BRIEF BROAD STOCK MARKET UPDATE and IMPORTANT UPDATE ON PRECIOUS METALS (9:30 pm EDT)
The DOW is edging up to a new weekly (and yearly) high today as the S&P 500 does not, and the NASDAQ remains below its high from July 19. Thus we have more bearish divergence and evidence that a top is forming now. We are still holding our short position in the DOW.
The precious metals are getting a little tricky to call right now. Gold made an isolated high yesterday and closed above the 15-day moving average, but yesterday was also a very strong "pivot point" for gold, and prices today are falling back below the 15-day moving average and also testing the 45-day moving average. "Pivot points" are short-term signals, and we note that gold is now falling into another major reversal zone specifically for the precious metals from Aug. 1 - Aug. 10. This means gold could find a low in this time frame and reverse back up. The problem is that it has this week and most of next week to make a low, so it could potentially go very low. But it doesn't have to do that; in fact, it could turn back up tomorrow as we are getting a bullish divergence signal today as gold makes a new weekly low without silver.
Even though gold's medium-term cycle is young (it started with the low of $1894 on June 29) and still bullish, it could turn bearish if prices start falling below $1900. We need to be alert for that possibility now. I am going to hold my long position in gold for now. We entered our long position in gold on June 30 close to $1900, so we still have a profit on this trade. We may sell it this week or next if it looks like gold prices are falling too low. If gold rallies, we may also take profits and sell at any new highs that are made in this new reversal zone. A good upper target for a rally could be around $2000 or even $2040. If gold's medium-term cycle stays bullish, prices could eventually go much higher.
Silver's medium-term cycle is also young as it most likely began on June 23 at $22.12. Its rally from there has been bullish, but as with gold, a cycle can sometimes turn bearish in its early phase. It hasn't done that yet, and prices could still test the 45-day moving average (now at $23.75 and rising) and remain bullish. Closing well below the 45-day moving average, however, would make me cautious, and breaking below $22 would turn the cycle bearish. We are currently on the sidelines of silver, but if prices find support near the 45-day moving average this week or next, we may look to go long in this metal as the upside to a bullish medium-term cycle could be as high as $30 - $35.
Sometimes watching the U.S. Dollar Index can give us clues as to how prices will move in the precious metals (i.e. they generally move in an opposite direction to the dollar). We just moved out of a strong reversal zone specifically for currencies (July 18 - 27). On July 25 (within the reversal zone), this index made an isolated high and then fell sharply into July 27 (the last day of the reversal). Interestingly, it made an isolated low on the 27th and has been rising from there. Thus it looks like a high AND a low were made in the same reversal zone, and we are now moving towards a new top. That top could come soon as we enter yet another reversal zone for currencies next week (August 8 - 17).
OK. A top in the U.S. Dollar Index could correspond to a bottom in the precious metals, and the reversal zone for precious metals (Aug. 1 - 10) extends into next week and overlaps with the reversal zone for currencies (Aug. 8 -17). The overlap days are Aug. 8, 9 and 10. This suggests that gold and silver might make a significant bottom around that time. We will watch for this.
The DOW is edging up to a new weekly (and yearly) high today as the S&P 500 does not, and the NASDAQ remains below its high from July 19. Thus we have more bearish divergence and evidence that a top is forming now. We are still holding our short position in the DOW.
The precious metals are getting a little tricky to call right now. Gold made an isolated high yesterday and closed above the 15-day moving average, but yesterday was also a very strong "pivot point" for gold, and prices today are falling back below the 15-day moving average and also testing the 45-day moving average. "Pivot points" are short-term signals, and we note that gold is now falling into another major reversal zone specifically for the precious metals from Aug. 1 - Aug. 10. This means gold could find a low in this time frame and reverse back up. The problem is that it has this week and most of next week to make a low, so it could potentially go very low. But it doesn't have to do that; in fact, it could turn back up tomorrow as we are getting a bullish divergence signal today as gold makes a new weekly low without silver.
Even though gold's medium-term cycle is young (it started with the low of $1894 on June 29) and still bullish, it could turn bearish if prices start falling below $1900. We need to be alert for that possibility now. I am going to hold my long position in gold for now. We entered our long position in gold on June 30 close to $1900, so we still have a profit on this trade. We may sell it this week or next if it looks like gold prices are falling too low. If gold rallies, we may also take profits and sell at any new highs that are made in this new reversal zone. A good upper target for a rally could be around $2000 or even $2040. If gold's medium-term cycle stays bullish, prices could eventually go much higher.
Silver's medium-term cycle is also young as it most likely began on June 23 at $22.12. Its rally from there has been bullish, but as with gold, a cycle can sometimes turn bearish in its early phase. It hasn't done that yet, and prices could still test the 45-day moving average (now at $23.75 and rising) and remain bullish. Closing well below the 45-day moving average, however, would make me cautious, and breaking below $22 would turn the cycle bearish. We are currently on the sidelines of silver, but if prices find support near the 45-day moving average this week or next, we may look to go long in this metal as the upside to a bullish medium-term cycle could be as high as $30 - $35.
Sometimes watching the U.S. Dollar Index can give us clues as to how prices will move in the precious metals (i.e. they generally move in an opposite direction to the dollar). We just moved out of a strong reversal zone specifically for currencies (July 18 - 27). On July 25 (within the reversal zone), this index made an isolated high and then fell sharply into July 27 (the last day of the reversal). Interestingly, it made an isolated low on the 27th and has been rising from there. Thus it looks like a high AND a low were made in the same reversal zone, and we are now moving towards a new top. That top could come soon as we enter yet another reversal zone for currencies next week (August 8 - 17).
OK. A top in the U.S. Dollar Index could correspond to a bottom in the precious metals, and the reversal zone for precious metals (Aug. 1 - 10) extends into next week and overlaps with the reversal zone for currencies (Aug. 8 -17). The overlap days are Aug. 8, 9 and 10. This suggests that gold and silver might make a significant bottom around that time. We will watch for this.
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