Well, the debt-ceiling "crisis" is over (for now), and not surprisingly the massive relief rally from Friday seems to have lost some of its steam. The S&P 500 and NASDAQ made slightly new weekly highs yesterday (the DOW did not - bearish divergence), and all three indices are correcting down a bit today. Yesterday was a potential "pivot point" for equity markets, but for the rest of the week this market is free of any reversal zones or pivot points.
Both the DOW and S&P 500 have been rallying up strongly from significant sub-cycle bottoms made on May 24 and 25, but we are now in the second half of their medium-term cycles. This means we should be anticipating a final top (if it hasn't happened already) and correction to the final (medium-term) cycle bottom sometime over the next 2- 11 weeks. The S&P 500 medium-term cycle made a new cycle high yesterday, but the DOW is still below its current medium-term cycle high from May 1 (34,258) - another bearish divergence signal. Yesterday's "pivot point" could be a signal for the market to turn down now, but equities seem reluctant to sell-off today. The DOW is testing support at its 45-day moving average, and the S&P 500 and NASDAQ are well above their 45-day moving averages (all three are above their 15-day moving averages). If this market can push higher over the next several days, it will not encounter much resistance in terms of reversal zones until the end of this month. There is a rather weak reversal zone coming up next week (June 13 - 22), but a much stronger one June 26 - July 5.
We anticipate that strong reversal zone (June 26 - July 5) to be a significant cycle high or low, but right now we can't say which it will be. If the DOW can manage to break above its recent May 1 high (34,258), we could see a final top to these medium-term cycles in that strong reversal zone. On the other hand, if the market falls from here, we could see a cycle bottom into the Fourth of July holiday. Right now I'm favoring a rally into that holiday. We will remain on the sidelines of the broad stock market for now.
Today gold is edging back above its 15-day moving average and silver is staying above its 15-day moving average, but neither one is showing any enthusiasm to rally. Both medium-term cycles are getting a bit "long in the tooth" and need to start rallying soon if they are to remain bullish before turning down to complete their final cycle bottoms. We are entering a new reversal zone specifically for the precious metals tomorrow (June 7 - 19), so we should be looking for a significant high or low in this time frame. As with the broad stock market, however, it's not clear which it will be. If prices rally into next week, we will look to take profits in our current long positions. If prices fall now, we will look to bail out with minimal loss. If gold drops below last week's low ($1932.85) and silver remains above its recent low ($22.70 on May 25), it could give us a strong bullish divergence signal in this new reversal zone. We are maintaining our long positions in both metals for now.