scenario, that is, a short rally now followed by a another decline into the final cycle bottoms of both gold and silver sometime early next year. My first target for this rally is the $1240 area. If we reach or exceed that level tomorrow or Monday, I may take profits as we are still in a timing zone for a market reversal. I would prefer, however, to see this rally continue into November and sell then. This rally could go as high as $1290, but unless it exceeds $1300, we will be looking to reverse position (ideally in November) and sell short a correction into the final bottom of the long-term gold cycle. Holding my long position in gold and still out of silver..
The U.S. Dollar Index is finally taking an overdue correction as it is moves down from a high of 86.75 on Oct. 3rd to a support level close to 85. This is giving a major lift to gold and silver prices, but the overall strength of the dollar chart suggests that this correction may not last very long. If 85 breaks there is another support level at 84-84.5.
A resumption of the dollar rally may be the trigger that sends gold and silver prices back down to their final bottoms so we will watch the dollar index closely to help time any short selling of the precious metals.
In last Sunday's blog I wrote: " ...there are several technical factors suggesting more volatility over the next several weeks. We need to be especially careful with our trading as market movements in this environment could be erratic and unpredictable."
We are certainly seeing this in the broad stock market this week with wild, triple digit fluctuations in the DOW. The DOW attempted to close above 17,000 on Monday but couldn't, and then it plunged 272 points on Tuesday. On Wednesday, minutes of the September FOMC meeting were released in which the Federal Reserve reaffirmed its intent to be prudent in raising interest rates. This not only calmed Wall Street investors but made them jubilant, and the DOW soared 274 points. Today, however, the DOW is back down with a 334 point loss for the day. This is obviously an extremely nervous and unstable market right now which tells us to be cautious in our trading. We are moving into the end of this week's time period for a likely reversal in the the markets as the DOW makes new lows close to 16,600. We might be seeing a good buy spot here, but some short-term indicators are bearish and suggest the possibility of more downside. If prices continue to hold above 16,600 over the next few days I will consider going long for a short-term rally, especially if short-term technical indicators turn bullish. As I've been stating in recent blogs, a significant correction of 10% or more is overdue in equity markets. It could be in progress now if the DOW starts closing below 16,600, but I think it is more likely we will see another rally into late October-early November and either a new all-time high or a double top to the DOW's Sept 19 high followed by a major correction.
Out of the market for now.
We are now in the red with our crude oil long position, but if prices stay above the $84 - $85 area there is a good chance crude will be turning up by early next week from the currently forming cycle bottom. I entered my long position on Sept. 25 and at that time wrote in my blog that: " Because crude prices can be very volatile under the current circumstances I am investing only a moderate amount of money in this trade." The limited funds I applied to this trade is making it a bit easier to "ride out" the current price drop, but cycle and timing analysis point strongly to an imminent bottom now so we will look for this by early next week. Holding my long position in crude.
It is "so far, so good" with our long position in gold. We seem to be back on track for a rally in the precious metals. The analysts I follow are a bit divided in their opinions on gold at the moment. While some anticipate a major rally and possibly a "breakout" right now, others feel the current rally will be short-lived and followed by a deeper correction. I am leaning towards the latter scenario, that is, a short rally now followed by a another decline into the final cycle bottoms of both gold and silver sometime early next year. My first target for this rally is the $1240 area. If we reach or exceed that level tomorrow or Monday, I may take profits as we are still in a timing zone for a market reversal. I would prefer, however, to see this rally continue into November and sell then. This rally could go as high as $1290, but unless it exceeds $1300, we will be looking to reverse position (ideally in November) and sell short a correction into the final bottom of the long-term gold cycle. Holding my long position in gold and still out of silver..
The U.S. Dollar Index is finally taking an overdue correction as it is moves down from a high of 86.75 on Oct. 3rd to a support level close to 85. This is giving a major lift to gold and silver prices, but the overall strength of the dollar chart suggests that this correction may not last very long. If 85 breaks there is another support level at 84-84.5.
A resumption of the dollar rally may be the trigger that sends gold and silver prices back down to their final bottoms so we will watch the dollar index closely to help time any short selling of the precious metals.
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