The DOW and S&P 500 have finally penetrated their target ranges (30,500-32,500 and 3,600-3,900, respectively) for a final medium-term cycle bottom in both as we enter a new and very strong general reversal zone March 13 -21. Yesterday the DOW dropped to 31,625 and the S&P 500 reached 3,809 and they are both rallying from those lows. Could those lows be the medium-term cycle bottoms? Yes, but it is very early in this reversal zone, and both indices have room to go lower in their target range. If they do, the final bottoms will most likely happen by the end of this week (if they didn't already happen yesterday). Let's cover (unload) our short position in the broad stock market now. We entered that short position on Feb. 17, so that gives us a 5% profit in the DOW. I am going to place this order tonight for tomorrow's market open. If this week is the final cycle bottom and the start of a new one, we will also be looking to go long for another multi-week rally that could test the highs of the previous cycles (that would be 34,712 in the DOW and 4,169 in the S&P 500).
Our decision to buy silver last Wednesday was a good one as the price has taken off from there. Silver's medium-term cycle bottom was most likely last week (it was long overdue), so we should now expect at least a 2-4 week rally from there as we begin a new cycle. We note, however, that prices are now rising sharply into a strong reversal zone specifically for the precious metals this week (March 14 - 21). It's possible for silver to reverse and make a new low this week or early next week below $19.91. If that happens, we will consider that to be the final medium-term cycle bottom. In the meantime, we will hold our long position in silver (which already has an 8% profit) and not worry too much unless prices start closing below $20 over the next several days (that can be be our "break even" stop loss). If silver's new cycle is bearish, it might only have a 2-4 week rally to $22 - $23 (we are nearly there now), but if bullish, a rally could last longer and get up into a range of $26 - $29. We note that there could also be significant resistance between $24 - $26..
It looks like gold started a new medium-term cycle with it's low of $1807 on Feb. 28. Prices have been rising sharply from there, but right now it is unclear if this new cycle will be bullish or bearish. If bearish, this cycle will top out ideally this week or next and most likely remain under $1970. This is my favored scenario at the moment as it ties in well with the idea that gold's long-term 23-year cycle peaked in Aug. 2020 at $2070 and is now falling to the final 23-year cycle low due sometime in 2023 - 2024 possibly near the $1000 level. This means we should be looking to enter a short position in gold soon. There is some resistance around $1915 - $1920 (we are approaching that range now), and after that around $1970 - $2000. We remain on the sidelines for now as we wait for signs of a top to sell short at these levels.
Any break and close above $2000 would put our bearish gold scenario in jeopardy. If that happens, we may have to consider the possibility that the 23-year cycle ended with the double-bottom lows of $1616 ad $1617 on Sept. 28, 2022 and Nov. 3, 2022, respectively. In that case, gold would be in the early stage of a new 23-year cycle and would be VERY bullish and ready to soar above that all-time high of $2070.
Crude oil prices plummeted today, and they are now testing the $70.86 (April contract chart) low from Dec. 9, 2022. It looks like that low was the start of a new medium-term cycle in crude. The fact that prices are testing the low that started the cycle is a bearish sign. If they start moving below, it means the cycle's trend has turned bearish and will continue lower to its final bottom due sometime in April. Because we are now in a strong reversal zone through next week, we can anticipate a significant sub-cycle bottom in this time frame (if it didn't happen today). If $70.86 is breached, prices could eventually fall back to the $60 - $65 area (maybe by mid-April). Let's stay on the sidelines of crude, at least until we see a clear sub-cycle bottom, and maybe even a full medium-term cycle bottom in April.