MARKETS UPDATE (5:30 pm EST)
In yesterday's blog on the broad stock market I wrote: "The next seven trading days will tell us if we are going to get a top to sell short or a market washout towards a bottom that could break below 17,000 in the DOW."
There is another strong possibility now, and that would be a correction down to somewhere between 17,200 - 17,700 (we are in that range today) over the next seven trading days followed by another strong rally. If that pattern unfolds we would pay close attention to how high the rally goes. A break to new yearly highs by all three market indices (DOW, S&P 500 and NASDAQ) would mean the market is turning bullish. However, if only one or two of these indices (or none) make new highs, the market could turn down again and become bearish. If at any time the DOW breaks below 17,000 the cycle would turn bearish and the market would likely be pointed down for at least five more weeks (and possibly 2-3 months). Over the next two weeks (up to April 15), a lot of money will be flowing into investment accounts for tax purposes, so it is hard to imagine the stock market plunging in this time frame (although it is possible). My bias, therefore, is to see a bottom in the range mentioned above and a subsequent rally. I may look to go long over the next several days if the DOW can make a new weekly low above 17,200. Still on the sidelines.
Entering a long position in silver yesterday turned out to be good timing as both gold and silver turned up and rallied strongly today (silver was up nearly 2%). Because we just started new short-term cycles in both gold and silver and the start of a new cycle is usually bullish, this rally in precious metals should continue higher. We need to keep in mind, however, that we are now in a strong reversal zone for this market so any new monthly highs over the next 6-7 trading days could be a top that could be followed by a significant reversal. We will keep this in mind as we watch this potential rally unfold. Holding my long positions in gold and silver.
The cycle picture for crude oil is still not clear. Last week's price surge to over $52 was likely due to the escalating civil war in Yemen (and the intervention of Saudi Arabia and other countries including the United States). This is just the latest conflict in an increasingly unstable, chaotic and volatile Middle East. Conflicts in the Middle East are always a potential "wild card" in the analysis of crude oil markets. On top of this, it seems like crude prices have recently (over the last six months) been manipulated down as a political strategy to cripple Russia's economy in sanctions against Russia over the Ukraine crisis. Crude prices are very low, but can they go lower? Yes, they can. But if we are at the start of a new long-term cycle in crude (from mid-March), we could see a long (several months or more) and substantial rally first. Any close now above $55 would suggest this is happening. Increasing turmoil in the Middle East could drive this rally. A rally over the next two or three weeks that fails to get above $55, however, would be a bearish sign and could signal that the market is going to remain bearish with lower prices ahead. If that happens, I will look to sell the market short. Out of this market.for now.
In yesterday's blog on the broad stock market I wrote: "The next seven trading days will tell us if we are going to get a top to sell short or a market washout towards a bottom that could break below 17,000 in the DOW."
There is another strong possibility now, and that would be a correction down to somewhere between 17,200 - 17,700 (we are in that range today) over the next seven trading days followed by another strong rally. If that pattern unfolds we would pay close attention to how high the rally goes. A break to new yearly highs by all three market indices (DOW, S&P 500 and NASDAQ) would mean the market is turning bullish. However, if only one or two of these indices (or none) make new highs, the market could turn down again and become bearish. If at any time the DOW breaks below 17,000 the cycle would turn bearish and the market would likely be pointed down for at least five more weeks (and possibly 2-3 months). Over the next two weeks (up to April 15), a lot of money will be flowing into investment accounts for tax purposes, so it is hard to imagine the stock market plunging in this time frame (although it is possible). My bias, therefore, is to see a bottom in the range mentioned above and a subsequent rally. I may look to go long over the next several days if the DOW can make a new weekly low above 17,200. Still on the sidelines.
Entering a long position in silver yesterday turned out to be good timing as both gold and silver turned up and rallied strongly today (silver was up nearly 2%). Because we just started new short-term cycles in both gold and silver and the start of a new cycle is usually bullish, this rally in precious metals should continue higher. We need to keep in mind, however, that we are now in a strong reversal zone for this market so any new monthly highs over the next 6-7 trading days could be a top that could be followed by a significant reversal. We will keep this in mind as we watch this potential rally unfold. Holding my long positions in gold and silver.
The cycle picture for crude oil is still not clear. Last week's price surge to over $52 was likely due to the escalating civil war in Yemen (and the intervention of Saudi Arabia and other countries including the United States). This is just the latest conflict in an increasingly unstable, chaotic and volatile Middle East. Conflicts in the Middle East are always a potential "wild card" in the analysis of crude oil markets. On top of this, it seems like crude prices have recently (over the last six months) been manipulated down as a political strategy to cripple Russia's economy in sanctions against Russia over the Ukraine crisis. Crude prices are very low, but can they go lower? Yes, they can. But if we are at the start of a new long-term cycle in crude (from mid-March), we could see a long (several months or more) and substantial rally first. Any close now above $55 would suggest this is happening. Increasing turmoil in the Middle East could drive this rally. A rally over the next two or three weeks that fails to get above $55, however, would be a bearish sign and could signal that the market is going to remain bearish with lower prices ahead. If that happens, I will look to sell the market short. Out of this market.for now.
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