Today the price of crude oil touched $61 before backing down a bit, and it seems to be holding above $60. In my last blog (Friday) I issued a crude trade alert and entered a short position with a stop loss on a close above $60. I am going to raise this stop loss to a close over $61.5 and try to maintain my short position for at least a few more days. There are several technical signals still pointing to an imminent correction in crude, and cycle analysis also strongly suggests a reversal this week. Weekly resistance is at $61 and the price target for this expected top is $59 - $61. This is an ideal setup for a short sell, but if prices push higher after Thursday we may have to abandon the trade (if not already stopped out). Maintaining my short position in crude with a stop loss now on a close above $61.5.
The broad stock market continues to be indecisive in its directional movement. Today was a down day with the DOW giving up 142 points. There is still time (now through Friday) for this index to drop down into our ideal bottom range of 17,600 -17,700 to go long. Our recent intermarket bearish divergence signal remains intact (the S&P 500 and NASDAQ have both made new yearly highs but the DOW has not) and supports the idea of a new low this week. The key here is the DOW's all-time high of 18,288. If the DOW continues to rally and breaches that high, we will probably have to wait at least a few more weeks for any significant correction. Overall directional momentum remains strongly bullish in all three broad stock market indices DOW, S&P 500, NASDAQ). Still on the sidelines.
The precious metals market is currently manifesting a strange mix of bullish and bearish signals. Directional momentum in gold charts is nearly 100% bearish, but it is almost 100% bullish in silver charts. Both gold and silver have been moving up and down in a defined trading range over the last four weeks around $1180 - $1220 in gold and $15.50 - $17 in silver. We were watching for a low for both metals in the current reversal zone and we may have gotten that last week in gold with Thursday and Friday's plunge to a new weekly low of $1170. Silver's low of $15.83 on Thursday, however, was not a new weekly low, and thus we have a case of intermarket divergence, which in this case is bullish. On the other hand, silver made a new weekly high yesterday and gold is a good distance away from its high of last week, so we may now also have a case of bearish intermarket divergence (unless gold can exceed last week's high of $1215). I know this is all a bit confusing, but there are a few key things to watch for now. If gold prices can rally above the April 6 high of $1224, it will indicate that gold is turning bullish. Timewise (according to cycles), gold could still make a new low this week and start a bullish rally from that point; however, if prices continue lower into next week it puts a damper on the bullish view and we will have to consider the possibility of the cycle turning bearish with prices going lower for at least another seven weeks. Still on the sidelines of gold and silver.
The U.S. Dollar Index seems to be stabilizing just above strong support at 94. Directional momentum in the dollar chart is now mixed bullish and bearish so it could go either way here. A bounce up from the 94 support is not out of the question, and such a rally could push down precious metal prices. We must keep in mind, however, that the dollar has now broken down from a medium-term parabolic uptrend (an upwardly sloping curved line that supported a continuously rising dollar from July 2014 through March 2015), and this is very bearish. My bias at the moment is that any bounce now in the dollar will not get very far before turning down again as it seems like the dollar's correction could go lower. Such a scenario would be bullish for gold and silver. The key level to watch now is 94.