MARKETS UPDATE and GOLD TRADE ALERT (11:00 pm EDT)
We are still waiting for the broad stock market to correct down to its final medium-term cycle bottom. Today the DOW finally made a strong move towards its 45-day moving average (which we like to see broken or at least tested at the final cycle bottom). The S&P 500 actually did break and close below its 45-day moving average today, and the NASDAQ continued to stay below its 45-day moving average for the fifth trading day in a row. So the S&P 500 and NASDAQ have satisfied our requirement for a cycle bottom, but they could still go lower. We are coming up to a very strong general reversal zone next week (Aug. 23 - Sept. 8), and this would be an excellent time for these indices to make their final medium-term cycle bottoms. Ideal targets now would be around 33,500 in the DOW and and 4,200 in the S&P 500, but they don't have to go that low. If we see these indices stabilizing anywhere near or below their 45-day moving averages inside this reversal time frame, we will assume the medium-term cycle bottom is forming and will look to take profits and cover our short positions in this market. Let's continue to hold any short positions in the DOW (and S&P 500 and NASDAQ) for now.
As long as these indices stay above their mid-March lows in this current correction, we should expect another rally to follow in a new medium-term cycle that may challenge the broad stock market's all-time highs before falling steeply into the end of this year. That steep correction may turn out to be the serious one we've been waiting for (unless this current corrective drop escalates into a serious sell-off and starts dropping towards the mid-March lows). Assuming the current correction stabilizes around the above mentioned targets for a bottom, we may look to go long again in this upcoming reversal zone for another substantial rally. We need to keep in mind, however, that unless all three indices (DOW, S&P 500 and NASDAQ) make new all-time highs, we are expecting a very serious downward correction to continue in this market (see CRASH UPDATES on the Home Page).
Gold prices were down again today and are now challenging support at $1900 and also the start of our medium-term cycle low at $1894 (on June 29). This relatively young cycle may be turning bearish, but it's also possible June 29 was not the start of a new cycle, and instead we may now be seeing the end of an expanded older cycle moving to its final bottom over the next several weeks. Either way, it's probably a good idea to sell (unload) our long position in gold now. We entered this position on June 30, and prices are now just slightly below our entrance price, so we should be able to get out with very little loss.
If gold prices can stabilize in the $1800- $1875 range within our next reversal zone for the precious metals (Aug. 22 - Sept. 4), we may relabel gold's medium-term cycle and look to buy again, but for now we are going to sell (unload) our long position in gold at tomorrow's market open.
Silver is also challenging a support line at $22.50 as well as its possible medium-term cycle start at $22.12 on June 23. There is a possibility of silver turning back up from today's new low ($22.36) or even a new low tomorrow as today and tomorrow are potential pivot points for silver. But even if that happens, prices have now gone down so close to $22.12 that a damper has been put on this cycle's previously bullish trend, so any rally from a reversal may be modest. We are on the sidelines of silver and will remain so until we see how prices move over the next few weeks. At this point we can't tell if that new reversal zone for both gold and silver will correspond to a high or a low.
Crude oil prices have been falling and are now closing below the 15-day moving average (but above the 45-day moving average). It is late in crude oil's current medium-term cycle, and that means that the final top in this cycle is due and may have happened already with last week's multi-month high at $84.89 (Sept. contract chart). After the final top, we expect a 2-5 week corrective decline to the final cycle bottom. We have a reversal zone coming up specifically for crude Aug. 17 - 25 that overlaps with a strong general reversal zone Aug. 23 - Sept. 8. There is another reversal for crude Sept. 1 -Sept. 11. So we could see a final cycle bottom in crude happen anytime between Aug. 17 and Sept. 11 with the strongest likelihood being either next week or the first week of September. If crude makes a new high next week, then it's likely prices will fall to the final cycle bottom in September's first week.
A good target for crude's final medium-term cycle bottom could be around the 45-day moving average (now at $76 and rising), but there is also strong support in the $78 - $80 area. Crude's overall trend right now is very bullish, so the final corrective low may be a little above the normal range. Timing here may be more important than price, so we will watch for a low in the above mentioned reversal zones. We will look to buy this low as this market seems very bullish now and prices could surge as high as $128 by the end of the year. For now, we remain on the sidelines of crude as we wait for a corrective low to buy sometime over the next three weeks.
We are still waiting for the broad stock market to correct down to its final medium-term cycle bottom. Today the DOW finally made a strong move towards its 45-day moving average (which we like to see broken or at least tested at the final cycle bottom). The S&P 500 actually did break and close below its 45-day moving average today, and the NASDAQ continued to stay below its 45-day moving average for the fifth trading day in a row. So the S&P 500 and NASDAQ have satisfied our requirement for a cycle bottom, but they could still go lower. We are coming up to a very strong general reversal zone next week (Aug. 23 - Sept. 8), and this would be an excellent time for these indices to make their final medium-term cycle bottoms. Ideal targets now would be around 33,500 in the DOW and and 4,200 in the S&P 500, but they don't have to go that low. If we see these indices stabilizing anywhere near or below their 45-day moving averages inside this reversal time frame, we will assume the medium-term cycle bottom is forming and will look to take profits and cover our short positions in this market. Let's continue to hold any short positions in the DOW (and S&P 500 and NASDAQ) for now.
As long as these indices stay above their mid-March lows in this current correction, we should expect another rally to follow in a new medium-term cycle that may challenge the broad stock market's all-time highs before falling steeply into the end of this year. That steep correction may turn out to be the serious one we've been waiting for (unless this current corrective drop escalates into a serious sell-off and starts dropping towards the mid-March lows). Assuming the current correction stabilizes around the above mentioned targets for a bottom, we may look to go long again in this upcoming reversal zone for another substantial rally. We need to keep in mind, however, that unless all three indices (DOW, S&P 500 and NASDAQ) make new all-time highs, we are expecting a very serious downward correction to continue in this market (see CRASH UPDATES on the Home Page).
Gold prices were down again today and are now challenging support at $1900 and also the start of our medium-term cycle low at $1894 (on June 29). This relatively young cycle may be turning bearish, but it's also possible June 29 was not the start of a new cycle, and instead we may now be seeing the end of an expanded older cycle moving to its final bottom over the next several weeks. Either way, it's probably a good idea to sell (unload) our long position in gold now. We entered this position on June 30, and prices are now just slightly below our entrance price, so we should be able to get out with very little loss.
If gold prices can stabilize in the $1800- $1875 range within our next reversal zone for the precious metals (Aug. 22 - Sept. 4), we may relabel gold's medium-term cycle and look to buy again, but for now we are going to sell (unload) our long position in gold at tomorrow's market open.
Silver is also challenging a support line at $22.50 as well as its possible medium-term cycle start at $22.12 on June 23. There is a possibility of silver turning back up from today's new low ($22.36) or even a new low tomorrow as today and tomorrow are potential pivot points for silver. But even if that happens, prices have now gone down so close to $22.12 that a damper has been put on this cycle's previously bullish trend, so any rally from a reversal may be modest. We are on the sidelines of silver and will remain so until we see how prices move over the next few weeks. At this point we can't tell if that new reversal zone for both gold and silver will correspond to a high or a low.
Crude oil prices have been falling and are now closing below the 15-day moving average (but above the 45-day moving average). It is late in crude oil's current medium-term cycle, and that means that the final top in this cycle is due and may have happened already with last week's multi-month high at $84.89 (Sept. contract chart). After the final top, we expect a 2-5 week corrective decline to the final cycle bottom. We have a reversal zone coming up specifically for crude Aug. 17 - 25 that overlaps with a strong general reversal zone Aug. 23 - Sept. 8. There is another reversal for crude Sept. 1 -Sept. 11. So we could see a final cycle bottom in crude happen anytime between Aug. 17 and Sept. 11 with the strongest likelihood being either next week or the first week of September. If crude makes a new high next week, then it's likely prices will fall to the final cycle bottom in September's first week.
A good target for crude's final medium-term cycle bottom could be around the 45-day moving average (now at $76 and rising), but there is also strong support in the $78 - $80 area. Crude's overall trend right now is very bullish, so the final corrective low may be a little above the normal range. Timing here may be more important than price, so we will watch for a low in the above mentioned reversal zones. We will look to buy this low as this market seems very bullish now and prices could surge as high as $128 by the end of the year. For now, we remain on the sidelines of crude as we wait for a corrective low to buy sometime over the next three weeks.
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