The negation of our bullish divergence signal in the broad stock market last week encouraged me to think that equities would fall into this week's reversal zone. While they still can, today's strong rally introduces the possibility that last week's lows in the DOW and S&P 500 may have been subcycle bottoms, and we could see another rally into the middle or end of this reversal zone (May 28 - June 3). This would mean that the reversal date would correspond to a top, not a bottom, and we would look to sell short any new highs in both these indices. We would especially want to pay close attention to the S&P 500 if it approaches and challenges its strong resistance at the 2,100 level. It is early in the week, however, and this volatile market could still turn back down. Remaining on the sidelines for now.
Gold and silver seem to be on target for new lows into this week's reversal zone. Both metals are now nearing their weekly support levels (around $1,230 in gold and $16 in silver) so we should be looking for signs of a bottom to buy over the next few days. If gold prices break below $1,200, however, we may refrain from buying as that could indicate a more serious correction is underway that could continue for several more weeks. On the sidelines of gold and silver but looking to buy.