MARKETS UPDATE (9:30 pm EDST)
In last Wednesday's post on the broad stock market I wrote:
"... if equities start falling from here, we may have to wait for a bottom to buy in our next reversal zone coming up next week (Sept. 23 - Oct. 2)."
It seems that the Fed's dovish near-zero interest rate policy reiterated after last week's FOMC meeting was not enough to keep equities buoyant, and they did indeed start to fall steeply after Wednesday's high. The plunge continued yesterday but may be stabilizing (at least temporarily) today.
This steep correction has broken important support in the DOW and S&P 500 which means that regardless of whether these indices are old or newer medium-term cycles, they are likely now correcting down to their final cycle bottoms. A good time for those bottoms would be anytime in our upcoming reversal zones: Sept. 23 - Oct. 2 and Sept. 28 - Oct. 19 (a VERY wide reversal zone). The most likely and best time for a final bottom would be from Oct. 7 -15 so we will watch that time frame closely. Targets for the bottom could be around 3,150 in the S&P 500 (but possibly lower). The DOW might only fall to around 27,000 (it got there yesterday and today), but it could also go as low as 26,000 (or even 24,000 !). We enter our first reversal zone tomorrow so there is plenty of time for these targets to be reached.
The NASDAQ's medium-term cycle is also likely to bottom in these new reversal zones. Our first target for a bottom in this index was somewhere below 10,500. We almost got there yesterday, but this index found some support just above 10,500 and now seems to be rallying. Was that the bottom? Maybe, but it was not in a reversal zone, and there is still plenty of time for it to go lower and closer to our target price and ideal target time zone (Oct. 7-15).
We will remain on the sidelines of all three indices for now.
Gold and especially silver prices are dropping significantly this week, and that is suggesting that the precious metals are also moving down towards their final medium-term cycle lows. Those lows could be well below $1900 in gold and close to or below $23 in silver (we are nearly there already). As with the broad stock market, we will watch for bottoms in our upcoming reversal zones as we remain on the sidelines for now.
Not surprisingly, this week's drop in precious metal prices was accompanied by a surge in the U.S. Dollar Index. The greenback broke and closed above its 45-day moving average yesterday and today. This is bullish, but the medium-term cycle for this index is getting old so the dollar could peak and turn back down over the next several weeks. That top may correlate with a final bottom in the precious metals so we will keep an eye out for it.
Crude oil may have started a new medium-term cycle with its low of $36.13 (October contract chart) on Sept. 8. But there is still a chance prices could make a lower low (or double bottom) in our upcoming reversal zones, especially if the broad stock market pushes lower and takes some commodities (like gold, silver and crude) along with it. If we did miss a buy spot at the start of a new cycle on Sept. 8, we may have to wait for the first significant sub-cycle correction for another opportunity to buy. We are still on the sidelines of crude oil.
In last Wednesday's post on the broad stock market I wrote:
"... if equities start falling from here, we may have to wait for a bottom to buy in our next reversal zone coming up next week (Sept. 23 - Oct. 2)."
It seems that the Fed's dovish near-zero interest rate policy reiterated after last week's FOMC meeting was not enough to keep equities buoyant, and they did indeed start to fall steeply after Wednesday's high. The plunge continued yesterday but may be stabilizing (at least temporarily) today.
This steep correction has broken important support in the DOW and S&P 500 which means that regardless of whether these indices are old or newer medium-term cycles, they are likely now correcting down to their final cycle bottoms. A good time for those bottoms would be anytime in our upcoming reversal zones: Sept. 23 - Oct. 2 and Sept. 28 - Oct. 19 (a VERY wide reversal zone). The most likely and best time for a final bottom would be from Oct. 7 -15 so we will watch that time frame closely. Targets for the bottom could be around 3,150 in the S&P 500 (but possibly lower). The DOW might only fall to around 27,000 (it got there yesterday and today), but it could also go as low as 26,000 (or even 24,000 !). We enter our first reversal zone tomorrow so there is plenty of time for these targets to be reached.
The NASDAQ's medium-term cycle is also likely to bottom in these new reversal zones. Our first target for a bottom in this index was somewhere below 10,500. We almost got there yesterday, but this index found some support just above 10,500 and now seems to be rallying. Was that the bottom? Maybe, but it was not in a reversal zone, and there is still plenty of time for it to go lower and closer to our target price and ideal target time zone (Oct. 7-15).
We will remain on the sidelines of all three indices for now.
Gold and especially silver prices are dropping significantly this week, and that is suggesting that the precious metals are also moving down towards their final medium-term cycle lows. Those lows could be well below $1900 in gold and close to or below $23 in silver (we are nearly there already). As with the broad stock market, we will watch for bottoms in our upcoming reversal zones as we remain on the sidelines for now.
Not surprisingly, this week's drop in precious metal prices was accompanied by a surge in the U.S. Dollar Index. The greenback broke and closed above its 45-day moving average yesterday and today. This is bullish, but the medium-term cycle for this index is getting old so the dollar could peak and turn back down over the next several weeks. That top may correlate with a final bottom in the precious metals so we will keep an eye out for it.
Crude oil may have started a new medium-term cycle with its low of $36.13 (October contract chart) on Sept. 8. But there is still a chance prices could make a lower low (or double bottom) in our upcoming reversal zones, especially if the broad stock market pushes lower and takes some commodities (like gold, silver and crude) along with it. If we did miss a buy spot at the start of a new cycle on Sept. 8, we may have to wait for the first significant sub-cycle correction for another opportunity to buy. We are still on the sidelines of crude oil.
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