MARKETS UPDATE (9:30 pm EDT)
In last Thursday's blog post I wrote:
"Tomorrow's jobs report could determine whether we see equities rise or fall next week. Fed officials have been making hawkish statements in the news recently that seem to be suggesting that they could raise interest rates soon, perhaps even twice before the year is over, if economic data supports it. A positive jobs report on Friday might scare investors into selling in anticipation of rate hikes."
Well, the jobs report on Friday turned out to be disappointing. This was a relief to investors, and the broad stock market rallied. It rallied again today. We are now out of last week's reversal zone. As long as the DOW, S&P 500 and NASDAQ can stay above last week's lows, we should see these markets rally to new highs into the next reversal zone that is coming up next week. That may turn out to be a good point to take profits on our long positions. If equities fall this week, however, we may see next week's reversal correspond to a bottom instead of a top. If that happens it could be a good opportunity to add to long positions or buy if not already long. It is too early to tell which scenario will unfold, but in both cases our overall strategy is to be bullish into the upcoming presidential election in November. If we do end up taking profits on our longs at new highs next week, we will look to buy again at the bottom of any correction that doesn't go too low. Still holding my long position in the broad stock market.
The weak jobs report (which makes an imminent rate hike less likely) not surprisingly weakened the U.S. Dollar Index which dipped down strongly on Friday and today took another steep plunge (closing the day at 94.84). This has given a strong boost to gold and silver prices. Gold recently made a bottom on Sept. 1 and silver made a bottom on Aug. 28. Both days were within our last reversal zone and we were anticipating a turn-up and rally in both metals. It looks like that is happening. We got long in gold on Aug. 25 but held off buying silver as it was not clear whether or not its medium-term cycle bottom was in. We can probably confirm that bottom now (Aug. 28 at $18.40) and should be looking to buy silver as the start of a new cycle is usually very bullish. The only problem is that we are now entering a strong reversal zone specifically related to precious metals (this week and into next week) so we may see a sudden pullback in prices. That could give us a second chance to buy silver which is now pushing against resistance around $20 and could start to back down. We could see some extremely volatile price moves in the precious metals this week so we need to be very careful with any trading. We don't want to see silver move back down below $18.40 and we don't want to see gold break below $1,300 (our stop loss for our long position). Holding my long position in gold but still waiting to buy silver.
In last Thursday's blog on crude oil I wrote:
"Crude oil prices dropped steeply this week and today broke below a strong support level at $44 (October contract chart). We are now out of a reversal zone for crude, but another one is coming up near the end of next week so we should wait to see if prices move lower into that time. If prices get too low (i.e. below $40) this market's trend may be turning bearish."
Crude prices have been rising from last week's low of $43 and are now above $44 again. The cycle structure of this market is suggestive of a significant bottom into the next reversal zone near the end of this week into early next week. If we get that we will look to buy (as long as prices stay above $40). Still on the sidelines of crude oil.
In last Thursday's blog post I wrote:
"Tomorrow's jobs report could determine whether we see equities rise or fall next week. Fed officials have been making hawkish statements in the news recently that seem to be suggesting that they could raise interest rates soon, perhaps even twice before the year is over, if economic data supports it. A positive jobs report on Friday might scare investors into selling in anticipation of rate hikes."
Well, the jobs report on Friday turned out to be disappointing. This was a relief to investors, and the broad stock market rallied. It rallied again today. We are now out of last week's reversal zone. As long as the DOW, S&P 500 and NASDAQ can stay above last week's lows, we should see these markets rally to new highs into the next reversal zone that is coming up next week. That may turn out to be a good point to take profits on our long positions. If equities fall this week, however, we may see next week's reversal correspond to a bottom instead of a top. If that happens it could be a good opportunity to add to long positions or buy if not already long. It is too early to tell which scenario will unfold, but in both cases our overall strategy is to be bullish into the upcoming presidential election in November. If we do end up taking profits on our longs at new highs next week, we will look to buy again at the bottom of any correction that doesn't go too low. Still holding my long position in the broad stock market.
The weak jobs report (which makes an imminent rate hike less likely) not surprisingly weakened the U.S. Dollar Index which dipped down strongly on Friday and today took another steep plunge (closing the day at 94.84). This has given a strong boost to gold and silver prices. Gold recently made a bottom on Sept. 1 and silver made a bottom on Aug. 28. Both days were within our last reversal zone and we were anticipating a turn-up and rally in both metals. It looks like that is happening. We got long in gold on Aug. 25 but held off buying silver as it was not clear whether or not its medium-term cycle bottom was in. We can probably confirm that bottom now (Aug. 28 at $18.40) and should be looking to buy silver as the start of a new cycle is usually very bullish. The only problem is that we are now entering a strong reversal zone specifically related to precious metals (this week and into next week) so we may see a sudden pullback in prices. That could give us a second chance to buy silver which is now pushing against resistance around $20 and could start to back down. We could see some extremely volatile price moves in the precious metals this week so we need to be very careful with any trading. We don't want to see silver move back down below $18.40 and we don't want to see gold break below $1,300 (our stop loss for our long position). Holding my long position in gold but still waiting to buy silver.
In last Thursday's blog on crude oil I wrote:
"Crude oil prices dropped steeply this week and today broke below a strong support level at $44 (October contract chart). We are now out of a reversal zone for crude, but another one is coming up near the end of next week so we should wait to see if prices move lower into that time. If prices get too low (i.e. below $40) this market's trend may be turning bearish."
Crude prices have been rising from last week's low of $43 and are now above $44 again. The cycle structure of this market is suggestive of a significant bottom into the next reversal zone near the end of this week into early next week. If we get that we will look to buy (as long as prices stay above $40). Still on the sidelines of crude oil.
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