The current reversal zone for the broad stock market ends tomorrow. This week both the DOW and S&P 500 have made new all-time highs, but the NASDAQ has not (yet). We thus have bearish intermarket divergence, and we are still in the reversal zone so the market can turn down here. If the NASDAQ can break its all-time high (6,461) tomorrow or next week and all three indices continue to rise, we could see this rally persist into the end of the month. Let's stay on the sidelines until we see if the NASDAQ will turn down or "break out".
Gold and silver prices have been falling this week, but gold is still a good distance away from our target price of $1,300, and the cycle structure in the charts of both gold and silver is suggesting that both metals could fall further. There is a line of support for gold around $1,320 so we could see a small bounce here before gold moves lower, probably down into the next reversal zone for the precious metals at the end of the month and the first week of October. On the sidelines of gold and silver for now.
The U.S. Dollar Index is rallying strongly this week, and that is putting downward pressure on the precious metals. The next resistance line for the dollar is 93. We could see the dollar get there or higher by the end of the month (which is the start of another reversal zone for currencies). If it does, it could top out and turn back down, and this could kick start a major rally in gold and silver (especially if the dollar breaks below 90 and starts to "free fall").
Our decision to go long in crude oil on Monday was a good one. Crude prices have risen sharply and touched $50.50 today (Oct. contract chart). The current rally we are seeing was off a sub-cycle bottom on Aug. 31 at $45.58. It is still early in this sub-cycle. The next major reversal zone for crude oil is Sept. 22 - Oct. 2 (centered on Sept. 27). It would not be unreasonable to expect a significant top in crude in this upcoming reversal zone. Let's see if crude can continue to push higher for at least another week before we consider taking profits on this trade. We are being cautiously optimistic here, and I should note that prices need to start closing above $50.51 (the high from Aug. 1) for crude to stay bullish. Holding my long position in crude oil for now.