MARKETS UPDATE (10:30 pm EDT)
Despite all the political and economic turmoil swirling around us now, the broad stock market remains very bullish. It is late in some longer-term cycles in this market, which means a sharp correction could start at any time; however, the shorter-term picture looks quite bullish. This suggests some strong rallying - possibly even a parabolic "blow-off" - before any major correction gets underway. We need to be careful and especially nimble with any trades made now.
There are several possible labelings for the medium-term cycles in our major indices (DOW, S&P 500, NASDAQ). It is possible the DOW started a new medium-term cycle with its low of 44,948 on Sept. 2. If that's the case, it could be quite bullish now. Tomorrow's FOMC meeting will almost certainly conclude with an announcement of rate cuts from the Federal Reserve, and that will likely trigger cheering (and market rallying) on Wall Street, which supports this idea of a new cycle. But the current cycle could also be an older one ready to take its final correction down.
Unlike the DOW, the S&P 500 and NASDAQ are both likely older cycles ready for their final downward correction. This week, they are both making new all-time highs without the DOW, and that gives us a new case of intermarket bearish divergence. We will have to see how the Fed's rhetoric tomorrow afternoon affects the market. A strong rally could negate this bearish divergence signal. Even if the DOW has started a new medium-term cycle, we would probably want to wait for the first significant sub-cycle correction before considering a long position. If these indices are older cycles, then we will soon get even better buying opportunities with deeper corrective lows. For now, we remain on the sidelines of the broad stock market.
Like the broad stock market, gold is looking short-term bullish. Nevertheless, we are also expecting a longer-term steep correction of $400 - $700 by the end of the year. That means we need to be flexible and nimble with any long positions taken.
Gold could have begun a new medium-term cycle with its low on Aug. 20 at $3311. Prices have already risen steeply from there, suggesting a bullish new cycle. But the current medium-term cycle may instead be an older one ready to take its final correction down. Even if this is an older cycle, it still looks very bullish and could exhibit a parabolic surge before its final fall. If it's a new (Aug, 20) cycle, it may take a modest sub-cycle correction before surging higher. A quick drop to support in the $3600 area would suggest this is happening. In terms of trading, we will now look for a rally to resistance just under $4000. That may be a good point to sell short for a $400 - $700 correction. We are still on the sidelines of gold.
Silver prices have already turned parabolic and seem to be headed up to test the all-time high around $48 from way back in 2011. The current medium-term cycle in silver started on July 31 ($36.29), so the cycle is relatively young, and it has been very bullish. What we want to do now is wait for a significant sub-cycle corrective dip to buy for more rallying that could get up to $50. A good target for that dip would be around $40. In the meantime, we are still on the sidelines of silver.
Crude oil prices have been reluctant to rally since we entered a long position on Aug. 27. We have been assuming a new medium-term cycle began on Aug. 13 at $61.29 (Oct. contract chart). A possible double-bottom on Sept. 5 ($61.45) may be supporting that idea, and today prices broke and closed above the 15-day and 45-day moving averages (a bullish sign). Nevertheless, it's still possible that crude's medium-term cycle is an older one that is ready to move lower to its final bottom soon ($55 or lower). I am going to hold my long position in crude for now with a stop-loss based on a close below $61. There is currently a strong support line around $62.
Despite all the political and economic turmoil swirling around us now, the broad stock market remains very bullish. It is late in some longer-term cycles in this market, which means a sharp correction could start at any time; however, the shorter-term picture looks quite bullish. This suggests some strong rallying - possibly even a parabolic "blow-off" - before any major correction gets underway. We need to be careful and especially nimble with any trades made now.
There are several possible labelings for the medium-term cycles in our major indices (DOW, S&P 500, NASDAQ). It is possible the DOW started a new medium-term cycle with its low of 44,948 on Sept. 2. If that's the case, it could be quite bullish now. Tomorrow's FOMC meeting will almost certainly conclude with an announcement of rate cuts from the Federal Reserve, and that will likely trigger cheering (and market rallying) on Wall Street, which supports this idea of a new cycle. But the current cycle could also be an older one ready to take its final correction down.
Unlike the DOW, the S&P 500 and NASDAQ are both likely older cycles ready for their final downward correction. This week, they are both making new all-time highs without the DOW, and that gives us a new case of intermarket bearish divergence. We will have to see how the Fed's rhetoric tomorrow afternoon affects the market. A strong rally could negate this bearish divergence signal. Even if the DOW has started a new medium-term cycle, we would probably want to wait for the first significant sub-cycle correction before considering a long position. If these indices are older cycles, then we will soon get even better buying opportunities with deeper corrective lows. For now, we remain on the sidelines of the broad stock market.
Like the broad stock market, gold is looking short-term bullish. Nevertheless, we are also expecting a longer-term steep correction of $400 - $700 by the end of the year. That means we need to be flexible and nimble with any long positions taken.
Gold could have begun a new medium-term cycle with its low on Aug. 20 at $3311. Prices have already risen steeply from there, suggesting a bullish new cycle. But the current medium-term cycle may instead be an older one ready to take its final correction down. Even if this is an older cycle, it still looks very bullish and could exhibit a parabolic surge before its final fall. If it's a new (Aug, 20) cycle, it may take a modest sub-cycle correction before surging higher. A quick drop to support in the $3600 area would suggest this is happening. In terms of trading, we will now look for a rally to resistance just under $4000. That may be a good point to sell short for a $400 - $700 correction. We are still on the sidelines of gold.
Silver prices have already turned parabolic and seem to be headed up to test the all-time high around $48 from way back in 2011. The current medium-term cycle in silver started on July 31 ($36.29), so the cycle is relatively young, and it has been very bullish. What we want to do now is wait for a significant sub-cycle corrective dip to buy for more rallying that could get up to $50. A good target for that dip would be around $40. In the meantime, we are still on the sidelines of silver.
Crude oil prices have been reluctant to rally since we entered a long position on Aug. 27. We have been assuming a new medium-term cycle began on Aug. 13 at $61.29 (Oct. contract chart). A possible double-bottom on Sept. 5 ($61.45) may be supporting that idea, and today prices broke and closed above the 15-day and 45-day moving averages (a bullish sign). Nevertheless, it's still possible that crude's medium-term cycle is an older one that is ready to move lower to its final bottom soon ($55 or lower). I am going to hold my long position in crude for now with a stop-loss based on a close below $61. There is currently a strong support line around $62.
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