MARKETS UPDATE (5:00 pm EDST)
Today the Bureau of Labor Statistics released its inflation data for March. The 8.5% rise in prices compared to a year ago (the largest annual increase since Dec. 1981) was alarming, but not unexpected. Equity markets showed their displeasure by falling steadily (after a brief morning surge) into the end of the day. Has a sell-off been triggered or will the this market get over its tantrum over the next few days and rally up again? Either scenario is possible, so we will have to wait and see. We are close to our corrective targets in all three broad stock market indices (DOW, S&P 500, NASDAQ), so we could see some support forming for another rally. We will stay on the sidelines for now.
Not surprisingly, gold and silver prices surged up with the inflation data. Gold is rising above its recent March 24 high, but silver is still below its March 24 high. This is creating an intermarket bearish divergence signal, and we are now within the reversal zone for the precious metals (April 12 - 20). A correction back down could be imminent. As I stated in my last blog, it's possible (probably more so now) that gold and/or silver started new medium-term cycles from their recent March 29 lows. If so, they could be very bullish. This makes me a bit reluctant to sell short here. If silver stays below $25.82 over the next day or two, I may consider it. Otherwise, we may be on track for another rally for gold to again test its all-time high of $2070. We will remain on the sidelines of both metals for now.
The U.S. Dollar Index could be peaking now as we enter a reversal zone specifically for currencies (April 12 - 20, same as for the precious metals). The greenback made a new high for the year today, breaking and closing just above 100. Any corrective drop in this index could boost gold and silver prices, so we will watch for this now.
Today the Bureau of Labor Statistics released its inflation data for March. The 8.5% rise in prices compared to a year ago (the largest annual increase since Dec. 1981) was alarming, but not unexpected. Equity markets showed their displeasure by falling steadily (after a brief morning surge) into the end of the day. Has a sell-off been triggered or will the this market get over its tantrum over the next few days and rally up again? Either scenario is possible, so we will have to wait and see. We are close to our corrective targets in all three broad stock market indices (DOW, S&P 500, NASDAQ), so we could see some support forming for another rally. We will stay on the sidelines for now.
Not surprisingly, gold and silver prices surged up with the inflation data. Gold is rising above its recent March 24 high, but silver is still below its March 24 high. This is creating an intermarket bearish divergence signal, and we are now within the reversal zone for the precious metals (April 12 - 20). A correction back down could be imminent. As I stated in my last blog, it's possible (probably more so now) that gold and/or silver started new medium-term cycles from their recent March 29 lows. If so, they could be very bullish. This makes me a bit reluctant to sell short here. If silver stays below $25.82 over the next day or two, I may consider it. Otherwise, we may be on track for another rally for gold to again test its all-time high of $2070. We will remain on the sidelines of both metals for now.
The U.S. Dollar Index could be peaking now as we enter a reversal zone specifically for currencies (April 12 - 20, same as for the precious metals). The greenback made a new high for the year today, breaking and closing just above 100. Any corrective drop in this index could boost gold and silver prices, so we will watch for this now.
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