In Tuesday's blog I wrote: "Even though we did not get an intermarket bearish divergence signal
between gold and silver (one making a new weekly high but not the other) as I would have liked, both metals appear to be turning down now, and a short-term sell signal appeared in both of their charts today."
It looks like my call was a little premature and we are now getting that bearish intermarket divergence signal today as gold surges to a new weekly high while silver remains below its high of last Friday. I entered a short position in gold (but not silver) on Tuesday with a stop loss in the $1140 area. I am going to remain short in gold and raise that stop loss to a close above $1160. Any traders who were stopped out at $1140 got out with a 1% loss and may want to consider re-shorting at today's high ($1155) with a stop loss at $1160 and/or silver making a new weekly high (i.e. above $15.43). If silver prices edge a bit higher and remain below $15.43 I will consider a short position in this metal as well (maybe tomorrow or early next week). Holding my short position in gold but out of silver for now.
We are now moving out of an important reversal zone for the broad stock market as stock prices continue to fall.
It looks like the DOW's high at 16,933 and the S&P 500's high at 2020, both on Sept.17, were significant tops, and this market is still on track for new lows into October. The DOW is now approaching fairly strong support around 16,000 so we could see a bounce here, but any rally will likely not get very far before turning down again. I am maintaining my short position in the broad stock market with the expectation of retesting or breaking below the lows of Aug. 24.
The U.S. Dollar Index has been falling with equity markets this week, and this may explain today's sudden surge in precious metal prices. Currency investors may be tired of waiting for the U.S. Federal Reserve to raise interest rates and could be seeing gold and silver as a better "safe haven" investment as equities crumble. Nevertheless, a short-term bounce in the broad stock market right now (as suggested above) could temporarily lift the dollar and send gold and silver prices down. There is currently strong support for the dollar just above 95 so we will now watch for a potential short-term rally in the dollar from there.
We are now moving out of a significant reversal zone for crude oil and crude prices have failed to reach our target of $50 -$55. Crude's high of $49.30 on Aug. 31 was too early to be a top in the current cycle (although a top on that date is not impossible, just unlikely) so we may have to wait until the first two weeks of October (crude's next reversal zone) to see a top within our target area. If equity markets bounce now, they might carry crude prices higher to a new high above $50. We will have to wait and see how this plays out. Directional momentum in crude is currently mixed bullish and bearish so there is at least some potential here for more rallying. Out of crude oil for now.