We are now in our new reversal zone (May 11 - 20) and approaching its center (Thursday/Friday). All three broad stock market indices (DOW, S&P 500, NASDAQ) made new weekly highs on Monday, but only the NASDAQ made a new cycle high so we did get a bearish divergence signal. Equities fell strongly yesterday and today so Monday could have been a significant top. Let's see if prices can now fall close to our target areas (22,000 in the DOW and 2,600 in the S&P 500). If they do and find some support there, we may look to buy. But markets are very unpredictable right now. There is still time for these indices to edge higher before this reversal zone is over. If they do that, we may be looking for a top to sell short later this week or early next.
Longer-term, we are still on track for more rallying into the summer with the NASDAQ possibly making a new all-time high (but probably not the DOW and S&P 500). Still on the sidelines of the broad stock market.
Gold and silver prices are edging a bit higher this week, but both metals seem reluctant to rally strongly. Both are close to making a new weekly high, but if one exceeds its April high without the other, we could have a bearish divergence signal in the middle of the current reversal zone, and that could lead to a reversal back down. We are still watching for a significant sub-cycle correction to buy both metals. Our target areas remain around $1600 for gold and $14 for silver. Staying on the sidelines of gold and silver for now.
There's a good chance that crude oil started a new medium-term cycle with its low of $6.50 (June contract chart) on April 21. If so, prices could make a significant sub-cycle top in our current reversal zone. If prices can get up to the $36 area and stall this week or early next week, it may be a good opportunity to sell short for a brief but possibly steep short-term correction down. On the sidelines of crude for now.