MARKETS UPDATE and an IMPORTANT UPDATE and ANALYSIS OF THE U.S. DOLLAR (3:30 pm EDST)
In last week's blog I posted:
"...I don't think the cycle will turn bearish as long as the DOW stays above 32,000 (and especially 30,000) and the S&P 500 remains above 3,800. We also don't want to see the NASDAQ fall below 12,397 as that would be a bearish sign. I am still anticipating a significant top in these indices in our next reversal zone coming up April 20 - 29 which could turn out to be an ideal spot to sell this market short."
We are now in the first day of that April 20 - 29 reversal zone, and it looks like all three broad stock market indices (DOW, S&P 500, NASDAQ) are moving down from last Friday's highs. Those highs from Friday were new weekly highs for all three indices, but were only new all-time highs for the DOW and S&P 500. The NASDAQ has yet to break above its all-time high from February 16 (14,167), and thus it still has strong intermarket bearish divergence to the other two indices. That could mean that last week's highs were a significant top, and a significant correction could be starting now...BUT (yes, there is usually a "but" in our analyses)...last week's tops were just outside our reversal zone, and we prefer to see significant tops and bottoms closer to the center of our reversal time frames. If this turns out to be just a small corrective dip, there is plenty of time for these indices to push a bit higher into this reversal zone and form another top. We are still well above those support areas (32,000 in the DOW, 3,800 in the S&P 500, and 12,397 in the NASDAQ). I am not going to get TOO concerned about this correction until we are close to breaking those levels. We will stay on the sidelines for now and see if this "dip" turns more serious over the next several days. If it doesn't, we will watch for a high to sell short this week or next.
Crude oil did not make a significant low or high in its last reversal zone (April 8 - 16), but it is now making a new weekly high as we enter the April 20 - 29 reversal zone (applicable to all markets). It is still possible crude started a new medium-term cycle with its low of $57.25 on March 23 (May contract chart). If so, it should be rallying strongly now. Because it is not doing that (yet), the new cycle could be turning very bearish or this is an older cycle still moving down to its final bottom. This ambiguity will keep us on the sidelines of crude for now.
Although the cycle labeling of gold and silver is still unclear, it is starting to look like both metals may have started new cycles recently and are not completing older cycles. That could mean both metals are bullish. But even if that's the case, prices have been rising, and we are now entering our April 20 - 29 reversal zone for all markets, and we are close to another reversal zone specifically for precious metals coming up this Thursday (April 22 - 30). If prices rally strongly now, they could be turned back down quickly from a top in one of these time frames. We will therefore remain on the sidelines until it is a little more clear whether or not new cycles have started.
I haven't written much about the U.S. Dollar Index for awhile, but the greenback may be at a turning point right now, so it's probably a good time to post an update. The U.S. Dollar Index is most likely approaching the end of a long-term 16.5 year cycle that began in March 2008 around 70.69 and likely peaked with the "double-top" highs of 103.82 in Jan. 2017 and 102.99 in March 2020. If this is valid, the dollar should now be headed down to its final cycle bottom which should happen around 2024 - 2025. There are several possible targets for this bottom which could be around 87, 77, or even as low as 53. We are not that far from 87 now, so my guess is that the bottom will be lower.
One interesting aspect of this 16.5 year cycle in the U.S. Dollar Index is that it frequently correlates to political party cycles in the U.S. presidential elections. More specifically, since 1984 the crest of the 16.5 year cycle has always corresponded to a Republican president while the trough has always corresponded to a Democrat president. This means the dollar usually rises (from a trough) after the election of a Democrat, and falls (from a peak) following the election of a Republican. (Please note that this is not a political discussion and is not meant to criticize any party. I am simply describing observable cycle patterns.)
What's especially interesting this year is that the election of Joe Biden (a Democrat) seems to be breaking the pattern. Donald Trump (a Republican) took the presidential office in 2017, seemingly at the peak of the 16.5 year cycle. For the pattern to be valid, a Republican SHOULD have been elected in 2020 to correlate with the dollar falling to its final cycle low in 2024 - 2025. The election of President Biden, however, suggests that the U.S. dollar will now rally over the next four years. This contradicts the idea that the greenback will sink lower and bottom in 2024 - 2025.
This current contradiction between the cycle of political parties and the normal 16.5 year cycle in the dollar may upset the prediction of a 16.5 year cycle bottom in 2024- 2025. If the policies of President Biden's administration drive the dollar up, we could see the 16.5 year cycle be erased (or restructured) and a new high (instead of a low) around 2024 - 2025, possibly in the 108 -116 range.
We may be at a crossroads right now as to which pattern (bearish 16.5 year cycle or bullish political party cycle) will unfold in the U.S. Dollar Index. This index is currently testing the 91 level. A definitive and sustained break below 90 would probably validate the idea of the greenback bottoming in 2024 - 2025. If that doesn't happen, we should watch for a rally to test and possibly exceed the 103 -104 level over the next several years.
In last week's blog I posted:
"...I don't think the cycle will turn bearish as long as the DOW stays above 32,000 (and especially 30,000) and the S&P 500 remains above 3,800. We also don't want to see the NASDAQ fall below 12,397 as that would be a bearish sign. I am still anticipating a significant top in these indices in our next reversal zone coming up April 20 - 29 which could turn out to be an ideal spot to sell this market short."
We are now in the first day of that April 20 - 29 reversal zone, and it looks like all three broad stock market indices (DOW, S&P 500, NASDAQ) are moving down from last Friday's highs. Those highs from Friday were new weekly highs for all three indices, but were only new all-time highs for the DOW and S&P 500. The NASDAQ has yet to break above its all-time high from February 16 (14,167), and thus it still has strong intermarket bearish divergence to the other two indices. That could mean that last week's highs were a significant top, and a significant correction could be starting now...BUT (yes, there is usually a "but" in our analyses)...last week's tops were just outside our reversal zone, and we prefer to see significant tops and bottoms closer to the center of our reversal time frames. If this turns out to be just a small corrective dip, there is plenty of time for these indices to push a bit higher into this reversal zone and form another top. We are still well above those support areas (32,000 in the DOW, 3,800 in the S&P 500, and 12,397 in the NASDAQ). I am not going to get TOO concerned about this correction until we are close to breaking those levels. We will stay on the sidelines for now and see if this "dip" turns more serious over the next several days. If it doesn't, we will watch for a high to sell short this week or next.
Crude oil did not make a significant low or high in its last reversal zone (April 8 - 16), but it is now making a new weekly high as we enter the April 20 - 29 reversal zone (applicable to all markets). It is still possible crude started a new medium-term cycle with its low of $57.25 on March 23 (May contract chart). If so, it should be rallying strongly now. Because it is not doing that (yet), the new cycle could be turning very bearish or this is an older cycle still moving down to its final bottom. This ambiguity will keep us on the sidelines of crude for now.
Although the cycle labeling of gold and silver is still unclear, it is starting to look like both metals may have started new cycles recently and are not completing older cycles. That could mean both metals are bullish. But even if that's the case, prices have been rising, and we are now entering our April 20 - 29 reversal zone for all markets, and we are close to another reversal zone specifically for precious metals coming up this Thursday (April 22 - 30). If prices rally strongly now, they could be turned back down quickly from a top in one of these time frames. We will therefore remain on the sidelines until it is a little more clear whether or not new cycles have started.
I haven't written much about the U.S. Dollar Index for awhile, but the greenback may be at a turning point right now, so it's probably a good time to post an update. The U.S. Dollar Index is most likely approaching the end of a long-term 16.5 year cycle that began in March 2008 around 70.69 and likely peaked with the "double-top" highs of 103.82 in Jan. 2017 and 102.99 in March 2020. If this is valid, the dollar should now be headed down to its final cycle bottom which should happen around 2024 - 2025. There are several possible targets for this bottom which could be around 87, 77, or even as low as 53. We are not that far from 87 now, so my guess is that the bottom will be lower.
One interesting aspect of this 16.5 year cycle in the U.S. Dollar Index is that it frequently correlates to political party cycles in the U.S. presidential elections. More specifically, since 1984 the crest of the 16.5 year cycle has always corresponded to a Republican president while the trough has always corresponded to a Democrat president. This means the dollar usually rises (from a trough) after the election of a Democrat, and falls (from a peak) following the election of a Republican. (Please note that this is not a political discussion and is not meant to criticize any party. I am simply describing observable cycle patterns.)
What's especially interesting this year is that the election of Joe Biden (a Democrat) seems to be breaking the pattern. Donald Trump (a Republican) took the presidential office in 2017, seemingly at the peak of the 16.5 year cycle. For the pattern to be valid, a Republican SHOULD have been elected in 2020 to correlate with the dollar falling to its final cycle low in 2024 - 2025. The election of President Biden, however, suggests that the U.S. dollar will now rally over the next four years. This contradicts the idea that the greenback will sink lower and bottom in 2024 - 2025.
This current contradiction between the cycle of political parties and the normal 16.5 year cycle in the dollar may upset the prediction of a 16.5 year cycle bottom in 2024- 2025. If the policies of President Biden's administration drive the dollar up, we could see the 16.5 year cycle be erased (or restructured) and a new high (instead of a low) around 2024 - 2025, possibly in the 108 -116 range.
We may be at a crossroads right now as to which pattern (bearish 16.5 year cycle or bullish political party cycle) will unfold in the U.S. Dollar Index. This index is currently testing the 91 level. A definitive and sustained break below 90 would probably validate the idea of the greenback bottoming in 2024 - 2025. If that doesn't happen, we should watch for a rally to test and possibly exceed the 103 -104 level over the next several years.
RSS Feed