There are major important shifts occurring now in all the markets we follow which is necessitating some changes in our trading strategies going forward.
The big news over the last several days in financial markets has been the breakdown of gold and silver. In anticipation of this we sold our silver long positions on April 4 and our gold longs on April 12 and thus managed to avoid the silver plunge and at least the major portion of gold's drop. In my last blog I was contemplating selling gold short on any brief relief rallys (wishful thinking) should they occur to take advantage of the extensive "crash" unfolding. Unfortunately no such opportunity has presented itself as the plunge has been rapid and steep and the correction has gone too far to make short selling a viable option now. There is strong support for gold around $1000 and for silver around $20, and while prices could drop to those levels (silver has already touched $22), they don't have to, and the correction may even now be leveling off at current prices. We will have to wait and see what happens as the momentum in both gold and silver is still strongly bearish. We don't want to forget, however, that once this correction bottoms, it will be another "golden" opportunity to go long. Standing aside gold and silver at the moment.
Interestingly, crude oil (often referred to as "black gold") has also been plunging since last Friday, and as I mentioned in Sunday night's blog, this market is now turning bearish. We will now look to sell short any short-term rallies in crude as long as momentum indicators remain bearish. A short-term cycle in crude may be bottoming now, so we will be watching for the subsequent rally. We are out of this market for now.
Have I mentioned that the broad stock market has been hard to call recently? Seriously, this is probably the most consistently manipulated (overtly and clandestinely) market we follow on the website, and the simple reason for this is that governments, politicians, and many big money people do not at the moment want another stock market crash. I believe there is a limit, however, to how long markets can be artificially propped up when cycle patterns, timing factors, and technical analysis point towards major overdue corrections. Unfortunately, when natural corrective market forces are suppressed for too long, like repressed anger they tend to assert themselves explosively and manifest as "crashes" more severe and damaging than what otherwise could be a gentle rising and falling of alternating bullish and bearish forces in a free market unencumbered by goal driven intervention. But enough of my rambling; lets move on to our trading strategy for this market.
Momentum indicators are still strongly bullish in the DOW, S&P 500, and NASDAQ. We have just moved out of a time zone for a likely reversal but are moving into another one towards the second half of next week. This means we could see more upside price movement into that window before seeing a reversal. On the other hand, yesterday's big drop in prices could be the start of the correction we've been anticipating. In recent blogs I've been short-term bullish on this market, and we've been waiting to buy any significant correction, even a small one, mostly based on the market's consistently bullish momentum and my reluctance to go against market manipulators (like the Federal Reserve) who seem intent on propping up the market at any cost. Two market developments over the last few days, however, are causing me to abandom this bullish view for now. First, as mentioned above, crude oil has suddenly turned bearish. This might be heralding a breakdown in the broad stock market because crude and the broad stock market tend to move in the same direction. The second development is a possible breakdown in copper prices. The price of copper has been in decline since February of this year, but chart analysis over the last few days is indicating a possible imminent severe breakdown. As I've mentioned in previous blogs, the price of copper is often an accurate bellwether of general economic conditions. Copper and crude oil are both important industrial commodities, and the fact that both seem to be turning bearish right now is not a good sign for the economy in general, which doesn't bode well for the broad stock market. For these reasons we are still standing aside the broad stock market and we are changing our view from bullish to neutral for now.