We are now in our new strong reversal zone for the broad stock market (and other markets) - July 30 - Aug. 10. Yesterday we got a strong bearish divergence signal as the DOW made a new all-time high (35,192) without the other two indices (S&P 500 and NASDAQ), and all three fell strongly. They seem to be recovering a bit today, however, so the directional pattern is still not clear. Cycle patterns are also a bit ambiguous at the moment. It is pretty clear that the S&P 500 and DOW are new, young medium-term cycles. The NASDAQ could also be a new cycle started on July 19, but it's still possible it is an older cycle about to move down to its final cycle bottom. Let's examine these indices separately.
The young DOW and S&P 500 cycles are both due for significant sub-cycle corrections. They may have started already with yesterday's drop, but one or both indices could rally some more to form a new top in this new reversal zone and then take a significant correction. Either way, these corrections shouldn't fall below the starting points of these young cycles (33,271 in the DOW and 4,165 - or even 4,233 - in the S&P 500), and they may turn out to be good buy spots for more rallying into the summer. (If those lows are breached, however, this market could turn very bearish, and we would be looking to sell short again.)
The NASDAQ could still be ready to take a major correction down to its final cycle bottom (if it is an older cycle), but we can't be sure of that as it could also be a bullish young cycle. If the S&P 500 and NASDAQ make new all-time highs this week (they are close), it will negate the bearish divergence signal from Monday, and that would suggest the NASDAQ is a new cycle. We may consider going short again if all three indices DO NOT make new all-time highs this week, or we may do that early next week if we get another bearish divergence signal.
For now, let's stay on the sidelines of all three indices. Longer-term, we are still waiting for a final long-term cycle top in the broad stock market which could come this month or possibly next month, to be followed by a MAJOR downturn (possible crash) over the next few years of possibly 50% or more.
Gold's medium-term cycle is also ambiguous now. It looks like gold started a new cycle off its $1752 low of June 29. That would make gold bullish. But it's still possible that gold is completing an older cycle and is ready to fall to the final bottom of that cycle - below $1752. Even if gold is a new cycle (most likely), it is due for a sub-cycle correction soon. We are still holding a long position in gold. Let's stay long with a stop loss based on gold breaking below that $1752 low. We are now in a reversal zone specifically for precious metals (July 30 - Aug. 11, same as for equities), so we could see a sub-cycle bottom form this week or early next week, or we could see prices push higher to form a top in this time frame and then a corrective drop. If gold is bullish, this new cycle could eventually rally to challenge the $1900 level and maybe even the $2000 level from 2020.
Silver may have started a new medium-term cycle with last week's low of $24.49, but it could also be completing an older cycle and could soon move below $24.49 to form its final cycle bottom. If it's a new cycle, silver should be very bullish now, but this new reversal zone could put a damper on any strong rally and turn it back down. If silver makes a new low this week or early next week, it could be the final bottom in an older cycle and a good buy spot. On the other hand, if this is a new cycle, prices could rally strongly and make a new top in this same time frame and then make a sub-cycle correction that would stay above that $24.49 low. That could also be a good spot to buy. Let's stay on the sidelines of silver for now and see which pattern plays out.
As with the other markets, crude oil's cycle pattern is also not clear -yet. Crude may have started a new medium-term cycle with its July 20 low at $65.01 (September contract chart) or it could be completing an older cycle that is getting ready to fall sharply to its final cycle bottom (below $65.01). In either case, crude could still rally higher short-term. If this is a new cycle, it could rally much higher - possibly to the low $90's. Crude and the broad stock market will likely be moving in the same direction, and that direction is not clear in either market right now. Let's remain on the sidelines of crude for now.