MARKETS UPDATE (3:30 pm EDST)
Another FOMC meeting concludes tomorrow afternoon with another potential rate hike from the Fed looming over the markets. Because of the recent banking crisis, some analysts are expecting the Fed to pull back a bit on rate hiking or at least soften their recently hawkish rhetoric, but others feel this won't happen because inflation is still very high. There is therefore a lot of uncertainty about tomorrow's meeting, and stock markets do not like uncertainty - it tends to give them the "jitters". We could see some volatility in the markets over the next few days, but we will try and navigate the situation with our technical and cycle analysis.
We are now moving into the last half of our strong general reversal zone from March 14 - March 23 (it ends Friday), and the broad stock market continues to rally from last week's lows. If those lows aren't revisited over the next few days, it will strongly suggest that they are the final medium-term cycle bottoms in the DOW and S&P 500 (the lows were well inside our target ranges and were also inside our reversal zone). If that's the case, another rally could be starting that could challenge the December highs in the DOW and February highs in the S&P 500. Today the S&P 500 broke above its 15-day moving average, and the DOW is challenging its 15-day moving average. Closing above those averages is a strong sign that new medium-term cycles are starting. If both indices can break and stay above their 15-day moving averages through the end of this week, we will look to buy this market. We remain on the sidelines for now.
Contrary to my statement yesterday of silver looking more bullish than gold, it"s starting to look like the opposite could be true, or at least it may be a coin toss between the two. Gold's surge to $2000 was unexpectedly bullish and was a bit sharper than silver's rally to resistance around $22.50. Both metals are pulling back today near the end of a strong reversal zone for precious metals (that ends today) and the end of a strong general reversal zone for all markets (that ends Friday). A corrective drop is most likely starting in both metals, but the big question is how low will they go?
It's still a bit early for silver's new medium-term cycle (that started March 10) to peak (we expect at least a 2-5 week rally from the start), but it's not impossible that yesterday's high was it. If that was the cycle peak, prices will soon move below the low from March 10 ($19.91). I think it's more likely, however, that any correction now will hold above that price and rally again to challenge or break above $22.50. We'll just have to wait and see how prices move over the next several days. If no new high forms by Friday, we may look to buy any significant correction in silver that holds above $19.91. We took profits on our long position in silver last week and remain out of silver for now.
Our decision to short gold yesterday seems to have been a good one as prices dropped sharply today. Our view of gold is now bearish, but prices have to drop below $1807 to confirm this and to confirm that the current medium-term cycle has just peaked. If it hasn't peaked, that $1807 low will hold and gold prices may move higher to challenge the all-time highs at $2066 and $2070. If those highs are exceeded, it would mean that a new 23 year cycle has already started, and that would be VERY bullish (see earlier blogs on gold). For now, we are going with the bearish scenario and will hold our short position in gold with the expectation of at least a few days of falling prices following yesterday's high. If this correction fails to gain momentum and remains above $1807, however, we will be prepared to cover this short position and possibly reverse back to the long side. We must be nimble as traders in this market right now.
In last Friday's blog on crude oil I wrote:
"...we are now in the center of a strong reversal zone, so some sort of bottom and reversal back up could be imminent. This reversal zone lasts through the end of next week. If prices can fall into our $60 - $65 target range for a medium-term cycle bottom, we might see that final bottom next week. However, the final bottom is more likely to happen in mid-April, which would be a more normal length for the medium-term cycle in crude."
Well, yesterday prices dropped into the upper part of our target range ($64.12 - April contract chart) and are now rising sharply from there. Could this be the final cycle bottom? Yes, but I am inclined to think it will go lower as we move into April. Let's plan on that for now with the idea of a very good buy spot in April deeper into our target and possibly at the end of a longer-term 3 year cycle (and the bullish start of a new one). We will remain on the sidelines of crude oil for now.
Another FOMC meeting concludes tomorrow afternoon with another potential rate hike from the Fed looming over the markets. Because of the recent banking crisis, some analysts are expecting the Fed to pull back a bit on rate hiking or at least soften their recently hawkish rhetoric, but others feel this won't happen because inflation is still very high. There is therefore a lot of uncertainty about tomorrow's meeting, and stock markets do not like uncertainty - it tends to give them the "jitters". We could see some volatility in the markets over the next few days, but we will try and navigate the situation with our technical and cycle analysis.
We are now moving into the last half of our strong general reversal zone from March 14 - March 23 (it ends Friday), and the broad stock market continues to rally from last week's lows. If those lows aren't revisited over the next few days, it will strongly suggest that they are the final medium-term cycle bottoms in the DOW and S&P 500 (the lows were well inside our target ranges and were also inside our reversal zone). If that's the case, another rally could be starting that could challenge the December highs in the DOW and February highs in the S&P 500. Today the S&P 500 broke above its 15-day moving average, and the DOW is challenging its 15-day moving average. Closing above those averages is a strong sign that new medium-term cycles are starting. If both indices can break and stay above their 15-day moving averages through the end of this week, we will look to buy this market. We remain on the sidelines for now.
Contrary to my statement yesterday of silver looking more bullish than gold, it"s starting to look like the opposite could be true, or at least it may be a coin toss between the two. Gold's surge to $2000 was unexpectedly bullish and was a bit sharper than silver's rally to resistance around $22.50. Both metals are pulling back today near the end of a strong reversal zone for precious metals (that ends today) and the end of a strong general reversal zone for all markets (that ends Friday). A corrective drop is most likely starting in both metals, but the big question is how low will they go?
It's still a bit early for silver's new medium-term cycle (that started March 10) to peak (we expect at least a 2-5 week rally from the start), but it's not impossible that yesterday's high was it. If that was the cycle peak, prices will soon move below the low from March 10 ($19.91). I think it's more likely, however, that any correction now will hold above that price and rally again to challenge or break above $22.50. We'll just have to wait and see how prices move over the next several days. If no new high forms by Friday, we may look to buy any significant correction in silver that holds above $19.91. We took profits on our long position in silver last week and remain out of silver for now.
Our decision to short gold yesterday seems to have been a good one as prices dropped sharply today. Our view of gold is now bearish, but prices have to drop below $1807 to confirm this and to confirm that the current medium-term cycle has just peaked. If it hasn't peaked, that $1807 low will hold and gold prices may move higher to challenge the all-time highs at $2066 and $2070. If those highs are exceeded, it would mean that a new 23 year cycle has already started, and that would be VERY bullish (see earlier blogs on gold). For now, we are going with the bearish scenario and will hold our short position in gold with the expectation of at least a few days of falling prices following yesterday's high. If this correction fails to gain momentum and remains above $1807, however, we will be prepared to cover this short position and possibly reverse back to the long side. We must be nimble as traders in this market right now.
In last Friday's blog on crude oil I wrote:
"...we are now in the center of a strong reversal zone, so some sort of bottom and reversal back up could be imminent. This reversal zone lasts through the end of next week. If prices can fall into our $60 - $65 target range for a medium-term cycle bottom, we might see that final bottom next week. However, the final bottom is more likely to happen in mid-April, which would be a more normal length for the medium-term cycle in crude."
Well, yesterday prices dropped into the upper part of our target range ($64.12 - April contract chart) and are now rising sharply from there. Could this be the final cycle bottom? Yes, but I am inclined to think it will go lower as we move into April. Let's plan on that for now with the idea of a very good buy spot in April deeper into our target and possibly at the end of a longer-term 3 year cycle (and the bullish start of a new one). We will remain on the sidelines of crude oil for now.
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