We have been watching for a significant sub-cycle correction in all three broad stock market indices (DOW, S&P 500, NASDAQ), but so far that hasn't happened. Yesterday was the last day of our reversal zone (Dec.3 - 14). The DOW made a new weekly and all-time high yesterday, but the other two indices did not (although the NASDAQ came very close to a new high today). That gives us a bearish divergence signal in a reversal zone. If that was a top, we could see a significant correction start now. But if the S&P 500 and NASDAQ push to new highs this week, that bearish signal will be negated, and we may have to look for a top in our next reversal zone coming up Dec. 22 - 30. This current medium-term cycle seems bullish, so I wouldn't be surprised to see more rallying into next week. Our targets for a correction are still around 29,000 and 3,545 for the DOW and S&P 500, respectively, and around 11,500 for the NASDAQ 100 (E-Mini, March contract chart). However, we may raise those targets if this market rallies strongly into next week. We are still on the sidelines of the broad stock market.
In last Tuesday's blog on gold and silver I wrote:
"We've established that gold's medium-term cycle has turned bearish. That means that the current rally should not exceed the recent high of $1965 (Nov. 9) before turning down again and falling to a final bottom below $1766 four to ten weeks from now. But silver's medium-term cycle COULD be bullish. If that's the case, silver's current rally could easily exceed its Nov. 9 high of $25.96 before its final corrective drop to its cycle bottom (two to ten weeks from now). Silver exceeding its Nov. 9 high and gold staying below its Nov. 9 high would be an ideal bearish divergence signal and could be a good opportunity to sell the metals short, if it happens."
Well, both metals are still well bellow their Nov. 9 highs. Last Tuesday was an isolated high in both gold and silver and was in the center of our last reversal zone. Prices corrected down a bit from there last week, but are rising again this week. If we see rallying into next week's reversal zone, we will watch for silver to break above its Nov. 9 high ($25.96) with gold staying below its Nov. 9 high ($1965) for a case of intermarket bearish divergence and a possible spot to sell short. Staying on the sidelines of both metals for now.