MARKETS UPDATE (11:30 pm EDST)
To simplify our analysis of the broad stock market, I am from this point on going to focus mainly on the DOW and S&P 500. I may, however, mention the NASDAQ in trading suggestions as it generally moves in tandem with the other two indices.
The DOW's current medium-term cycle began with its low of 29,653 on June 16. The S&P 500 started its current medium-term cycle on June 17 with its low of 3,637. Both cycles rallied strongly and made significant sub-cycle tops on Aug. 16 (the DOW at 34,281 and the S&P 500 at 4,325). They both then corrected down sharply to significant sub-cycle bottoms last week (the DOW got to 31,048 and the S&P 500 reached 3,887), The subsequent sharp rally from those lows was looking quite bullish - until today. Investors were rattled after data released today showed that inflation had not moderated over the last month - dashing hopes that the Fed might slow its pace of interest rate increases at next week's FOMC meeting.
Our concern now is whether or not today's sell-off will gain any legs. The DOW broke briefly slightly below last week's low but then closed just above it. The S&P 500 (and NASDAQ) did not breach last week's lows. If these indices break these lows tomorrow and continue down, it will be a bearish sign and will open up the possibility of the trend turning bearish and these indices falling below the start of their current medium-term cycles (the June 16-17 lows).
We are technically in a reversal zone from now through Oct. 6, so equity markets could be very volatile over the next three weeks. Sept. 23 -26 would be the center point of this reversal period (the "eye of the storm"), and that could turn out to be a major turning point (a top or bottom). If today's panic sell-off continues, we may see an early final bottom to these current medium-term cycles near that time. But if this market snaps back quickly from today's plunge, we could see the resumption of a strong rally into the end of September and the possibility of a new all-time high (or at least a break above those Aug. 16 highs). We will remain on the sidelines of the broad stock market for now.
The likelihood of more inflation and a strongly hawkish Fed today boosted the U.S. Dollar Index as it depressed gold and silver prices. Let's analyze the current medium-term cycles in both metals.
Gold started its current medium-term cycle (and probably a longer-term 16-month cycle as well) with its low of $1681 on July 21. It essentially made a double-bottom to this low at $1689 on Sept. 1. If this labeling is correct, this market should be very bullish now and ready to rally strongly. Prices have been rallying since Sept. 1, but most of that gain was lost with today's price dip, which held above $1700. We don't want to see prices start to close below $1681 as that would suggest that the short-term trend is turning bearish. If prices hold above $1681, we will think about going long for a potentially strong rally that might go to $1900 or even higher over the next month or two.
[We note here, however, that we don't expect any rally to exceed $2000. That's because the final top to a long-term 23 year cycle in gold most likely happened in Aug. 2020 at $2070 (see Gold Update on the Homepage). This means we will want to reverse any long positions and short sell at the top of any strong rally now to ride down a steep corrective drop to the final 23 year cycle bottom that is due around 2023 - 2024. That correction could go down to $1000.] For now, we are still on the sidelines of gold.
Silver likely started its current medium-term cycle with its July 14 low at $18.15. Unlike gold, silver prices have gone below the start of this cycle. This means the cycle has probably turned bearish and is headed lower towards its final bottom due many weeks from now. The other possibility is that silver started a new medium-term cycle (and possibly a longer-term cycle) with its Sept. 1 low at $17.58. If that's the case, silver could be very bullish and may have already started a long-term rally that could take prices as high as $30. A break and close above $20.85 would support this bullish view. If prices can't exceed $20.85 soon, however, we will have to go with the bearish scenario. Let's remain on the sidelines of silver for now.
I will analyze the crude oil market tomorrow.
To simplify our analysis of the broad stock market, I am from this point on going to focus mainly on the DOW and S&P 500. I may, however, mention the NASDAQ in trading suggestions as it generally moves in tandem with the other two indices.
The DOW's current medium-term cycle began with its low of 29,653 on June 16. The S&P 500 started its current medium-term cycle on June 17 with its low of 3,637. Both cycles rallied strongly and made significant sub-cycle tops on Aug. 16 (the DOW at 34,281 and the S&P 500 at 4,325). They both then corrected down sharply to significant sub-cycle bottoms last week (the DOW got to 31,048 and the S&P 500 reached 3,887), The subsequent sharp rally from those lows was looking quite bullish - until today. Investors were rattled after data released today showed that inflation had not moderated over the last month - dashing hopes that the Fed might slow its pace of interest rate increases at next week's FOMC meeting.
Our concern now is whether or not today's sell-off will gain any legs. The DOW broke briefly slightly below last week's low but then closed just above it. The S&P 500 (and NASDAQ) did not breach last week's lows. If these indices break these lows tomorrow and continue down, it will be a bearish sign and will open up the possibility of the trend turning bearish and these indices falling below the start of their current medium-term cycles (the June 16-17 lows).
We are technically in a reversal zone from now through Oct. 6, so equity markets could be very volatile over the next three weeks. Sept. 23 -26 would be the center point of this reversal period (the "eye of the storm"), and that could turn out to be a major turning point (a top or bottom). If today's panic sell-off continues, we may see an early final bottom to these current medium-term cycles near that time. But if this market snaps back quickly from today's plunge, we could see the resumption of a strong rally into the end of September and the possibility of a new all-time high (or at least a break above those Aug. 16 highs). We will remain on the sidelines of the broad stock market for now.
The likelihood of more inflation and a strongly hawkish Fed today boosted the U.S. Dollar Index as it depressed gold and silver prices. Let's analyze the current medium-term cycles in both metals.
Gold started its current medium-term cycle (and probably a longer-term 16-month cycle as well) with its low of $1681 on July 21. It essentially made a double-bottom to this low at $1689 on Sept. 1. If this labeling is correct, this market should be very bullish now and ready to rally strongly. Prices have been rallying since Sept. 1, but most of that gain was lost with today's price dip, which held above $1700. We don't want to see prices start to close below $1681 as that would suggest that the short-term trend is turning bearish. If prices hold above $1681, we will think about going long for a potentially strong rally that might go to $1900 or even higher over the next month or two.
[We note here, however, that we don't expect any rally to exceed $2000. That's because the final top to a long-term 23 year cycle in gold most likely happened in Aug. 2020 at $2070 (see Gold Update on the Homepage). This means we will want to reverse any long positions and short sell at the top of any strong rally now to ride down a steep corrective drop to the final 23 year cycle bottom that is due around 2023 - 2024. That correction could go down to $1000.] For now, we are still on the sidelines of gold.
Silver likely started its current medium-term cycle with its July 14 low at $18.15. Unlike gold, silver prices have gone below the start of this cycle. This means the cycle has probably turned bearish and is headed lower towards its final bottom due many weeks from now. The other possibility is that silver started a new medium-term cycle (and possibly a longer-term cycle) with its Sept. 1 low at $17.58. If that's the case, silver could be very bullish and may have already started a long-term rally that could take prices as high as $30. A break and close above $20.85 would support this bullish view. If prices can't exceed $20.85 soon, however, we will have to go with the bearish scenario. Let's remain on the sidelines of silver for now.
I will analyze the crude oil market tomorrow.
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