Yesterday the S&P 500 and NASDAQ made new weekly lows BELOW THEIR FEB. 24 LOWS - a bearish sign; however, the DOW did not make a new low and is still above its Feb. 24th low. This creates a strong bullish divergence signal. Thus we have mixed signals in the broad stock market right now. And it is happening as we enter a new strong reversal zone (May 3 - 12). We also have an FOMC meeting this week that ends tomorrow with the Fed updating its policy on interest rates. It is widely expected that the Fed will raise rates, but there is some debate on just how much. If the Fed is too hawkish, we could see equities push lower. Even if that happens, if the DOW can stay above its Feb. 24 low (32,283) inside our new reversal zone, that bullish divergence might propel another rally that could challenge the all-time highs. We will stay on the sidelines for now as we watch how the markets react to the Fed's statement to be delivered at 2:00 pm tomorrow afternoon.
Gold and silver prices continue to fall this week. Silver is likely falling to the final bottom of an older medium-term cycle that is due this week or next. We enter a new reversal zone specifically for the precious metals tomorrow (May 4 - 12). Silver is already in our target range for a bottom ($22.5 - $23), so we may be looking to buy soon. Gold may also be moving into the final bottom of an older medium-term cycle within this new reversal zone. Let's stay on the sidelines of both metals for now and see where they go into the end of this week.
If the Fed raises interest rates tomorrow, it could give a boost to the U.S. Dollar Index as a hawkish Fed demonstrates fiscal responsibility and gives investors confidence in the greenback. As I've mentioned in recent special blogs on the U.S. dollar (April 9 and April 27), we are waiting to see if the greenback can exceed 104 - an important "triple-top" to a long-term 15-16 year cycle that began with the low of 70.69 in March 2008. If it can't break clearly above 104 and continue higher, then we are probably on track for a very significant correction in the dollar from this top over the next few years to a final long-term cycle bottom into 2023- 2025 that could go as low as 55 - 60.
Currently the dollar seems to be forming a top just under 104 over the last several trading days. It is also near the end of a medium-term cycle and is due (overdue) for a correction. We enter a reversal zone specifically for currencies on Thursday (May 5 - 13). It looks like this index is ripe for a top and correction any day now. Perhaps the Fed's interest rate raise will push the greenback a bit higher, and then it reverses back down. This could be in sync with the precious metals dropping a bit lower and then reversing back up. We will watch for this.
Crude oil prices have been rising into a reversal zone specifically for crude (April 26 - May 4), and it may have formed a top last Friday at $108 (June contract chart). So far, the correction from that top hasn't been great, and prices seem to be finding support near the 15-day and 45-day moving averages. This could mean that prices are ready to rally some more. This market is very volatile right now because of the ongoing Russia/Ukraine war, and that makes me reluctant to trade right now. If prices edge a bit lower past Wednesday, I might consider buying as the current medium-term cycle could be be quite bullish. We will stay on the sidelines for now.