MARKETS UPDATE (4:15 pm EDT)
Last Thursday I repeated a statement I had made on the 25th of August which was: " Any rally in the DOW should encounter resistance in the 16,500 area, and if that is breached, there is extremely strong resistance at 17,000. A rebound rally should not get beyond these points, and if approached they may be turning points for a reversal and a resumption of the correction. (Similar resistance is at 1980 and 2050 in the S&P 500.)" This prediction seems to be playing out as the DOW reached 16,669 and the S&P 500 hit 1993 on Friday, and these indices are now falling steeply again. Our timing was good as we added to our short positions in the broad stock market on Thursday afternoon. As I've stated in recent blogs, cycle analysis shows that the broad stock market is likely pointing down at least until the end of October. Therefore, the final bottom to this correction is a ways off, and the markets could go considerably lower. The correction in the DOW reached 16% with last Monday's low of 15,370, but it could easily go to 20% or even more before the current cycle bottoms. This market is very volatile right now so large surges up and down can be expected. The next strong turning point could be the end of this week into early next week so we will watch that carefully. I would like to see the 15,370 low in the DOW taken out soon to verify our bearish view. If that doesn't happen, we could see another surge up towards our 17,000 stop loss area before the markets resume a more serious correction. Holding all short positions for now.
Cycle analysis still suggests that gold and silver are in the early stages of a new medium-term cycle, but this cycle looks bearish and is pointing down. That means we should be looking to sell short the top of any rally. Gold made a new high at $1170 last week and then fell sharply. That could have been the turning point, but gold is rallying again, and now through next Monday is another strong reversal zone for both gold and silver so we may get another opportunity to sell this market short. On the sidelines of precious metals and waiting for a signal to sell short.
One of the most frustrating things for a market analyst and trader is to accurately foresee an important turning point in a market cycle and then miss the trade. Any readers who have been following my crude oil analysis over the last month or so will know that I've been anticipating an important cycle bottom in crude for some time. Last Thursday I wrote: " Crude oil prices are finally starting to rise as a cycle bottom (and the start of a new cycle) is due this week. Monday's low at $37.75 could be that bottom. Normally I would be looking to buy this bottom, but the broad stock market's ongoing correction and volatility is making me reluctant to do so." Oh well, even experienced traders can get the "jitters". Oil prices surged to a high of $49.30 yesterday; however, they are falling today with the broad stock market so my fears about equities dragging down crude prices may be valid. It appears that crude took the opportunity during the broad stock market's relief rally to start a new cycle with a strong rally of its own. A normal price target for this rally would be around $50 - $53. We are practically there already so it is probably too late to go long. Crude seems to be taking its cues from the broad stock market so if equities continue their downward correction, we may try and short sell crude oil as well. On the sidelines of crude for now.
Last Thursday I repeated a statement I had made on the 25th of August which was: " Any rally in the DOW should encounter resistance in the 16,500 area, and if that is breached, there is extremely strong resistance at 17,000. A rebound rally should not get beyond these points, and if approached they may be turning points for a reversal and a resumption of the correction. (Similar resistance is at 1980 and 2050 in the S&P 500.)" This prediction seems to be playing out as the DOW reached 16,669 and the S&P 500 hit 1993 on Friday, and these indices are now falling steeply again. Our timing was good as we added to our short positions in the broad stock market on Thursday afternoon. As I've stated in recent blogs, cycle analysis shows that the broad stock market is likely pointing down at least until the end of October. Therefore, the final bottom to this correction is a ways off, and the markets could go considerably lower. The correction in the DOW reached 16% with last Monday's low of 15,370, but it could easily go to 20% or even more before the current cycle bottoms. This market is very volatile right now so large surges up and down can be expected. The next strong turning point could be the end of this week into early next week so we will watch that carefully. I would like to see the 15,370 low in the DOW taken out soon to verify our bearish view. If that doesn't happen, we could see another surge up towards our 17,000 stop loss area before the markets resume a more serious correction. Holding all short positions for now.
Cycle analysis still suggests that gold and silver are in the early stages of a new medium-term cycle, but this cycle looks bearish and is pointing down. That means we should be looking to sell short the top of any rally. Gold made a new high at $1170 last week and then fell sharply. That could have been the turning point, but gold is rallying again, and now through next Monday is another strong reversal zone for both gold and silver so we may get another opportunity to sell this market short. On the sidelines of precious metals and waiting for a signal to sell short.
One of the most frustrating things for a market analyst and trader is to accurately foresee an important turning point in a market cycle and then miss the trade. Any readers who have been following my crude oil analysis over the last month or so will know that I've been anticipating an important cycle bottom in crude for some time. Last Thursday I wrote: " Crude oil prices are finally starting to rise as a cycle bottom (and the start of a new cycle) is due this week. Monday's low at $37.75 could be that bottom. Normally I would be looking to buy this bottom, but the broad stock market's ongoing correction and volatility is making me reluctant to do so." Oh well, even experienced traders can get the "jitters". Oil prices surged to a high of $49.30 yesterday; however, they are falling today with the broad stock market so my fears about equities dragging down crude prices may be valid. It appears that crude took the opportunity during the broad stock market's relief rally to start a new cycle with a strong rally of its own. A normal price target for this rally would be around $50 - $53. We are practically there already so it is probably too late to go long. Crude seems to be taking its cues from the broad stock market so if equities continue their downward correction, we may try and short sell crude oil as well. On the sidelines of crude for now.
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