MARKETS UPDATE (5:00 pm EDT)
Despite the negative impact of the Fed's first rate hike on equity markets last week, it looks like we may be getting a "Santa Claus" rally after all, albeit a late one. The broad stock market has been rising sharply from last Friday's lows, and the Christmas holiday is just one day away. We also have New Year's Eve and New Year's Day on Thursday and Friday of next week. Can this holiday rally continue into January 1st? It is possible, but we are now entering a minor reversal zone which will continue into next week so it is also possible for the market to turn down again. Directional momentum in the broad stock market is still mixed bullish and bearish so the short-term trend continues to be ambiguous. Cycle analysis gives us two possibilities right now:
1) The first possibility is that we have already begun new medium-term cycles with the Dec.14 lows of the S&P 500 and NASDAQ (1993 and 4871, respectively) and the Dec.18 low in the DOW (at 17,124). If this is the case, the broad stock market is bullish and all three indices could easily make new highs into 2016.
2) The second possibility is that we haven't finished the old cycle yet and the bottom is due within the next several weeks at lows beneath the lows mentioned above. In this situation we could see these indices make new monthly lows before making new yearly highs. Those lows could come next week or ideally in mid-January (the next strong reversal zone). A good target for those lows would be around 16,700 for the DOW and around 1970 (possibly lower) for the S&P 500.
This second possibility basically views the current rally as a "sucker rally". A clear break above the 18,000 level in the DOW and 2120 in the S&P 500 would negate this idea. I should point out, however, that in the current chart of the S&P 500 there is now the near completion of a large "head and shoulders" top formation (a very bearish sign) and that this formation is also neatly configured under the peak of a huge "dome top" which is another strong bearish signal (until the market breaks above the dome). The line of this dome is currently around 2100 so any clear break above there will start to make this picture more bullish. Based on all of this analysis, I am remaining on the sidelines of the broad stock market for now with a careful eye on the 2100 -2120 level in the S&P 500 and the 17,900 - 18,000 level in the DOW and also on the rest of this month (Christmas through new Year's Eve) and mid-January as potential turning points for the market.
Gold and silver prices seem to be stable and holding above their December lows. Those lows still look like the medium-term cycle bottoms so I am holding my long position in both metals for now. If prices can stay buoyant through next week, we could see more rallying with a top around mid-January. The direction of precious metals could be affected by what happens to the U.S. dollar over the next several weeks. Last week the dollar attempted a "comeback" after its breakdown earlier in the month. The U.S. Dollar Index jumped sharply to the 99 level but has since backed off. The dollar has an enormous amount of resistance to overcome before it can break out and clear that 100 mark. This downward pressure on the dollar now should (at least in the short-term) favor higher gold and silver prices.
Crude oil prices continue to edge lower this week but seem to be leveling off near $34. The end of this current medium-term cycle in crude is due any time over the next six weeks, but in terms of timing, the ideal bottom would be in mid-January. We will watch for a bottom to buy then, possibly below $30. On the sidelines of crude oil for now.
I would like to take this opportunity to wish all the blog readers a
MERRY CHRISTMAS AND A HAPPY AND PROSPEROUS NEW YEAR !
Despite the negative impact of the Fed's first rate hike on equity markets last week, it looks like we may be getting a "Santa Claus" rally after all, albeit a late one. The broad stock market has been rising sharply from last Friday's lows, and the Christmas holiday is just one day away. We also have New Year's Eve and New Year's Day on Thursday and Friday of next week. Can this holiday rally continue into January 1st? It is possible, but we are now entering a minor reversal zone which will continue into next week so it is also possible for the market to turn down again. Directional momentum in the broad stock market is still mixed bullish and bearish so the short-term trend continues to be ambiguous. Cycle analysis gives us two possibilities right now:
1) The first possibility is that we have already begun new medium-term cycles with the Dec.14 lows of the S&P 500 and NASDAQ (1993 and 4871, respectively) and the Dec.18 low in the DOW (at 17,124). If this is the case, the broad stock market is bullish and all three indices could easily make new highs into 2016.
2) The second possibility is that we haven't finished the old cycle yet and the bottom is due within the next several weeks at lows beneath the lows mentioned above. In this situation we could see these indices make new monthly lows before making new yearly highs. Those lows could come next week or ideally in mid-January (the next strong reversal zone). A good target for those lows would be around 16,700 for the DOW and around 1970 (possibly lower) for the S&P 500.
This second possibility basically views the current rally as a "sucker rally". A clear break above the 18,000 level in the DOW and 2120 in the S&P 500 would negate this idea. I should point out, however, that in the current chart of the S&P 500 there is now the near completion of a large "head and shoulders" top formation (a very bearish sign) and that this formation is also neatly configured under the peak of a huge "dome top" which is another strong bearish signal (until the market breaks above the dome). The line of this dome is currently around 2100 so any clear break above there will start to make this picture more bullish. Based on all of this analysis, I am remaining on the sidelines of the broad stock market for now with a careful eye on the 2100 -2120 level in the S&P 500 and the 17,900 - 18,000 level in the DOW and also on the rest of this month (Christmas through new Year's Eve) and mid-January as potential turning points for the market.
Gold and silver prices seem to be stable and holding above their December lows. Those lows still look like the medium-term cycle bottoms so I am holding my long position in both metals for now. If prices can stay buoyant through next week, we could see more rallying with a top around mid-January. The direction of precious metals could be affected by what happens to the U.S. dollar over the next several weeks. Last week the dollar attempted a "comeback" after its breakdown earlier in the month. The U.S. Dollar Index jumped sharply to the 99 level but has since backed off. The dollar has an enormous amount of resistance to overcome before it can break out and clear that 100 mark. This downward pressure on the dollar now should (at least in the short-term) favor higher gold and silver prices.
Crude oil prices continue to edge lower this week but seem to be leveling off near $34. The end of this current medium-term cycle in crude is due any time over the next six weeks, but in terms of timing, the ideal bottom would be in mid-January. We will watch for a bottom to buy then, possibly below $30. On the sidelines of crude oil for now.
I would like to take this opportunity to wish all the blog readers a
MERRY CHRISTMAS AND A HAPPY AND PROSPEROUS NEW YEAR !
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