MARKETS UPDATE (6:30 pm EDT)
After a long three day weekend (markets were closed Monday due to the Memorial Day holiday), U.S. investors found a lot going on in many markets on this first day of the trading week. There were big declines in the broad stock market, gold, and crude oil. The cause of this seems to be a strong rally in the U.S.dollar which is likely being fueled by fears of a Greek loan default. Greece is dangerously close to defaulting on its next debt repayment to the International Monetary Fund due in early June. A default could have a serious negative effect on the European economy and lead to a weakening of the euro. The dollar was also bolstered late last week by comments from Federal Reserve Chairwoman Janet Yellen who warned that a first interest rate hike could still be made before the end of 2015. (Many financial analysts had been predicting a rate hike postponement into next year). Time will tell if Ms.Yellen is bluffing, but for the moment, at least, the dollar looks appealing, especially to those worried about Greece defaulting and possibly leaving the eurozone. So how does the U.S. dollar look technically? Today's rally triggered a strong bullish momentum signal in the chart of the U.S. Dollar Index making its directional momentum now mixed bullish and bearish (it had been 100% bearish). Nevertheless, the dollar broke down from its long-term parabolic uptrend in April, and it has a lot of resistance to overcome to regain that strength. Although anything is possible (especially if Greece defaults on its debt), it seems likely this dollar rally is short-term, and the U.S. Dollar Index will probably turn back down soon and make a deeper correction. We will watch this index carefully, especially during the first two weeks of June when Greece's debt payment is due.
The dollar surge helped push gold and silver prices lower with gold dropping close to $1185 today. In my blog last Thursday I wrote: "A cycle pattern is manifesting here which usually takes the form of a steep but brief drop quickly followed by a steep rally to a new high and then a final substantial drop. The end of this week through early next week is the strongest part of the current reversal zone for gold and silver. If these metals move lower over the next three trading days and gold stays above $1190 and silver above $16, I will consider going long for what could be a strong short-term rally into the first week of June." Well, gold has dropped a bit below $1190, but silver is holding above $16 (it reached $16.68 today). This cycle pattern could be unfolding with a strong reversal now imminent; however, gold's strong plunge today along with some other bearish short-term technical signals opens up the possibility of a steeper correction and a major "washout". I will still consider going long over the next day or two if a short-term buy signal appears and gold prices can stay above $1175. On the sidelines for now.
The broad stock market plummeted today with the DOW losing nearly 200 points. There was, however, no change in directional momentum in the DOW, S&P 500 or NASDAQ so the technical trend in all three indices remains mostly bullish. The steep drop does confirm that the middle of last week was a significant reversal point for the DOW, and we could be falling into another one at the end of this week into early next. It is hard to trade such a fast moving volatile market, but if the DOW continues to fall I will look to buy late this week/early next, perhaps in the 17,600 - 17,800 area. If, instead, the DOW turns up and rallies into early next week, it could turn out to be a good spot to sell short, especially if only one or two of the three major indices (DOW, S&P 500, NASDAQ) make(s) a new high, but not all three (intermarket bearish divergence). Even if the first scenario plays out (buying a low), the subsequent rally would likely be brief (but possibly substantial) and followed by a significant correction (10% or more) from a peak in mid to late June. We will try to sell short from that peak if it happens. Still on the sidelines of this market.
Unlike the broad stock market and precious metals which have been fluctuating wildly (and somewhat unpredictably) over the last several weeks, crude oil prices have been relatively stable and have been staying (so far) within the parameters of our analysis. We are expecting a correction from a high on May 6 (at $63) to drop into the $52 - $55 range this week or next. Prices dropped close to $58 today so we seem to be getting there. Holding my short position in crude oil.
After a long three day weekend (markets were closed Monday due to the Memorial Day holiday), U.S. investors found a lot going on in many markets on this first day of the trading week. There were big declines in the broad stock market, gold, and crude oil. The cause of this seems to be a strong rally in the U.S.dollar which is likely being fueled by fears of a Greek loan default. Greece is dangerously close to defaulting on its next debt repayment to the International Monetary Fund due in early June. A default could have a serious negative effect on the European economy and lead to a weakening of the euro. The dollar was also bolstered late last week by comments from Federal Reserve Chairwoman Janet Yellen who warned that a first interest rate hike could still be made before the end of 2015. (Many financial analysts had been predicting a rate hike postponement into next year). Time will tell if Ms.Yellen is bluffing, but for the moment, at least, the dollar looks appealing, especially to those worried about Greece defaulting and possibly leaving the eurozone. So how does the U.S. dollar look technically? Today's rally triggered a strong bullish momentum signal in the chart of the U.S. Dollar Index making its directional momentum now mixed bullish and bearish (it had been 100% bearish). Nevertheless, the dollar broke down from its long-term parabolic uptrend in April, and it has a lot of resistance to overcome to regain that strength. Although anything is possible (especially if Greece defaults on its debt), it seems likely this dollar rally is short-term, and the U.S. Dollar Index will probably turn back down soon and make a deeper correction. We will watch this index carefully, especially during the first two weeks of June when Greece's debt payment is due.
The dollar surge helped push gold and silver prices lower with gold dropping close to $1185 today. In my blog last Thursday I wrote: "A cycle pattern is manifesting here which usually takes the form of a steep but brief drop quickly followed by a steep rally to a new high and then a final substantial drop. The end of this week through early next week is the strongest part of the current reversal zone for gold and silver. If these metals move lower over the next three trading days and gold stays above $1190 and silver above $16, I will consider going long for what could be a strong short-term rally into the first week of June." Well, gold has dropped a bit below $1190, but silver is holding above $16 (it reached $16.68 today). This cycle pattern could be unfolding with a strong reversal now imminent; however, gold's strong plunge today along with some other bearish short-term technical signals opens up the possibility of a steeper correction and a major "washout". I will still consider going long over the next day or two if a short-term buy signal appears and gold prices can stay above $1175. On the sidelines for now.
The broad stock market plummeted today with the DOW losing nearly 200 points. There was, however, no change in directional momentum in the DOW, S&P 500 or NASDAQ so the technical trend in all three indices remains mostly bullish. The steep drop does confirm that the middle of last week was a significant reversal point for the DOW, and we could be falling into another one at the end of this week into early next. It is hard to trade such a fast moving volatile market, but if the DOW continues to fall I will look to buy late this week/early next, perhaps in the 17,600 - 17,800 area. If, instead, the DOW turns up and rallies into early next week, it could turn out to be a good spot to sell short, especially if only one or two of the three major indices (DOW, S&P 500, NASDAQ) make(s) a new high, but not all three (intermarket bearish divergence). Even if the first scenario plays out (buying a low), the subsequent rally would likely be brief (but possibly substantial) and followed by a significant correction (10% or more) from a peak in mid to late June. We will try to sell short from that peak if it happens. Still on the sidelines of this market.
Unlike the broad stock market and precious metals which have been fluctuating wildly (and somewhat unpredictably) over the last several weeks, crude oil prices have been relatively stable and have been staying (so far) within the parameters of our analysis. We are expecting a correction from a high on May 6 (at $63) to drop into the $52 - $55 range this week or next. Prices dropped close to $58 today so we seem to be getting there. Holding my short position in crude oil.
RSS Feed