MARKETS UPDATE (10:00 pm EDT)
The Labor Day holiday in the U.S. is now over, and the recent rally in the DOW and S&P 500 may also be over (at least temporarily) as both are dropping steeply today from last week's highs. Significantly, the DOW made a new all-time high last week (41,585) while the S&P 500 and NASDAQ did not. This gives us a strong bearish divergence between these indices, and it is happening in the center of our current strong reversal zone (Aug. 23 - Sept. 6). A significant correction down could be starting. We note that the NASDAQ seems to be the most bearish at the moment. Unlike the other two indices, this index has been trending down since Aug. 22, and today it broke and is closing below both its 15-day and 45-day moving averages.
All three indices started new medium-term cycles on Aug. 5 and are only 4 weeks old. They are young and bullish. Nevertheless, they are now in a time frame for their first significant sub-cycle correction. The depth of this correction will determine whether or not their trend stays bullish. We'll have to wait and see. If the NASDAQ finds support this week (i.e. inside our reversal zone) around 17,000 and the DOW and S&P 500 find support at or below their 15-day and 45-day moving averages, that could be a springboard for another rally. I think this scenario is likely, and so, barring a serious sell-off this week, I will probably be looking to cover my short position in the DOW (broad stock market) at any support level it finds by the end of the week. I am holding my short position in the DOW for now.
Gold and silver prices are also dropping today. As I wrote in last Wednesday's blog:
"It is late in the current medium-term cycle of gold. This means the final top in the cycle is due, and it may have already happened with last week's all-time high at $2530. We also note that the final top in a longer-term 50 week cycle is also due and will be simultaneous with the medium-term cycle top. Once this top is in, we expect a sharp correction down to at least $2400, and possibly as low as $2250. Wherever the low ends up, that will be a good spot to buy as it would be the final bottom to both the medium-term and 50 week cycles and thus the start of new ones."
That high at $2530 is still holding, and gold broke below its 15-day moving average today. Unless prices can break to a new all-time by the end of the week, it looks like the final correction has started. We are currently staying on the sidelines of gold and waiting to buy at the final bottom to these cycles.
Silver has been falling steeply from last week's high, and prices thankfully closed today below the entry point of our short position (entered on Aug. 1). This puts our trade back in the black, but we still can't be certain a new bullish medium-term cycle didn't start on Aug. 8 until prices start closing below $26.52. I am holding my short position in silver as we wait to see if prices can go lower. We don't want to see prices move back above the 15-day and 45-day moving averages (now just above $29) as that would negate our current bearish view of this market.
Today crude oil prices took a deep dive and closed just above $70 (Oct.contract chart). Because this is a clear break below the "triple bottom" around $72 on June 4, Aug. 5, and Aug. 21, it is a very bearish development. If the June 4 low at $71.90 was the start of a medium-term cycle, the cycle is old and should be making its final bottom 3 - 11 weeks from now (somewhere below $71.90). As long as prices stay above the 4-year cycle low of $63.57 made on May 4, 2023, the longer-term trend in crude oil will stay bullish. If prices break below there, however, we will have to reexamine our bullish view of this commodity. We are currently on the sidelines of crude.
The Labor Day holiday in the U.S. is now over, and the recent rally in the DOW and S&P 500 may also be over (at least temporarily) as both are dropping steeply today from last week's highs. Significantly, the DOW made a new all-time high last week (41,585) while the S&P 500 and NASDAQ did not. This gives us a strong bearish divergence between these indices, and it is happening in the center of our current strong reversal zone (Aug. 23 - Sept. 6). A significant correction down could be starting. We note that the NASDAQ seems to be the most bearish at the moment. Unlike the other two indices, this index has been trending down since Aug. 22, and today it broke and is closing below both its 15-day and 45-day moving averages.
All three indices started new medium-term cycles on Aug. 5 and are only 4 weeks old. They are young and bullish. Nevertheless, they are now in a time frame for their first significant sub-cycle correction. The depth of this correction will determine whether or not their trend stays bullish. We'll have to wait and see. If the NASDAQ finds support this week (i.e. inside our reversal zone) around 17,000 and the DOW and S&P 500 find support at or below their 15-day and 45-day moving averages, that could be a springboard for another rally. I think this scenario is likely, and so, barring a serious sell-off this week, I will probably be looking to cover my short position in the DOW (broad stock market) at any support level it finds by the end of the week. I am holding my short position in the DOW for now.
Gold and silver prices are also dropping today. As I wrote in last Wednesday's blog:
"It is late in the current medium-term cycle of gold. This means the final top in the cycle is due, and it may have already happened with last week's all-time high at $2530. We also note that the final top in a longer-term 50 week cycle is also due and will be simultaneous with the medium-term cycle top. Once this top is in, we expect a sharp correction down to at least $2400, and possibly as low as $2250. Wherever the low ends up, that will be a good spot to buy as it would be the final bottom to both the medium-term and 50 week cycles and thus the start of new ones."
That high at $2530 is still holding, and gold broke below its 15-day moving average today. Unless prices can break to a new all-time by the end of the week, it looks like the final correction has started. We are currently staying on the sidelines of gold and waiting to buy at the final bottom to these cycles.
Silver has been falling steeply from last week's high, and prices thankfully closed today below the entry point of our short position (entered on Aug. 1). This puts our trade back in the black, but we still can't be certain a new bullish medium-term cycle didn't start on Aug. 8 until prices start closing below $26.52. I am holding my short position in silver as we wait to see if prices can go lower. We don't want to see prices move back above the 15-day and 45-day moving averages (now just above $29) as that would negate our current bearish view of this market.
Today crude oil prices took a deep dive and closed just above $70 (Oct.contract chart). Because this is a clear break below the "triple bottom" around $72 on June 4, Aug. 5, and Aug. 21, it is a very bearish development. If the June 4 low at $71.90 was the start of a medium-term cycle, the cycle is old and should be making its final bottom 3 - 11 weeks from now (somewhere below $71.90). As long as prices stay above the 4-year cycle low of $63.57 made on May 4, 2023, the longer-term trend in crude oil will stay bullish. If prices break below there, however, we will have to reexamine our bullish view of this commodity. We are currently on the sidelines of crude.
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