MARKETS UPDATE (11:30 pm EDT)
We are out of last week's reversal zone for the broad stock market and are now entering a new one which is centered on this Friday. Both of these reversal zones are minor and not that strong, but they can still be turning points for this market. A small dip in equities followed from highs on May 9 last week, but that dip was short-lived. The DOW, S&P 500 and NASDAQ are now rising again into this new reversal point. Not only that, the S&P 500 and NASDAQ are making new all-time highs while the DOW (so far) is staying below its all-time high (21,169 on March 1). This creates an intermarket bearish divergence signal until the DOW gets above that high (it is close). It would not be unusual, therefore, to see this market take another correction from a top in this new reversal zone (especially if the DOW cannot clear that high soon). Nevertheless, it is very early in the new medium-term cycles for these three indices (they started in March-April) so it would be highly unlikely to see a serious correction right now. As long as the DOW and S&P 500 stay above the lows that started this new cycle (20,379 in the DOW and 2,322 in the S&P 500) we should see new highs at least into early summer. Holding my long position in the broad stock market with a stop loss based on the DOW closing below 21,379 and the S&P 500 closing below 2,322).
It appears that gold and silver may have formed new medium-term cycle bottoms last Tuesday (May 9th) in last week's reversal zone. Both metals have risen sharply from those lows. Prices still need to go higher, however, before we can confirm the start of a new cycle, but it is looking good so far for our long positions in both metals. This week's reversal point (Friday) could also affect the precious metals so there is still a possibility of prices turning down again and making new lows into the first week of June, but even if that happens we won't worry too much as long as gold stays above $1195 and silver above $15.65. In fact, if either gold or silver break below last week's low without the other doing so, it would be a strong bullish divergence signal (especially in the first week of June) and would be another good spot to buy. Holding my long positions in gold and silver.
In last Thursday's blog on the U.S. Dollar Index I wrote:
"The dollar's rally this week has been quite strong, but it may be backing off now as it encounters strong resistance in the 100 area. Directional momentum in this market is currently nearly 100% bearish... The dollar's strong rally was triggered by the euro's sharp selloff following Macron's election... For this reason, it may not last because the euro's post election selloff should be brief as pro-EU Macron is (theoretically, at least) good for the euro. If the dollar backs down, we should see gold and silver prices rise."
This appears to be happening as the dollar is falling strongly this week and precious metal prices surge. The U.S. Dollar Index is now making a new yearly low, and its chart is looking quite bearish. Macron's election may have saved the euro, but it is dealing a hard blow to the U.S. greenback.
I may be revising my analysis of crude oil's chart. In earlier blogs I labeled the March 22 low ($47.58 June contract chart) as the start of a new medium-term cycle in crude. It is now looking like the deeper low of May 5 at $43.76 may instead be the medium-term cycle bottom. The difference is important because if the cycle started on March 22, prices have already fallen below that point, and the general trend would be turning bearish. If we have a newer cycle starting on May 5, however, then this market could be quite bullish now. Chart analysis is currently supporting this more bullish view of crude. There was a reversal point specifically for crude last Friday and into Monday. Monday's price surge to $49.66 may be the top of the reversal so let's see how far prices come down over the next several days. If May 5 was the start of a new cycle (bullish), prices should stay above $44, and we may want to buy the bottom of this correction. Still out of crude oil.
We are out of last week's reversal zone for the broad stock market and are now entering a new one which is centered on this Friday. Both of these reversal zones are minor and not that strong, but they can still be turning points for this market. A small dip in equities followed from highs on May 9 last week, but that dip was short-lived. The DOW, S&P 500 and NASDAQ are now rising again into this new reversal point. Not only that, the S&P 500 and NASDAQ are making new all-time highs while the DOW (so far) is staying below its all-time high (21,169 on March 1). This creates an intermarket bearish divergence signal until the DOW gets above that high (it is close). It would not be unusual, therefore, to see this market take another correction from a top in this new reversal zone (especially if the DOW cannot clear that high soon). Nevertheless, it is very early in the new medium-term cycles for these three indices (they started in March-April) so it would be highly unlikely to see a serious correction right now. As long as the DOW and S&P 500 stay above the lows that started this new cycle (20,379 in the DOW and 2,322 in the S&P 500) we should see new highs at least into early summer. Holding my long position in the broad stock market with a stop loss based on the DOW closing below 21,379 and the S&P 500 closing below 2,322).
It appears that gold and silver may have formed new medium-term cycle bottoms last Tuesday (May 9th) in last week's reversal zone. Both metals have risen sharply from those lows. Prices still need to go higher, however, before we can confirm the start of a new cycle, but it is looking good so far for our long positions in both metals. This week's reversal point (Friday) could also affect the precious metals so there is still a possibility of prices turning down again and making new lows into the first week of June, but even if that happens we won't worry too much as long as gold stays above $1195 and silver above $15.65. In fact, if either gold or silver break below last week's low without the other doing so, it would be a strong bullish divergence signal (especially in the first week of June) and would be another good spot to buy. Holding my long positions in gold and silver.
In last Thursday's blog on the U.S. Dollar Index I wrote:
"The dollar's rally this week has been quite strong, but it may be backing off now as it encounters strong resistance in the 100 area. Directional momentum in this market is currently nearly 100% bearish... The dollar's strong rally was triggered by the euro's sharp selloff following Macron's election... For this reason, it may not last because the euro's post election selloff should be brief as pro-EU Macron is (theoretically, at least) good for the euro. If the dollar backs down, we should see gold and silver prices rise."
This appears to be happening as the dollar is falling strongly this week and precious metal prices surge. The U.S. Dollar Index is now making a new yearly low, and its chart is looking quite bearish. Macron's election may have saved the euro, but it is dealing a hard blow to the U.S. greenback.
I may be revising my analysis of crude oil's chart. In earlier blogs I labeled the March 22 low ($47.58 June contract chart) as the start of a new medium-term cycle in crude. It is now looking like the deeper low of May 5 at $43.76 may instead be the medium-term cycle bottom. The difference is important because if the cycle started on March 22, prices have already fallen below that point, and the general trend would be turning bearish. If we have a newer cycle starting on May 5, however, then this market could be quite bullish now. Chart analysis is currently supporting this more bullish view of crude. There was a reversal point specifically for crude last Friday and into Monday. Monday's price surge to $49.66 may be the top of the reversal so let's see how far prices come down over the next several days. If May 5 was the start of a new cycle (bullish), prices should stay above $44, and we may want to buy the bottom of this correction. Still out of crude oil.
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