UPDATES on GOLD, SILVER, and the BROAD STOCK MARKET (9:00 pm EDT)
It is late in the current medium-term cycle of gold. This means the final top in the cycle is due, and it may have already happened with last week's all-time high at $2530. We also note that the final top in a longer-term 50 week cycle is also due and will be simultaneous with the medium-term cycle top. Once this top is in, we expect a sharp correction down to at least $2400, and possibly as low as $2250. Wherever the low ends up, that will be a good spot to buy as it would be the final bottom to both the medium-term and 50 week cycles and thus the start of new ones.
The question at the moment is whether or not last week's high was the final top. Gold prices have been rallying a bit this week and challenging that high. But we note that we are now inside another strong reversal zone (Aug. 23 - Sept. 6) that affects all markets. Even if gold makes a new all-time high over the next several days, a top could be imminent, and we still have a strong bearish divergence signal with silver, which is well below its recent highs from May and July. Today (Wednesday) could be a significant pivot point as prices took a sharp turn down in both metals.
Today's sharp drop in silver is good news for our short position in this metal (we are still on the sidelines of gold), but we have to see prices move lower and break back below the 15-day and 45-day moving averages to confirm silver's bearish trend. As I mentioned in recent blogs, it's still possible silver could have started a new medium-term cycle with its recent low on Aug. 8 ($26.52). If that's the case, silver could be bullish and prices could rally strongly now to challenge the May highs around $32. It seems more likely, however, that silver's current medium-term cycle began with the low of $28.62 on June 26. Because prices moved well below that into early August, this cycle is technically bearish and prices should continue lower into the final bottom of the cycle that would be due 4 - 12 weeks from now. If this labeling is correct, silver's recent rally should roll over soon. That may be starting today as prices dropped sharply from resistance around $30. I am holding my short position in silver today (which I entered on Aug. 1) as I wait to see if prices will move lower over the next several days.
The broad stock market indices (DOW, S&P 500, NASDAQ) also fell today. All three recently peaked in a reversal zone (the DOW and S&P 500 on Monday, and the NASDAQ last Thursday), and we note that the DOW made a new all-time high on Monday without the other two indices. This gives us a strong bearish divergence signal inside a reversal zone. A sharp correction down could be imminent, and it may have started today. Nevertheless, all three medium-term cycles are young (having all started from their Aug. 5 lows), and young cycles are usually bullish. It all depends on whether we are currently in a long-term cycle of 4 years or 6 years (see my IMPORTANT BROAD STOCK MARKET UPDATE from Aug. 22). If a 4-year cycle is playing out, this market should turn down now and start a 16% - 26% correction down to the final 4-year cycle bottom into the end of the year. But if we are in a 6-year cycle, these indices could be much more bullish with all three potentially rallying well above their all-time highs into next year. This latter bullish scenario is looking more and more probable, so I am going to stick with the same trading strategy I described in the Aug. 22 update:
"...I am going to play it safe here and probably look to cover my short DOW position if this index [moves down and] pauses near any of these support lines (i.e. 40,300, 40,000 and 39,000). If the market continues to rally, I will also unload my short position if ALL THREE indices make new all-time highs."
For now, I am still holding my short position in the DOW.
It is late in the current medium-term cycle of gold. This means the final top in the cycle is due, and it may have already happened with last week's all-time high at $2530. We also note that the final top in a longer-term 50 week cycle is also due and will be simultaneous with the medium-term cycle top. Once this top is in, we expect a sharp correction down to at least $2400, and possibly as low as $2250. Wherever the low ends up, that will be a good spot to buy as it would be the final bottom to both the medium-term and 50 week cycles and thus the start of new ones.
The question at the moment is whether or not last week's high was the final top. Gold prices have been rallying a bit this week and challenging that high. But we note that we are now inside another strong reversal zone (Aug. 23 - Sept. 6) that affects all markets. Even if gold makes a new all-time high over the next several days, a top could be imminent, and we still have a strong bearish divergence signal with silver, which is well below its recent highs from May and July. Today (Wednesday) could be a significant pivot point as prices took a sharp turn down in both metals.
Today's sharp drop in silver is good news for our short position in this metal (we are still on the sidelines of gold), but we have to see prices move lower and break back below the 15-day and 45-day moving averages to confirm silver's bearish trend. As I mentioned in recent blogs, it's still possible silver could have started a new medium-term cycle with its recent low on Aug. 8 ($26.52). If that's the case, silver could be bullish and prices could rally strongly now to challenge the May highs around $32. It seems more likely, however, that silver's current medium-term cycle began with the low of $28.62 on June 26. Because prices moved well below that into early August, this cycle is technically bearish and prices should continue lower into the final bottom of the cycle that would be due 4 - 12 weeks from now. If this labeling is correct, silver's recent rally should roll over soon. That may be starting today as prices dropped sharply from resistance around $30. I am holding my short position in silver today (which I entered on Aug. 1) as I wait to see if prices will move lower over the next several days.
The broad stock market indices (DOW, S&P 500, NASDAQ) also fell today. All three recently peaked in a reversal zone (the DOW and S&P 500 on Monday, and the NASDAQ last Thursday), and we note that the DOW made a new all-time high on Monday without the other two indices. This gives us a strong bearish divergence signal inside a reversal zone. A sharp correction down could be imminent, and it may have started today. Nevertheless, all three medium-term cycles are young (having all started from their Aug. 5 lows), and young cycles are usually bullish. It all depends on whether we are currently in a long-term cycle of 4 years or 6 years (see my IMPORTANT BROAD STOCK MARKET UPDATE from Aug. 22). If a 4-year cycle is playing out, this market should turn down now and start a 16% - 26% correction down to the final 4-year cycle bottom into the end of the year. But if we are in a 6-year cycle, these indices could be much more bullish with all three potentially rallying well above their all-time highs into next year. This latter bullish scenario is looking more and more probable, so I am going to stick with the same trading strategy I described in the Aug. 22 update:
"...I am going to play it safe here and probably look to cover my short DOW position if this index [moves down and] pauses near any of these support lines (i.e. 40,300, 40,000 and 39,000). If the market continues to rally, I will also unload my short position if ALL THREE indices make new all-time highs."
For now, I am still holding my short position in the DOW.
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