MARKETS UPDATE (10:15 pm EST)
Crude oil prices dipped down below $29.50 in yesterday's overnight market, but when the U.S. exchanges opened this morning the price was close to $31 so we did not buy. The Jan. 20 low at $27.56 still looks like the medium-term cycle bottom so we will continue to watch for a good buy spot as long as that low holds. Any trader that went long on the overnight market can hold that position for a possible rally into early February with a stop loss at the Jan. 20 low.
Still on the sidelines of crude.
The broad stock market rallied strongly today with the DOW rising 287 points and closing at 16,167 which is above the important resistance level we were watching at 16,100. This is supporting the idea that Jan. 20 was the start of a new medium-term cycle. If that is the case then the target for this rally could be anywhere between 16,200 and 17,000, and we would expect it to peak around Feb. 8 (+/- a few trading days). That is only nine trading days from now. The market could rally strongly into next week, but we still want to watch for an important top starting as early as next Wednesday. A rally with a top that stays under 17,000 in the DOW and under 2000 in the S&P 500 could be an important turning point marking a reversal and the start of a serious correction in the market (as I described in last Sunday's blog). The question right now is whether or not to go long for a potential rally into next week. It is still possible for the market to turn back down and make a new cycle bottom next week instead of a top (although this is looking less likely now). This week's Federal Reserve meeting will end tomorrow with the FOMC releasing its policy statement at 2 PM in the afternoon. Today's rally in equities may reflect Wall Street's hope that the Fed will signal more modest rate hikes than it had previously planned in view of the recent turmoil in the markets. Many economists, however, are expecting the Fed to "stay the course" and not indicate any changes in policy one way or the other. It is probably best for us to stay on the sidelines for at least another day. We know from the past that market reactions to Fed meetings can sometimes be dramatic (although they are often short-term). Remaining on the sidelines of the broad stock market for now.
Precious metal prices also rallied today with gold pushing closer to our target range for a top ($1127 - $1147). Silver's rally was especially significant as it made a new high for the month (in the March contract chart) which suggests that it started a new medium-term cycle on Dec. 14. (We had previously thought that the old cycle was still bottoming.) This increases the likelihood of higher prices now (possibly $15 or higher); however, we have to keep in mind that gold and silver are susceptible to large price swings (both up and down) this week and next, and we are also expecting a significant top and reversal in both metals in the first two weeks of February. There are also some short-term technical signals suggesting the possibility of a sharp decline in prices on Thursday (note that this is the day after the Fed statement) or Friday this week. As with the broad stock market, it is probably best to remain on the sidelines of gold and silver for at least the next day or two as price fluctuations could be erratic. On the sidelines of gold and silver.
Crude oil prices dipped down below $29.50 in yesterday's overnight market, but when the U.S. exchanges opened this morning the price was close to $31 so we did not buy. The Jan. 20 low at $27.56 still looks like the medium-term cycle bottom so we will continue to watch for a good buy spot as long as that low holds. Any trader that went long on the overnight market can hold that position for a possible rally into early February with a stop loss at the Jan. 20 low.
Still on the sidelines of crude.
The broad stock market rallied strongly today with the DOW rising 287 points and closing at 16,167 which is above the important resistance level we were watching at 16,100. This is supporting the idea that Jan. 20 was the start of a new medium-term cycle. If that is the case then the target for this rally could be anywhere between 16,200 and 17,000, and we would expect it to peak around Feb. 8 (+/- a few trading days). That is only nine trading days from now. The market could rally strongly into next week, but we still want to watch for an important top starting as early as next Wednesday. A rally with a top that stays under 17,000 in the DOW and under 2000 in the S&P 500 could be an important turning point marking a reversal and the start of a serious correction in the market (as I described in last Sunday's blog). The question right now is whether or not to go long for a potential rally into next week. It is still possible for the market to turn back down and make a new cycle bottom next week instead of a top (although this is looking less likely now). This week's Federal Reserve meeting will end tomorrow with the FOMC releasing its policy statement at 2 PM in the afternoon. Today's rally in equities may reflect Wall Street's hope that the Fed will signal more modest rate hikes than it had previously planned in view of the recent turmoil in the markets. Many economists, however, are expecting the Fed to "stay the course" and not indicate any changes in policy one way or the other. It is probably best for us to stay on the sidelines for at least another day. We know from the past that market reactions to Fed meetings can sometimes be dramatic (although they are often short-term). Remaining on the sidelines of the broad stock market for now.
Precious metal prices also rallied today with gold pushing closer to our target range for a top ($1127 - $1147). Silver's rally was especially significant as it made a new high for the month (in the March contract chart) which suggests that it started a new medium-term cycle on Dec. 14. (We had previously thought that the old cycle was still bottoming.) This increases the likelihood of higher prices now (possibly $15 or higher); however, we have to keep in mind that gold and silver are susceptible to large price swings (both up and down) this week and next, and we are also expecting a significant top and reversal in both metals in the first two weeks of February. There are also some short-term technical signals suggesting the possibility of a sharp decline in prices on Thursday (note that this is the day after the Fed statement) or Friday this week. As with the broad stock market, it is probably best to remain on the sidelines of gold and silver for at least the next day or two as price fluctuations could be erratic. On the sidelines of gold and silver.
RSS Feed