All three of our broad stock market indices (S&P 500, NASDAQ, and recently the DOW) have now exceeded their June 16 highs suggesting that the final tops to their current medium-term cycles are still forming. Today we enter a new strong general reversal zone for all markets (July 18 - 26), so it seems likely the tops will form in this time frame. If a top forms this week, it's possible we could also see a subsequent steep fall to the final medium-term cycle bottoms in this same reversal zone. All three indices are making new weekly highs so we won't see any bearish divergence signal this week, but we might get one next week. If we see an obvious top forming this week or next (preferably next), we may attempt to sell short again. But if we miss the top, we will just wait for a correction and try to buy at the final bottoms to the current medium-term cycles (as long as the bottoms don't go TOO low) as we are expecting another rally (new medium-term cycle) into late summer. (We note, however, that after that rally we are expecting a very severe correction in this market and will be looking to sell short again.) We will remain on the sidelines for now.
Silver and especially gold prices are rallying strongly today. Both metals started new medium-term cycles recently (gold on June 29 and silver on June 23), and cycles are usually bullish in their early phase. Significantly, both metals have now broken and closed above their 45-day moving averages, which is also a bullish sign. But we note that we are now entering a strong general reversal zone that also overlaps with a reversal zone specifically for these precious metals (July 18 - 26). This means a significant top in prices could be imminent with a correction to follow. We may want to take a profit in our long gold position soon. Because both metals are making new highs this week, we have no bearish divergence signal, but we might get one next week if one metal makes a new weekly high without the other. Next Monday is in the center of our reversal zones, and it is also a potentially strong "pivot point" for gold. If we get a bearish divergence signal then, it may be a good place to take profits in our gold trade. For now, we continue to hold our long position in gold.
Unfortunately, we did not get long in silver when we bought gold on June 30 and have missed out on a very strong rally. If we do get a top in this new reversal zone followed by a corrective drop, we will try to find a good spot in silver to buy - as long as the drop doesn't go too far (e.g. below $22 which could turn the cycle bearish). If this new cycle remains bullish, we could still see prices rise into the $27 - $35 range. For now we remain on the sidelines of silver.
LONG-TERM GOLD UPDATE:
We are now at a critical juncture in the longer-term cycle of gold. As I have discussed in past blogs and in my Gold Updates on the Homepage, we may have already started a new 23 year long-term cycle in gold on September 28, 2022 at $1616. If that's the case, gold should be very bullish now and soon make a new all-time high, and prices should continue to be bullish for at least several more years. The other possibility is that gold is still completing the end of an older 23 year cycle that began in 1999 - 2001 (around $280). In this alternate scenario, the long-term cycle high has already happened (at $2070 in Aug. 2020), and gold is now in the process of falling to the final 23 year cycle low which is due in the first half of next year somewhere near $1000.
I am currently favoring the bullish (new 23-year cycle) scenario, but we can't rule out the old cycle scenario just yet. We should know soon enough which cycle labeling is correct. If our current medium-term cycle in gold remains bullish and can exceed $2070, it will confirm that a new 23 year cycle started on Sept. 28, 2022 and gold will be very bullish for some time. However, if the current medium-term cycle cannot exceed $2070 and turns bearish, it will support the idea that we are still in an older 23 year cycle that is falling to its final bottom due next year.
The U.S. Dollar Index fell strongly last week but now seems to be finding some support around 99.5. The new general reversal zone we entered today also overlaps with a reversal zone for currencies (July 18 - 27). If the greenback edges lower this week or next, we could see a significant bottom form followed by a rally back up. It is early in this reversal zone, however, so we can't rule out the possibility of the dollar forming a top instead of a bottom (or both) in this same time frame. As usual we expect gold and silver prices to move opposite the dollar, so we will keep an eye on the greenback's movements this week and next.
Crude oil rallied strongly last week and made a high on Thursday at $77.33 (August contract chart). In last Wednesday's blog on crude oil I wrote:
"Crude prices have been rallying, and It's about time for another sub-cycle top and correction. A good time for a crest would be in next week's strong reversal zone, but we might instead see a top this week leading to a corrective low in next week's reversal window. We will be looking to buy any significant sub-cycle correction now as long as the correction doesn't go TOO low (i.e. below $67, and especially below $64)."
After last Thursday's high, crude prices dropped to $74 on Friday, and this week they are edging back up from there. That one day correction on Friday was too brief to be a significant sub-cycle low. This means we could see another top in our current reversal zone (July 18 - 26 - i.e. this week or next) followed by a significant sub-cycle correction, or we could see a deeper sub-cycle corrective bottom in this same time frame (or possibly both).
We are currently on the sidelines of crude. We still may want to buy any significant corrective low we see this week or next for another sub-cycle rally up, but if we do that and the next rally cannot break through resistance around $77 - $80, the cycle could be turning bearish and we would want to get out. But right now, crude still looks bullish. As I stated in last Wednesday's blog:
"As long as prices remain above $64, there's a good chance that May 4 was also the start of a new long-term 3 year cycle. If that's the case, crude prices could be very bullish into the end of this year. If prices can get above $85, we could see crude getting back up to $128 - $130 by the end of the year."