Our bearish divergence signal in the broad stock market is persisting today as the NASDAQ made a new all-time without the DOW and S&P 500. While this is suggesting a reversal down now, there are other bullish technical signals that would mitigate this idea. Let's look at each index separately.
The DOW has been falling from last week's high (35,510) into our new reversal zone (Sept. 1 - 10) and today made a new weekly low in this time frame. This actually suggests a reversal UP from here (especially since today's low is at a strong support near the 45-day moving average).
The S&P 500 is also making a new weekly low today in this reversal zone.
The NASDAQ is rallying to a new all-time high (hence its bearish divergence against the other two indices); however, this index just started a new medium-term cycle on Aug. 19 and looks very bullish. If it corrects down, the correction may be modest.
The bottom line here is that we are getting a mixed bag of bullish and bearish signals, so we will stay on the sidelines for now. Here are some "lines in the sand" that, if crossed, would determine the direction of this market right now:
* If the DOW falls below its Aug. 19 low of 34,691, the cycle will turn bearish and will be pointed down for many more weeks. If this index doesn't make a new all-time high (above 35,631) soon, that bearish scenario is very possible.
* The S&P 500's low on Aug. 19 (4,368) is also a line that if broken would be very bearish.
* The NASDAQ is the youngest of these medium-term cycles and should be bullish, but if this index drops below its Aug. 19 starting point (14,424), it too would be turning bearish and would be moving lower for AT LEAST two more months.
In Sunday's blog on the precious metals, I suggested watching for a top in our current reversal zone (Sept. 1 - 10) in both gold and silver, and a possible corrective dip to buy (as both metals seem to have recently started bullish new cycles). From isolated highs last Friday (Sept. 3), prices have dropped in both metals. Today gold dropped into our target range for a corrective low ($1780 - $1800), but silver didn't quite reach our target of $23.75. There are three more days left in this reversal zone, and Thursday/Friday/Monday could be a strong pivot/turning point. Let's see if prices can edge a little lower over the next few days for a good buy spot in both metals. Staying on the sidelines for now.
In Sunday's blog on crude oil I wrote:
"There is a good chance that crude oil started a new medium-term cycle as well as a new longer-term cycle on Aug. 23 at $61.74 (Oct. contract chart). If that's the case, crude prices could be quite bullish now and ready to rally significantly higher. (This would also support the short-term bullish case for the broad stock market right now.) We are now moving into the center of a reversal zone specifically for crude (Sept. 3 - 13). Any new high in this time frame could be a top that could be followed by a short-term sub-cycle correction, or we might just see prices fall and make a sub-cycle bottom in here. "
Well, prices seem to be falling, so we may look to buy a low by the end of this week - UNLESS prices jump to a new high in the same time frame. In that case, we may wait for a second dip from that high. A clear break and close above $70 would be a bullish sign indicating higher prices ahead. Staying on the sidelines for now..