CRUDE OIL TRADE ALERT and UPDATE ON THE BROAD STOCK MARKET (3:00 pm EDT)
The broad stock market continues to look very bullish. Today, the S&P 500 made a new all-time high without the DOW or NASDAQ, and this gives us another instance of bearish divergence between the indices. This week's strong general reversal zone ends Friday, and it is getting very late in the medium-term cycles of all three indices. It is therefore highly likely we will see a final top this week and the start of a 2 - 5 week corrective drop to the final cycle bottoms. Should this market continue to rally past Friday, there is another (weaker) reversal zone starting next week (Sept. 2 - 11) that might also correlate with a final top to the medium-term cycles. Either way, we are going to wait for the final bottoms of these cycles as a possible place to buy (as long as the correction doesn't go too deep and switch the trend from bullish to bearish). For now, I am still on the sidelines of this market.
It looks very much like crude oil started a new medium-term cycle with its low of $60.59 (Sept. contract chart) on August 13. A sharp rally from there reached a peak on Monday at $63.23 (in the center of our reversal zone), and prices backed down a bit on Tuesday and today. This looks like a good spot to buy as the beginning of a new cycle is usually bullish. I am going to enter a long position in crude today with an initial stop loss based on a close below $60.50.
The broad stock market continues to look very bullish. Today, the S&P 500 made a new all-time high without the DOW or NASDAQ, and this gives us another instance of bearish divergence between the indices. This week's strong general reversal zone ends Friday, and it is getting very late in the medium-term cycles of all three indices. It is therefore highly likely we will see a final top this week and the start of a 2 - 5 week corrective drop to the final cycle bottoms. Should this market continue to rally past Friday, there is another (weaker) reversal zone starting next week (Sept. 2 - 11) that might also correlate with a final top to the medium-term cycles. Either way, we are going to wait for the final bottoms of these cycles as a possible place to buy (as long as the correction doesn't go too deep and switch the trend from bullish to bearish). For now, I am still on the sidelines of this market.
It looks very much like crude oil started a new medium-term cycle with its low of $60.59 (Sept. contract chart) on August 13. A sharp rally from there reached a peak on Monday at $63.23 (in the center of our reversal zone), and prices backed down a bit on Tuesday and today. This looks like a good spot to buy as the beginning of a new cycle is usually bullish. I am going to enter a long position in crude today with an initial stop loss based on a close below $60.50.
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