MARKETS UPDATE (9:00 pm EST)
We are still looking for a major sub-cycle bottom in the broad stock market that is due this week or next. Last Thursday's lows in the DOW and S&P 500 (32,573 and 3,764, respectively) may have been it as both those lows were well below the 45-day moving average. A rally now would not be out of the question because we still have another holiday coming up this week-end - New Year's Day, and equity markets traditionally like to rally into holidays. But we didn't get a "Santa Claus" rally this year, and today's trading - the first day after the Christmas holiday - is not looking very bullish. We could still see these indices push lower for that sub-cycle bottom this week or next. If we see one or two (but not all three) of our indices (DOW, S&P 500, NASDAQ) make a new weekly low this week or next, we will have a bullish divergence signal, and that could be a good spot to buy for a short-term and possibly steep rally into the new year. We will watch for that. We remain on the sidelines for now.
Gold is now in the 8th week of its current medium-term cycle that started with the low of $1617 on Nov. 3. Prices jumped to a new weekly (and monthly) high today ($1829) before backing off and closing close to the bottom of the day's range (bearish behavior). A sub-cycle correction was due last week and was probably bypassed, but another deeper one is due anytime now over the next three weeks. We could see prices dip into the next reversal zone specifically for gold and silver coming up Jan. 5 - 13. That "dip" should be at least 40% of the rise from the $1617 start of the cycle. If today is the high ($1829), then we want to see prices drop to $1744 or lower to the sub-cycle bottom. If prices push to new highs this week or next, we will have to adjust our target for any sub-cycle correction. Let's stay on the sidelines of gold as we wait for a deeper price correction and a possible spot to buy.
Unlike gold, silver did not make a new weekly high today, and that gives us a bearish divergence signal (until silver can break above last week's high of $24.27). This week begins the 17th week of silver's current medium-term cycle. That means the cycle is old and the final bottom is due anytime now over the next four weeks. But we still don't know if the final top has been reached yet. Last week I wrote:
"The question now is whether or not silver can shoot up to $30 before correcting down again to that final bottom which is due anytime over the next 5 weeks. It's possible, but that would be a very steep rise over a short period of time. I'm going to be cautious here and bet on another corrective drop to the final medium-term cycle bottom before hitting $30. That would give us a safer potential spot to buy."
All of this is still valid, and today's bearish divergence signal could mean that the a drop to the final low has started. A good target for the final bottom could be around $21 - $22. If silver does break to new highs, we may have to adjust that target upwards. Let's stay on the sidelines of silver for now.
In last Thursday's blog on crude oil I wrote:
"...prices are rising up to a strong resistance line at $80 (Feb. contract chart). A top and reversal back down could be imminent. Again, my preference here would be to see a reversal and prices move below $70 over the next few weeks. But if crude "breaks out" above $80 and can exceed the $83.27 high of Dec. 1, we will have to consider the possibility that a new medium-term cycle cycle started with that $70.31 low on Dec. 9. That could be very bullish because it would also be the start of a longer-term 3 year cycle."
Well, today crude prices pushed a bit above $80, but then closed slightly below. Our "lines in the sand" here are $80 and then $83.27. I would still like to see prices drop back to $70 or below over the next three weeks for a final cycle bottom to buy. But if crude can first break and close above those lines, we may have to go with the idea that a new bullish cycle started on Dec. 9. Let's stay on the sidelines until this market decides in which direction it wants to go
We are still looking for a major sub-cycle bottom in the broad stock market that is due this week or next. Last Thursday's lows in the DOW and S&P 500 (32,573 and 3,764, respectively) may have been it as both those lows were well below the 45-day moving average. A rally now would not be out of the question because we still have another holiday coming up this week-end - New Year's Day, and equity markets traditionally like to rally into holidays. But we didn't get a "Santa Claus" rally this year, and today's trading - the first day after the Christmas holiday - is not looking very bullish. We could still see these indices push lower for that sub-cycle bottom this week or next. If we see one or two (but not all three) of our indices (DOW, S&P 500, NASDAQ) make a new weekly low this week or next, we will have a bullish divergence signal, and that could be a good spot to buy for a short-term and possibly steep rally into the new year. We will watch for that. We remain on the sidelines for now.
Gold is now in the 8th week of its current medium-term cycle that started with the low of $1617 on Nov. 3. Prices jumped to a new weekly (and monthly) high today ($1829) before backing off and closing close to the bottom of the day's range (bearish behavior). A sub-cycle correction was due last week and was probably bypassed, but another deeper one is due anytime now over the next three weeks. We could see prices dip into the next reversal zone specifically for gold and silver coming up Jan. 5 - 13. That "dip" should be at least 40% of the rise from the $1617 start of the cycle. If today is the high ($1829), then we want to see prices drop to $1744 or lower to the sub-cycle bottom. If prices push to new highs this week or next, we will have to adjust our target for any sub-cycle correction. Let's stay on the sidelines of gold as we wait for a deeper price correction and a possible spot to buy.
Unlike gold, silver did not make a new weekly high today, and that gives us a bearish divergence signal (until silver can break above last week's high of $24.27). This week begins the 17th week of silver's current medium-term cycle. That means the cycle is old and the final bottom is due anytime now over the next four weeks. But we still don't know if the final top has been reached yet. Last week I wrote:
"The question now is whether or not silver can shoot up to $30 before correcting down again to that final bottom which is due anytime over the next 5 weeks. It's possible, but that would be a very steep rise over a short period of time. I'm going to be cautious here and bet on another corrective drop to the final medium-term cycle bottom before hitting $30. That would give us a safer potential spot to buy."
All of this is still valid, and today's bearish divergence signal could mean that the a drop to the final low has started. A good target for the final bottom could be around $21 - $22. If silver does break to new highs, we may have to adjust that target upwards. Let's stay on the sidelines of silver for now.
In last Thursday's blog on crude oil I wrote:
"...prices are rising up to a strong resistance line at $80 (Feb. contract chart). A top and reversal back down could be imminent. Again, my preference here would be to see a reversal and prices move below $70 over the next few weeks. But if crude "breaks out" above $80 and can exceed the $83.27 high of Dec. 1, we will have to consider the possibility that a new medium-term cycle cycle started with that $70.31 low on Dec. 9. That could be very bullish because it would also be the start of a longer-term 3 year cycle."
Well, today crude prices pushed a bit above $80, but then closed slightly below. Our "lines in the sand" here are $80 and then $83.27. I would still like to see prices drop back to $70 or below over the next three weeks for a final cycle bottom to buy. But if crude can first break and close above those lines, we may have to go with the idea that a new bullish cycle started on Dec. 9. Let's stay on the sidelines until this market decides in which direction it wants to go
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