IMPORTANT MARKETS UPDATE (3:15 pm EDT)
Last week there were several technical signals suggesting that the broad stock market could be turning bullish. If this is happening it is possible that the August 24 market lows were a significant cycle bottom in all three major market indices (DOW, S&P 500, and NASDAQ) and that the correction of around 16% may be it for now (i.e. at least 6 more weeks). After examining the charts of these indices during the weekend, I am thinking this bullish view is highly probable. I am therefore abandoning the idea of these markets making new short-term lows (below their August lows). It appears the cycle structure of the broad stock market is shifting, and we need to shift our trading strategy as well.
Despite all of this, we are still at the center of a strong reversal period in many markets this week (it may extend into early next week), and the strong rally in equities from last week seems to be leveling off. There is therefore still a high probability of some sort of reversal now which we can use as an opportunity to take profits in our short broad stock market positions. If the cycles have turned bullish then a pullback in the DOW right now may only get to the 16,700 area before rallying again. We will watch for this to happen this week or possibly into next week. An equivalent pullback in the S&P 500 would be to the 1960 area. Holding my short position in the broad stock market but looking to take profits soon.
We are now also at the center of a reversal period for gold and silver and prices in both metals are rising into it. Because silver exceeded its August high last week and gold didn't, we still have a strong case of intermarket bearish divergence. We are also seeing bearish divergence this week as yesterday silver exceeded its high from last week, but gold did not. All of this points to some kind of pullback now. If gold stays below its August 24 high ($1170.10) it suggests that the cycle trend is still bearish, and a major correction could be forthcoming. If prices break above $1170.10 this week or next, we could still see a reversal, but the correction would likely not be as severe. Either way, a price reversal seems imminent so I am holding on to my short gold position for now. Unlike gold, silver's trend seems to have turned bullish so it may be wise to wait for a correction in both metals and then look for an opportunity to buy. Holding my gold short position and still out of silver.
Crude oil made a top last Friday at $50.92 and prices made a low of $46.80 intraday today. I had been expecting such a correction but from a higher price (closer to $55). The lower top, as well as last week's shift in directional momentum from bearish to mixed bullish and bearish suggests that prices could still go higher. If prices fall to the $44 - $45 area this week or next, I may consider buying for another rally to $55 or higher. Out of crude oil for now.
Last week there were several technical signals suggesting that the broad stock market could be turning bullish. If this is happening it is possible that the August 24 market lows were a significant cycle bottom in all three major market indices (DOW, S&P 500, and NASDAQ) and that the correction of around 16% may be it for now (i.e. at least 6 more weeks). After examining the charts of these indices during the weekend, I am thinking this bullish view is highly probable. I am therefore abandoning the idea of these markets making new short-term lows (below their August lows). It appears the cycle structure of the broad stock market is shifting, and we need to shift our trading strategy as well.
Despite all of this, we are still at the center of a strong reversal period in many markets this week (it may extend into early next week), and the strong rally in equities from last week seems to be leveling off. There is therefore still a high probability of some sort of reversal now which we can use as an opportunity to take profits in our short broad stock market positions. If the cycles have turned bullish then a pullback in the DOW right now may only get to the 16,700 area before rallying again. We will watch for this to happen this week or possibly into next week. An equivalent pullback in the S&P 500 would be to the 1960 area. Holding my short position in the broad stock market but looking to take profits soon.
We are now also at the center of a reversal period for gold and silver and prices in both metals are rising into it. Because silver exceeded its August high last week and gold didn't, we still have a strong case of intermarket bearish divergence. We are also seeing bearish divergence this week as yesterday silver exceeded its high from last week, but gold did not. All of this points to some kind of pullback now. If gold stays below its August 24 high ($1170.10) it suggests that the cycle trend is still bearish, and a major correction could be forthcoming. If prices break above $1170.10 this week or next, we could still see a reversal, but the correction would likely not be as severe. Either way, a price reversal seems imminent so I am holding on to my short gold position for now. Unlike gold, silver's trend seems to have turned bullish so it may be wise to wait for a correction in both metals and then look for an opportunity to buy. Holding my gold short position and still out of silver.
Crude oil made a top last Friday at $50.92 and prices made a low of $46.80 intraday today. I had been expecting such a correction but from a higher price (closer to $55). The lower top, as well as last week's shift in directional momentum from bearish to mixed bullish and bearish suggests that prices could still go higher. If prices fall to the $44 - $45 area this week or next, I may consider buying for another rally to $55 or higher. Out of crude oil for now.
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