SILVER TRADE ALERT and MARKETS UPDATE (6:00 pm EDT)
In Tuesday's blog on gold and silver I wrote:
"We got long in gold on Aug. 25 but held off buying silver as it was not clear whether or not its medium-term cycle bottom was in. We can probably confirm that bottom now (Aug. 28 at $18.40) and should be looking to buy silver as the start of a new cycle is usually very bullish. The only problem is that we are now entering a strong reversal zone specifically related to precious metals (this week and into next week) so we may see a sudden pullback in prices. That could give us a second chance to buy silver which is now pushing against resistance around $20 and could start to back down."
Silver prices have backed down from Tuesday's high of $20.12. That top was a "pivot point" at the start of a general reversal zone for gold and silver (gold fell too) which will extend into next Thursday. Prices are now dropping into the center of of this zone and could turn back up any time before then. The U.S. Dollar Index (which generally moves opposite precious metal prices) "gapped" down Tuesday from 95.75 to just below 95. The dollar could rise and start to fill that gap, but there is resistance there, and other technical signals in the U.S. Dollar Index chart are suggesting that the dollar could move lower. A falling dollar would support a rise in the precious metals. For all of these reasons I am going to enter a long position in silver tonight for the opening of tomorrow's market. Silver (and gold) prices could fall lower before next Thursday, but there is some support for silver at $19.50 and then $19.00, and we are now in the center of this reversal zone with the dollar poised to move lower. We can place our stop loss for this trade around $19.00 (or even $19.50 if gold falls below $1,300). Going long in silver and still holding our long position in gold.
Equity markets this week are staying above last week's lows but seem reluctant to rally. We are entering a strong reversal zone for the broad stock market next week so there is still time to either rally and make a top at new highs or fall below last week's lows and make a bottom. Directional momentum is currently mixed bullish and bearish in this market, but some short-term technical signals are slightly in favor of more rallying. We will have to wait and see how this plays out. Today's meeting of European Central Bank officials put a slight damper on equities as the ECB decided to keep interest rates steady but did not announce any additional measures to boost Europe's sluggish economy. We are still holding our long position in the broad stock market and will watch how equities move into next week. As I stated in my last blog post, we will probably look to take profits if these markets make new highs then.
On Tuesday I wrote on crude oil:
"Crude prices have been rising from last week's low of $43 and are now above $44 again. The cycle structure of this market is suggestive of a significant bottom into the next reversal zone near the end of this week into early next week. If we get that we will look to buy (as long as prices stay above $40)."
Well, we are not getting that. Today the U.S. government reported the largest drop in domestic crude oil supplies in 17 years. This caused the price of crude to soar above $47. While it is still possible for prices to drop to new lows next week, that seems less likely now. We may instead see new highs in this reversal zone which could give us a setup to sell short. If this market does continue to rally next week I will need to revise the cycle structure timing to accommodate this price surge. Still on the sidelines of crude.
In Tuesday's blog on gold and silver I wrote:
"We got long in gold on Aug. 25 but held off buying silver as it was not clear whether or not its medium-term cycle bottom was in. We can probably confirm that bottom now (Aug. 28 at $18.40) and should be looking to buy silver as the start of a new cycle is usually very bullish. The only problem is that we are now entering a strong reversal zone specifically related to precious metals (this week and into next week) so we may see a sudden pullback in prices. That could give us a second chance to buy silver which is now pushing against resistance around $20 and could start to back down."
Silver prices have backed down from Tuesday's high of $20.12. That top was a "pivot point" at the start of a general reversal zone for gold and silver (gold fell too) which will extend into next Thursday. Prices are now dropping into the center of of this zone and could turn back up any time before then. The U.S. Dollar Index (which generally moves opposite precious metal prices) "gapped" down Tuesday from 95.75 to just below 95. The dollar could rise and start to fill that gap, but there is resistance there, and other technical signals in the U.S. Dollar Index chart are suggesting that the dollar could move lower. A falling dollar would support a rise in the precious metals. For all of these reasons I am going to enter a long position in silver tonight for the opening of tomorrow's market. Silver (and gold) prices could fall lower before next Thursday, but there is some support for silver at $19.50 and then $19.00, and we are now in the center of this reversal zone with the dollar poised to move lower. We can place our stop loss for this trade around $19.00 (or even $19.50 if gold falls below $1,300). Going long in silver and still holding our long position in gold.
Equity markets this week are staying above last week's lows but seem reluctant to rally. We are entering a strong reversal zone for the broad stock market next week so there is still time to either rally and make a top at new highs or fall below last week's lows and make a bottom. Directional momentum is currently mixed bullish and bearish in this market, but some short-term technical signals are slightly in favor of more rallying. We will have to wait and see how this plays out. Today's meeting of European Central Bank officials put a slight damper on equities as the ECB decided to keep interest rates steady but did not announce any additional measures to boost Europe's sluggish economy. We are still holding our long position in the broad stock market and will watch how equities move into next week. As I stated in my last blog post, we will probably look to take profits if these markets make new highs then.
On Tuesday I wrote on crude oil:
"Crude prices have been rising from last week's low of $43 and are now above $44 again. The cycle structure of this market is suggestive of a significant bottom into the next reversal zone near the end of this week into early next week. If we get that we will look to buy (as long as prices stay above $40)."
Well, we are not getting that. Today the U.S. government reported the largest drop in domestic crude oil supplies in 17 years. This caused the price of crude to soar above $47. While it is still possible for prices to drop to new lows next week, that seems less likely now. We may instead see new highs in this reversal zone which could give us a setup to sell short. If this market does continue to rally next week I will need to revise the cycle structure timing to accommodate this price surge. Still on the sidelines of crude.
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