GOLD TRADE ALERT and BROAD STOCK MARKET UPDATE (2:30 pm EST)
Gold and silver both rallied a bit early this morning to make new weekly highs, but prices are now backing down from those highs, and it looks like the day will close in the red. We are thus getting a top in a reversal zone. This reversal zone ends tomorrow, but another one (that is specific to the precious metals) also begins tomorrow and ends next Friday (Nov. 21 - 30). What this means is that even if these metals rally and push past the first reversal zone, they will be making new highs in the second (stronger) one so the chances of getting a significant top soon are high. For this reason I am going to sell my long position in gold today. We have a small profit in this trade (we bought last Thursday). We bought gold with the idea that a new medium-term cycle started with the low of Nov. 13 (at $1196). That might still be the case, but the lack of a strong rally from there is increasing the chances of prices turning down and breaking below that low to complete the bottom of an older cycle. If a new (bullish) cycle did start on Nov. 13, we will have plenty of opportunity to go long again and buy the bottom of the next sub-cycle correction (which could be starting now as long as prices stay above $1196). Silver is most likely near the end of its current medium-term cycle so it too could soon be heading lower to make its final cycle low (especially if it can't clear $14.91 soon). We are still on the sidelines of silver.
In yesterday's blog on the broad stock market I wrote:
"We should also keep in mind that even if we take out last week's lows, we are still in a major reversal zone through Wednesday, and as long as we stay above the Oct. 29 lows we could still reverse strongly back up and stay bullish. In fact, if the NASDAQ does break its Oct. 29 low of 6,922 (it is close) while the DOW and S&P 500 stay above their Oct. 29 lows (24,122 and 2,603, respectively), we will have a strong bullish divergence signal and a strong incentive to stay long in this market. Unfortunately, all financial markets could be very volatile over the next three to four weeks so we could see a lot of price fluctuations and testing of support and resistance lines."
Well, all of this is happening very quickly. Another big drop in equities today has pushed the NASDAQ below its Oct. 29 low which means that index is completing an older medium-term cycle which should see its final low between now and the first week of December. Both the DOW and S&P 500 are (so far) holding above their Oct. 29 lows so we now have a strong bullish divergence signal. Both these indices are very close to their Oct. 29 lows. This means it is possible we are seeing double bottoms here which often end old cycles and start new ones. If that is the case then these indices are bullish and will rally from here. But we don't want to see the DOW break its 24,122 low as that would mean this market is turning bearish. In fact, we don't even want to see the market close this week below our stop loss of 24,750 (it is below there now). If the DOW can't rally above 24,750 tomorrow, we will likely sell our long position. Note that the market is closed on Thursday (Thanksgiving holiday) and closes early at 1 pm (EST) on Friday.
Holding my long position today.
Gold and silver both rallied a bit early this morning to make new weekly highs, but prices are now backing down from those highs, and it looks like the day will close in the red. We are thus getting a top in a reversal zone. This reversal zone ends tomorrow, but another one (that is specific to the precious metals) also begins tomorrow and ends next Friday (Nov. 21 - 30). What this means is that even if these metals rally and push past the first reversal zone, they will be making new highs in the second (stronger) one so the chances of getting a significant top soon are high. For this reason I am going to sell my long position in gold today. We have a small profit in this trade (we bought last Thursday). We bought gold with the idea that a new medium-term cycle started with the low of Nov. 13 (at $1196). That might still be the case, but the lack of a strong rally from there is increasing the chances of prices turning down and breaking below that low to complete the bottom of an older cycle. If a new (bullish) cycle did start on Nov. 13, we will have plenty of opportunity to go long again and buy the bottom of the next sub-cycle correction (which could be starting now as long as prices stay above $1196). Silver is most likely near the end of its current medium-term cycle so it too could soon be heading lower to make its final cycle low (especially if it can't clear $14.91 soon). We are still on the sidelines of silver.
In yesterday's blog on the broad stock market I wrote:
"We should also keep in mind that even if we take out last week's lows, we are still in a major reversal zone through Wednesday, and as long as we stay above the Oct. 29 lows we could still reverse strongly back up and stay bullish. In fact, if the NASDAQ does break its Oct. 29 low of 6,922 (it is close) while the DOW and S&P 500 stay above their Oct. 29 lows (24,122 and 2,603, respectively), we will have a strong bullish divergence signal and a strong incentive to stay long in this market. Unfortunately, all financial markets could be very volatile over the next three to four weeks so we could see a lot of price fluctuations and testing of support and resistance lines."
Well, all of this is happening very quickly. Another big drop in equities today has pushed the NASDAQ below its Oct. 29 low which means that index is completing an older medium-term cycle which should see its final low between now and the first week of December. Both the DOW and S&P 500 are (so far) holding above their Oct. 29 lows so we now have a strong bullish divergence signal. Both these indices are very close to their Oct. 29 lows. This means it is possible we are seeing double bottoms here which often end old cycles and start new ones. If that is the case then these indices are bullish and will rally from here. But we don't want to see the DOW break its 24,122 low as that would mean this market is turning bearish. In fact, we don't even want to see the market close this week below our stop loss of 24,750 (it is below there now). If the DOW can't rally above 24,750 tomorrow, we will likely sell our long position. Note that the market is closed on Thursday (Thanksgiving holiday) and closes early at 1 pm (EST) on Friday.
Holding my long position today.
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