I was intending to wait until the end of the week before making any major trading decisions as Thursday-Friday is the ideal timing point in this week's reversal zone for markets to turn. The FOMC meeting that started today and ends tomorrow, however, has me concerned that we could see an early shift in the markets as they react to possible changes in the Fed's policy on QE tapering. Recent negative jobs data and a steeply falling stock market may give the Fed an excuse to backpedal on the tapering plan it announced in December and at least temporarily continue its regular bond purchasing. Such a decision could excite the stock market and reverse the current downturn. Even if the Fed decides to move forward with its tapering program, the markets may turn up soon after the announcement anyway as last week's steep fall has more than likely already taken into account taper fears. The results of the FOMC meeting will be announced tomorrow afternoon.
We have good profits in our short positions in the broad stock market since we entered them at the start of the downturn on Jan.17. While the market could fall further, it has reached my original target zone and cycle patterns indicate that we are at or near the end of this market's current cycle. It therefore looks like a good time to cover these shorts and take profits. If the broad stock market is in a more severe correction mode, this will become obvious when directional momentum switches to 100% bearish (it is currently mixed bearish and bullish), and we could re-establish our short positions if that happens. I am taking profits and unloading (covering) my short positions in the broad stock market today.
Gold and silver are starting to look short-term bearish. Gold has encountered some resistance at the $1280 price level and looks like it could react back down short-term. Silver looks even more bearish (short-term) at the moment.
I have been holding a long position in gold but have been avoiding buying silver as it seems more vulnerable to a deeper short-term correction. We may be seeing this correction now. If the Fed does decide to slow down tapering at the FOMC meeting, this could temporarily push down precious metal prices. It makes sense, therefore, to sell our gold positions now and wait to buy back later, possibly at a better price. Gold prices today are just above the point where we bought them on Jan.14, so we can sell them here with no loss. Selling all gold long positions today.
As mentioned above, the FOMC meeting concludes tomorrow afternoon so markets will likely not react until then (if they do react). Any traders who miss this alert today will more than likely have time tomorrow morning to make any appropriate trades before the Fed speaks.