MARKETS UPDATE (7:00 pm EDT)
Several factors could create volatile trading for many financial markets tomorrow. Of course, Wall Street continues to worry about the Greek debt crisis. On Wednesday the Greek government must decide whether or not it wants to adopt the harsh reform measures being demanded by its international creditors to qualify for new bailout money. These austerity reforms are unpopular with the Greek people, but rejecting them could lead to a collapse of the Greek economy and Greece's exit from the euro. As if that isn't enough to worry about, a report on China's second-quarter economic growth comes out tomorrow morning and threatens to reignite more fears about that country's collapsing stock market. Finally, Federal Reserve Chairwoman Janet Yellen is scheduled to speak to the House Financial Services committee concerning the central bank's current view of the economy and how it might affect the timeline for raising short-term interest rates (a subject that always makes Wall Street nervous). It is probably a good thing that we are now on the sidelines of all the markets.
Gold and silver prices may have made significant bottoms last week (gold at $1147 and silver at $14.75), but the strong bearish directional momentum in the charts of both metals now is suggestive of still lower prices. The cycle structure and timing signals in these charts allow for lower prices over the next three weeks, but the bottom of the current cycle should be in by the end of the month. The question right now is whether or not last week's lows were were early cycle bottoms. If they were, we could get a sharp rally now in both gold and silver with gold possibly rising back up to $1200 and silver to $17.50. Unfortunately, it is not clear at the moment what direction this market will take. Because of the potential for high volatility in the current trading environment, I am remaining on the sidelines of the metals for now.
The chart of the U.S. Dollar Index is also giving us mixed signals at the moment. Last week the dollar appeared to be breaking out of a downtrend, but so far its rally has not been able to break above resistance at the 97 level. Like other markets, it appears the dollar is taking its cues from the ongoing Greek debt crisis. Any negative news on this crisis (such as Greece rejecting austerity reforms on Wednesday) could weaken the euro and boost the dollar.
Crude oil prices also seem to be in the process of forming a significant bottom that could happen anytime over the next few weeks. This bottom will likely mark the end of the current medium-term cycle and the start of a new one. Even though directional momentum is mostly bearish for crude right now, a cycle bottom could be a good place to buy for at least a short-term rally back to $55 or higher. We will watch for a new low near $49 or lower this week and next. On the sidelines for now.
Several factors could create volatile trading for many financial markets tomorrow. Of course, Wall Street continues to worry about the Greek debt crisis. On Wednesday the Greek government must decide whether or not it wants to adopt the harsh reform measures being demanded by its international creditors to qualify for new bailout money. These austerity reforms are unpopular with the Greek people, but rejecting them could lead to a collapse of the Greek economy and Greece's exit from the euro. As if that isn't enough to worry about, a report on China's second-quarter economic growth comes out tomorrow morning and threatens to reignite more fears about that country's collapsing stock market. Finally, Federal Reserve Chairwoman Janet Yellen is scheduled to speak to the House Financial Services committee concerning the central bank's current view of the economy and how it might affect the timeline for raising short-term interest rates (a subject that always makes Wall Street nervous). It is probably a good thing that we are now on the sidelines of all the markets.
Gold and silver prices may have made significant bottoms last week (gold at $1147 and silver at $14.75), but the strong bearish directional momentum in the charts of both metals now is suggestive of still lower prices. The cycle structure and timing signals in these charts allow for lower prices over the next three weeks, but the bottom of the current cycle should be in by the end of the month. The question right now is whether or not last week's lows were were early cycle bottoms. If they were, we could get a sharp rally now in both gold and silver with gold possibly rising back up to $1200 and silver to $17.50. Unfortunately, it is not clear at the moment what direction this market will take. Because of the potential for high volatility in the current trading environment, I am remaining on the sidelines of the metals for now.
The chart of the U.S. Dollar Index is also giving us mixed signals at the moment. Last week the dollar appeared to be breaking out of a downtrend, but so far its rally has not been able to break above resistance at the 97 level. Like other markets, it appears the dollar is taking its cues from the ongoing Greek debt crisis. Any negative news on this crisis (such as Greece rejecting austerity reforms on Wednesday) could weaken the euro and boost the dollar.
Crude oil prices also seem to be in the process of forming a significant bottom that could happen anytime over the next few weeks. This bottom will likely mark the end of the current medium-term cycle and the start of a new one. Even though directional momentum is mostly bearish for crude right now, a cycle bottom could be a good place to buy for at least a short-term rally back to $55 or higher. We will watch for a new low near $49 or lower this week and next. On the sidelines for now.
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