The DOW and S&P 500 rallied a bit today but then each closed in the lower part of their day's range. This is bearish behavior. Today the NASDAQ made another new weekly high while the DOW and S&P 500 remained below their highs from last week so these indices continue their intermarket bearish divergence. We sold short yesterday in expectation of a top and reversal by the end of the week. We will hold this (short) position unless we see both the DOW and S&P make new highs by the end of the week.
Both gold and silver made new weekly highs today so we are not going to get any intermarket bearish divergence signal this week. We are still, however, in a strong reversal zone for the precious metals through Friday. A top followed by a reversal down is still possible, especially as gold is approaching a strong resistance zone around $1,200 and silver is nearing resistance around $17. This market is very tricky to call right now. Directional momentum in both metals is mixed bullish and bearish. Some technical studies are showing the possibility of a breakout now followed by a strong rally, but others seem to indicate an imminent correction to new lows that could approach or even exceed the lows from late 2015. Thursday could be a pivot point for this market so I am going to wait and see if gold and silver prices can edge closer to those resistance lines ($1,200 and $17) before considering any short positions. Still on the sidelines of gold and silver.
Another argument for bearish gold and silver is coming from the chart of the U.S. Dollar Index. The dollar seems to be stabilizing at a support level around 101, and directional momentum in its chart is nearly 100% bullish. Furthermore, the recent jobs report from the U.S. Department of Labor did not present any major threat to rising interest rates which favor the dollar. All of this suggests that the dollar could now resume its rally and push gold and silver prices back down.
Crude oil prices fell strongly yesterday and today and are now approaching $50. There is a support level for crude around $49 - $50. If we get there before the end of the week, it could be a good buy spot. We need to be careful, however, because today directional momentum in crude charts switched from nearly 100% bullish to mixed bullish and bearish. That means crude's bullish trend may be reversing, and prices could break below that $49 - $50 support zone. On the sidelines of crude oil for now.