The DOW and S&P 500 both made new weekly highs last Friday (16,620 in the DOW and 1891 in the S&P), but they did not exceed their April 4 all-time highs (16,631 and 1897, respectively), and both indices are falling moderately now. Friday's highs were close to the all-time highs so this could represent a significant "double top" bearish formation. Directional momentum, however, remains nearly 100% bullish in the DOW and S&P 500 charts so it is more likely we will see a minor correction and then more rallying into the second half of this month. A major argument against this view is the fact that NASDAQ chart momentum remains stubbornly bearish. Could this be warning us of a more severe imminent correction in the broad stock market? Maybe, but for now I am sticking with the more bullish expectation of new all-time highs (at least in the DOW and S&P 500) over the next few weeks before a more severe correction kicks in. There is some support now around 16,300 in the DOW and 1850 in the S&P 500. It would take a break below those levels to change my bullish view. Still standing aside the broad stock market.
Crude oil prices have found it difficult to break through the $100 mark over the last several days in spite of the escalating tensions between Russia and Ukraine. This bodes well for our short position in crude right now where I've set a a stop loss price between $100 - $101. Cycle and timing analysis are suggesting a correction to at least the $97 - $98 area over the next several weeks. If prices break below there we could even see the $92 area tested.
Maintaining my short position in crude oil.
Gold and silver prices remain at crossroads where they could turn either bullish or bearish, but my bias is still bearish as directional momentum in silver charts is still strongly bearish (gold is still mixed bullish and bearish). Short-term cycles are a little ambiguous in the precious metals right now, but many technical and timing factors are suggesting prices could fall lower over the next few weeks. Until gold breaks clearly over $1330 and silver breaks the $20 level, I am staying with the idea of a significant new low in prices to buy into around the third week of this month. That said, we also need to watch the Russia/Ukraine crisis carefully now as this is a "wild card" factor that could push precious metal prices higher and turn the markets bullish. Still on the sidelines of precious metals.
Directional momentum in the U.S. Dollar Index turned 100% bearish last week, and today the index plunged to just above the 79 level. While we may be seeing the start of a dollar breakdown, it should be noted that there is a very strong support line for the dollar between 78 and 79, and this level could serve as a springboard for at least a temporary bounce. My main concern here is the bullish effect a dollar breakdown would have on precious metal prices. A clear break of the dollar below 78 would very likely kick-start a major rally in gold and silver. On the other hand, a short-term bounce in the dollar from here could bring precious metal prices into the ideal low we are looking for in the third week of May. We will therefore keep a careful eye on the dollar over the next few weeks.