The broad stock market wavered a bit today - the first day after a long holiday week-end - but closed the day with losses. All three of our market indices (DOW, S&P 500, NASDAQ) made new weekly lows this morning, so we are not going to get a bullish divergence signal this week. Nevertheless, a significant sub-cycle bottom is due now and could be forming today or tomorrow. If this market continues to fall past Wednesday, however, it would likely indicate that a sub-cycle trough is being bypassed and the current medium-term cycle is turning bearish. That would be confirmed if these indices fall below their June 16 (NASDAQ) and June 17 (DOW and S&P 500) lows. Even if we get a reversal now, these indices have fallen low enough for us to question the bullishness of any subsequent rally. Let's stay on the sidelines of this market for now, or at least until we see more signs of a bottom and reversal back up.
Last week we had a bullish divergence signal between gold and silver. Both metals rallied in early trading today but then dropped back down to close with losses. Today and the next three days as well as early next week could see pivot points for gold and silver, so we may see one or two reversals in that time frame. We also enter a major reversal zone for these metals next Monday (Sept. 12 - 20). Thus this week and next could be a bit of a roller coaster ride in prices. If we get a significant bottom next week in either metal, it may be a good spot to buy. For now, we are staying on the sidelines as the cycle patterns in this market are still not clear.
The U.S. Dollar Index seems to be "breaking out" to a new 20 year high as it closed above 110 today. There are no major reversal zones for currencies until later this month, so this index may only be hampered by minor corrective dips over the next two weeks. A bullish dollar will usually depress gold and silver prices.
Like gold and silver, crude oil prices rallied sharply in early trading today, but then fell back and lost all of their early gain near the end of the trading day. This is bearish behavior. Prices could now challenge or push lower than the Aug. 16 low of $85.37 (Oct. contract chart) to form a final medium-term cycle bottom. As I wrote in last Thursday's blog on crude (referring to the $85.98 low that day):
"This could be a "double-bottom" to the Aug. 16 low, or it could go lower for a deeper bottom by Sept. 6 (next Tuesday). Let's wait until after Labor Day to see where the price is headed."
Well, here we are on Sept. 6, and today's low at $86.16 still hasn't broken $85.37, but crude looks like it could go lower. There's a major reversal zone specifically for crude coming up at the end of next week (Sept 16 -26). If prices don't stabilize and form a bottom this week, we may see the final bottom form in that reversal zone. Let's remain on the sidelines of crude for now.