MARKETS UPDATE (3:30 pm EST)
Today is the second day of yet another reversal zone for the broad stock market, and it looks like equities want to push lower. It's still possible for this market to push higher and make a top in this reversal period (which extends through Nov. 21), but right now I think we should be looking for a bottom to buy this week or early next. Cycle studies are telling us this drop could be steep (say, to 22,900 in the DOW and 2,500 in the S&P 500), but it doesn't have to be. Even a milder correction by early next week accompanied by some bullish signals would entice me to go long. We will remain on the sidelines for now and watch how these indices move over the next several days.
The precious metals market is giving us a lot of mixed signals right now. It is still not clear if gold and silver started new medium-term cycles with their lows on Oct. 6 ($1,262 in gold, $16.38 in silver) or if both metals are completing older cycles that will bottom below those lows over the next several weeks. If these are new cycles, gold and silver could be very bullish now and prices could be poised to take off strongly. This week's reversal zone could easily influence these metals so we should be on the lookout for a significant top or bottom (especially accompanied by bearish or bullish divergence). Right now this market could go either way, but I would prefer to see an older cycle bottom as that would give us an excellent spot to buy. If gold breaks below $1,262, we could easily see prices drop close to $1,200 for a final bottom and a good buy spot. If that $1,262 level holds, however, prices could be ready to rally strongly. A break above $1,290 would suggest that is happening. A bearish argument for gold and silver could be made now based on the current directional momentum in the two precious metal mining company stock indices HUI and XAU which are both 100% bearish. On the other hand, the U.S. Dollar index has failed in its recent attempts to break above resistance at 95, and it is falling steeply today. This is giving at least a temporary boost to gold and silver prices. We will remain on the sidelines of the precious metals until we get a more definitive buy signal which should come soon.
Crude oil's current medium-term cycle is in the process of making its final high before taking a steep correction towards its final bottom in the $50 area. On Nov. 3 we were stopped out of our short position in crude as prices pushed above the normal target for a cycle high. Prices surged to a new high of $57.92 on Nov. 8 (Dec. contract chart) but have been falling from there and today are sharply down (nearly touching $55 late this morning). It's possible that Nov. 8 high was the final high and prices are now moving down to the final cycle bottom, but Nov. 8 was not in a reversal zone. We like to see significant tops and bottoms in reversal zones (as statistically they occur more frequently there). We just entered a reversal zone specifically for crude today (Nov. 14 - 22) and there is another one coming up Nov. 28 - Dec. 6. If crude doesn't fall to $50 in this week's reversal zone, it's possible prices could push back up to $57.92 or higher for a final top and then correct down into the Nov./Dec. reversal for a final bottom. Our main strategy here will be to wait for a final bottom near $50 to buy, but if prices do push higher to a new high (or double top) this week or early next, we will consider selling short again. On the sidelines of crude oil for now.
Today is the second day of yet another reversal zone for the broad stock market, and it looks like equities want to push lower. It's still possible for this market to push higher and make a top in this reversal period (which extends through Nov. 21), but right now I think we should be looking for a bottom to buy this week or early next. Cycle studies are telling us this drop could be steep (say, to 22,900 in the DOW and 2,500 in the S&P 500), but it doesn't have to be. Even a milder correction by early next week accompanied by some bullish signals would entice me to go long. We will remain on the sidelines for now and watch how these indices move over the next several days.
The precious metals market is giving us a lot of mixed signals right now. It is still not clear if gold and silver started new medium-term cycles with their lows on Oct. 6 ($1,262 in gold, $16.38 in silver) or if both metals are completing older cycles that will bottom below those lows over the next several weeks. If these are new cycles, gold and silver could be very bullish now and prices could be poised to take off strongly. This week's reversal zone could easily influence these metals so we should be on the lookout for a significant top or bottom (especially accompanied by bearish or bullish divergence). Right now this market could go either way, but I would prefer to see an older cycle bottom as that would give us an excellent spot to buy. If gold breaks below $1,262, we could easily see prices drop close to $1,200 for a final bottom and a good buy spot. If that $1,262 level holds, however, prices could be ready to rally strongly. A break above $1,290 would suggest that is happening. A bearish argument for gold and silver could be made now based on the current directional momentum in the two precious metal mining company stock indices HUI and XAU which are both 100% bearish. On the other hand, the U.S. Dollar index has failed in its recent attempts to break above resistance at 95, and it is falling steeply today. This is giving at least a temporary boost to gold and silver prices. We will remain on the sidelines of the precious metals until we get a more definitive buy signal which should come soon.
Crude oil's current medium-term cycle is in the process of making its final high before taking a steep correction towards its final bottom in the $50 area. On Nov. 3 we were stopped out of our short position in crude as prices pushed above the normal target for a cycle high. Prices surged to a new high of $57.92 on Nov. 8 (Dec. contract chart) but have been falling from there and today are sharply down (nearly touching $55 late this morning). It's possible that Nov. 8 high was the final high and prices are now moving down to the final cycle bottom, but Nov. 8 was not in a reversal zone. We like to see significant tops and bottoms in reversal zones (as statistically they occur more frequently there). We just entered a reversal zone specifically for crude today (Nov. 14 - 22) and there is another one coming up Nov. 28 - Dec. 6. If crude doesn't fall to $50 in this week's reversal zone, it's possible prices could push back up to $57.92 or higher for a final top and then correct down into the Nov./Dec. reversal for a final bottom. Our main strategy here will be to wait for a final bottom near $50 to buy, but if prices do push higher to a new high (or double top) this week or early next, we will consider selling short again. On the sidelines of crude oil for now.
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