UPDATE ON THE BROAD STOCK MARKET and PRECIOUS METALS (11:30 pm EST)
Despite the turmoil and uncertainty around the presidential election, the broad stock market seems to be shrugging it all off and is energetically rallying to new heights. Wall Street may be taking its cues from the Democrat party and the mainstream media which is celebrating the projected victory of Joe Biden despite the fact that the vote counting is not over and several lawsuits are pending from the Trump administration claiming voter fraud. Curiously, Democrats, who were highly critical of an accelerated or "rushed" vaccine under Trump, are now praising the same "sooner than later" vaccine under the predicted Biden administration. The news of an imminent vaccine in the midst of the current "second wave" of COVID-19 cases is certainly contributing to the current rally in equity markets.
As I stated in my last blog, the DOW and S&P 500 most likely started new medium-term cycles on Oct. 30. From their lows on that date, both indices rallied strongly into our wide reversal zone (Nov. 5 - 19). Both indices also made corrective dips from peaks on Nov. 9 and Nov. 16 which we had identified as "pivot points" for possible reversals (see my blog post on Nov. 4). Those dips were not deep, which indicates how bullish this market is right now. Today's strong rally brought the DOW into record territory (above 30,000 for the first time), but the S&P 500 and NASDAQ did not make new highs (yet) so we already have a case of intermarket bearish divergence. We also entered a new reversal zone today (Nov. 24 - Dec. 1) which means we should be looking for another top in this time frame. Because. this is a holiday week (Thanksgiving in the U.S. on Thursday), I think there's a good chance the S&P 500 and NASDAQ will make new highs (equities are usually bullish into holidays), and we may have to look for another bearish divergence signal early next week. We want to watch for a significant sub-cycle correction (which we didn't get from those Nov. 9 and Nov. 16 highs) and a low which could be a good buying opportunity (assuming the market stays bullish). We will remain on the sidelines for now.
In last Friday's blog I wrote:
"The NASDAQ 100 (E-mini, Dec. contract chart) already had its first significant sub-cycle correction with its 10,942 low on Nov. 2. It could come down for another low this week or next to around 11,350. If it does, that may be a good spot to buy. But if this index pushes higher today (Friday) or next week, it could challenge and exceed last week's high before giving us another corrective dip and possible buying opportunity. What we really need to see soon, however, is a new all-time high in the NASDAQ 100 (above 12,449) to confirm that this market is still bullish and worth buying into. "
OK. This index did not come down to our 11,350 target. It is rallying, but so far it is still below its Nov. 9 high (12,409) as well as its all-time high (12,449 on Sept. 2). As with the other two broad stock market indices, we will wait for a more significant correction for a possible spot to buy. We still need that 12,449 level to be broken to confirm that this market is bullish. We are on the sidelines of this index.
In my last post on the precious metals (Nov. 12) I wrote:
"It does look like we can label the medium-term cycles in both metals as having started with their lows on Sept. 24 ($1849 in gold and $21.75 in silver).... If these cycles are going to be bearish [then] prices will start to break below those Sept. 24 lows, and the trend will be down for many more weeks."
Gold has fallen below its Sept. 24 low which means gold's cycle has turned bearish. Silver, however, is still above its Sept. 24 low and could still be bullish. We thus have a bullish divergence signal as we enter our new reversal zone (Nov. 24 - Dec. 1). This means we should be watching for some sort of bottom this week or early next week. Even if silver does break below its Sept. 24 low ($21.75), a bottom and subsequent reversal back up is possible in this time frame. If both metals turn bearish, we may switch our trading strategy from buying to selling short. We are staying on the sidelines of this market for now.
Despite the turmoil and uncertainty around the presidential election, the broad stock market seems to be shrugging it all off and is energetically rallying to new heights. Wall Street may be taking its cues from the Democrat party and the mainstream media which is celebrating the projected victory of Joe Biden despite the fact that the vote counting is not over and several lawsuits are pending from the Trump administration claiming voter fraud. Curiously, Democrats, who were highly critical of an accelerated or "rushed" vaccine under Trump, are now praising the same "sooner than later" vaccine under the predicted Biden administration. The news of an imminent vaccine in the midst of the current "second wave" of COVID-19 cases is certainly contributing to the current rally in equity markets.
As I stated in my last blog, the DOW and S&P 500 most likely started new medium-term cycles on Oct. 30. From their lows on that date, both indices rallied strongly into our wide reversal zone (Nov. 5 - 19). Both indices also made corrective dips from peaks on Nov. 9 and Nov. 16 which we had identified as "pivot points" for possible reversals (see my blog post on Nov. 4). Those dips were not deep, which indicates how bullish this market is right now. Today's strong rally brought the DOW into record territory (above 30,000 for the first time), but the S&P 500 and NASDAQ did not make new highs (yet) so we already have a case of intermarket bearish divergence. We also entered a new reversal zone today (Nov. 24 - Dec. 1) which means we should be looking for another top in this time frame. Because. this is a holiday week (Thanksgiving in the U.S. on Thursday), I think there's a good chance the S&P 500 and NASDAQ will make new highs (equities are usually bullish into holidays), and we may have to look for another bearish divergence signal early next week. We want to watch for a significant sub-cycle correction (which we didn't get from those Nov. 9 and Nov. 16 highs) and a low which could be a good buying opportunity (assuming the market stays bullish). We will remain on the sidelines for now.
In last Friday's blog I wrote:
"The NASDAQ 100 (E-mini, Dec. contract chart) already had its first significant sub-cycle correction with its 10,942 low on Nov. 2. It could come down for another low this week or next to around 11,350. If it does, that may be a good spot to buy. But if this index pushes higher today (Friday) or next week, it could challenge and exceed last week's high before giving us another corrective dip and possible buying opportunity. What we really need to see soon, however, is a new all-time high in the NASDAQ 100 (above 12,449) to confirm that this market is still bullish and worth buying into. "
OK. This index did not come down to our 11,350 target. It is rallying, but so far it is still below its Nov. 9 high (12,409) as well as its all-time high (12,449 on Sept. 2). As with the other two broad stock market indices, we will wait for a more significant correction for a possible spot to buy. We still need that 12,449 level to be broken to confirm that this market is bullish. We are on the sidelines of this index.
In my last post on the precious metals (Nov. 12) I wrote:
"It does look like we can label the medium-term cycles in both metals as having started with their lows on Sept. 24 ($1849 in gold and $21.75 in silver).... If these cycles are going to be bearish [then] prices will start to break below those Sept. 24 lows, and the trend will be down for many more weeks."
Gold has fallen below its Sept. 24 low which means gold's cycle has turned bearish. Silver, however, is still above its Sept. 24 low and could still be bullish. We thus have a bullish divergence signal as we enter our new reversal zone (Nov. 24 - Dec. 1). This means we should be watching for some sort of bottom this week or early next week. Even if silver does break below its Sept. 24 low ($21.75), a bottom and subsequent reversal back up is possible in this time frame. If both metals turn bearish, we may switch our trading strategy from buying to selling short. We are staying on the sidelines of this market for now.
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