MARKETS UPDATE (5:30 pm EST)
In Sunday's blog on the broad stock market I wrote:
"We are now in the center of a strong reversal zone for equities that technically ends this Wednesday (but let's extend that into Friday). There is a good chance we will see a top by the end of this week and then some sort of correction...
If the DOW tops out early this week, a correction might go down to the 24,900 area..."
Well, the DOW did top out on Monday then fell dramatically on Tuesday (nearly 800 points) to bring it close to the 25,000 level. Today regular trading on Wall Street was closed in observance of a day of mourning for George H.W. Bush, but stock index electronic trading remained open and the DOW was up about 100 points at the end of morning trading. The big question now is if this correction will find support over the next few days and serve as a base for another strong rally. Usually a significant sub-cycle correction will last 3-8 days. This one is in its second day and it is already at a strong support level.
As I stated in Sunday's blog, there is a good chance the DOW, S&P 500 and NASDAQ recently started new medium-term cycles (the DOW and S&P 500 on Oct. 29 at 24,122 and 2,603, respectively, and the NASDAQ on Nov. 20 at 6,830). If so, the current correction should not break those lows and this correction should end and another strong rally should start before the end of next week. If this market continues to plunge and those lows stated above are broken then we will have to abandon our bullish view as the market could be in serious trouble. President Trump's announcement on Monday to delay tariffs on China for 90 days gave a big boost to equities until Mr. Trump causally "tweeted" later that a deal with China would "probably" happen and gave himself the nickname "Tariff Man". Wall Street is very nervous right now and does not like such uncertainty so we cannot rule out a major downturn in the broad stock market now. I am still favoring, however, the bullish idea of of new cycles and more rallying into the new year. This would be following the traditional pattern of a "Santa Claus" rally at this time of year. Let's wait and see if the current support around 25,000 will hold. We may look to buy over the next day or two. On the sidelines of the broad stock market for now.
Gold and silver seem to be topping out in this week's reversal zone (which we will extend into Friday). This week's rally so far has not been very strong, and this is a bearish sign. As I discussed in Sunday's blog, both metals may be near the end of their current medium-term cycles and about to complete their final cycle bottoms. We will be watching for these bottoms to buy over the next several weeks. Ideally, gold's final bottom will stay above $1161 as silver pushes below $13.89 for a strong intermarket bullish divergence signal. Still on the sidelines of the precious metals.
Last Thursday's low in crude oil at $49.41 (Jan. contract chart) could have been the final bottom of a medium-term and even longer-term cycle in crude. We are, however, in the center of a reversal zone specifically for crude that extends into next Wednesday, and prices are rallying into it. Let's wait and see if this reversal pushes prices back down before considering a long position. On the sidelines of crude for now.
In Sunday's blog on the broad stock market I wrote:
"We are now in the center of a strong reversal zone for equities that technically ends this Wednesday (but let's extend that into Friday). There is a good chance we will see a top by the end of this week and then some sort of correction...
If the DOW tops out early this week, a correction might go down to the 24,900 area..."
Well, the DOW did top out on Monday then fell dramatically on Tuesday (nearly 800 points) to bring it close to the 25,000 level. Today regular trading on Wall Street was closed in observance of a day of mourning for George H.W. Bush, but stock index electronic trading remained open and the DOW was up about 100 points at the end of morning trading. The big question now is if this correction will find support over the next few days and serve as a base for another strong rally. Usually a significant sub-cycle correction will last 3-8 days. This one is in its second day and it is already at a strong support level.
As I stated in Sunday's blog, there is a good chance the DOW, S&P 500 and NASDAQ recently started new medium-term cycles (the DOW and S&P 500 on Oct. 29 at 24,122 and 2,603, respectively, and the NASDAQ on Nov. 20 at 6,830). If so, the current correction should not break those lows and this correction should end and another strong rally should start before the end of next week. If this market continues to plunge and those lows stated above are broken then we will have to abandon our bullish view as the market could be in serious trouble. President Trump's announcement on Monday to delay tariffs on China for 90 days gave a big boost to equities until Mr. Trump causally "tweeted" later that a deal with China would "probably" happen and gave himself the nickname "Tariff Man". Wall Street is very nervous right now and does not like such uncertainty so we cannot rule out a major downturn in the broad stock market now. I am still favoring, however, the bullish idea of of new cycles and more rallying into the new year. This would be following the traditional pattern of a "Santa Claus" rally at this time of year. Let's wait and see if the current support around 25,000 will hold. We may look to buy over the next day or two. On the sidelines of the broad stock market for now.
Gold and silver seem to be topping out in this week's reversal zone (which we will extend into Friday). This week's rally so far has not been very strong, and this is a bearish sign. As I discussed in Sunday's blog, both metals may be near the end of their current medium-term cycles and about to complete their final cycle bottoms. We will be watching for these bottoms to buy over the next several weeks. Ideally, gold's final bottom will stay above $1161 as silver pushes below $13.89 for a strong intermarket bullish divergence signal. Still on the sidelines of the precious metals.
Last Thursday's low in crude oil at $49.41 (Jan. contract chart) could have been the final bottom of a medium-term and even longer-term cycle in crude. We are, however, in the center of a reversal zone specifically for crude that extends into next Wednesday, and prices are rallying into it. Let's wait and see if this reversal pushes prices back down before considering a long position. On the sidelines of crude for now.
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