MARKETS UPDATE (7:45 pm EST)
People following this blog over the last few weeks know that I am on the verge of going long in several markets now (gold, silver, crude oil and the broad stock market) and am waiting for an ideal entry point to buy. Strategically I am focused on the end of this month as the next likely timing zone or turning point for a major reversal in all of these markets. This is important to keep in mind in the discussion of the markets below.
Many technical indicators and chart patterns are now clearly showing gold and silver to be in a "breakout" mode. Directional momentum in both gold and silver is now nearly 100% bullish as prices have broken important resistance areas over the last two weeks. Both metals, however, are overbought, and cycle analysis as well as some short-term technical signals are suggesting a small pullback over the next week or two. Ideally I would like to see a brief pullback for a bottom to buy at the end of next week, but if prices keep rising we may instead see a top into that time frame and then a correction into March. The pullback could go as low as $1270 - $1280 in gold and $20 - $21 in silver, which would be ideal entry points to buy these metals. I should mention here that many technical studies are now suggesting that the final bottom in the long-term cycle of gold could be in (that would be the $1183 low of June 27, 2013), and if so, the precious metals are set to rise dramatically and make new all-time highs over the next several years. Still on the sidelines of precious metals and waiting to buy.
In my last blog I stated that I wanted to see more bullish signals in the DOW before going long in the broad stock market. We are getting that this week, but the DOW is still not 100% bullish (it is now mixed bullish and bearish). The NASDAQ and some contract charts for the S&P 500, however, are 100% bullish which continues to suggest an underlying strength in this market. So this market does appear to be turning bullish, but because the end of next week could be a major market turning point, we need to choose any entry point carefully. I am reluctant to trade until we are closer to that time frame. One important thing to keep in mind here is that the DOW needs to break above its Dec.31 high at 16,588 soon to confirm that this market is bullish; otherwise we may be seeing a setup for another significant correction. Still on the sidelines of this market.
Crude oil prices continue to rise this week due to the unusually persistent cold weather in many parts of the U.S.
In my last blog I stated that crude should be taking a short-term correction soon and I speculated that the top could have been at the Feb.12 high of $101.38. Prices are now greatly exceeding that high (today's prices approached $104), so this market is very bullish and we may be seeing a top to this rally into the end of next week and then a correction into March. An alternative scenario would be a sudden sharp decline starting anytime now and bottoming into the end of the month. Either way we will be looking to go long on any correction as long as momentum remains bullish. Still out of this market for now.
I mentioned in my last blog that the U.S. Dollar Index had dropped down to strong support at 80 and could possibly react with a short-term bounce that might push precious metal prices down a bit and give us a good entry point to buy. That 80 level appears to be holding and there are some short-term technical signals today suggesting a brief relief rally in the dollar. Directional momentum in the dollar is now nearly 100% bearish so any rally here would probably be weak and possibly followed by another downturn that could break through the 80 level. If such a breakdown occurs it would likely kick start a very strong rally in gold and silver.
Considering the potential bullishness of precious metals, crude oil, and the broad stock market right now, one might pose the question: What could cause all of these markets to rise simultaneously? There may be several answers to this, but one factor that could have a bullish impact on many markets would be the Federal Reserve cutting back on QE tapering (i.e. tapering the "taper"). New Federal Reserve Chairwoman Janet Yellen has a reputation for being dovish, and in recent statements she has said that continued tapering is dependent on supportive data from the economy. I am speculating here, of course, but there are many financial analysts these days who doubt the ability of the Fed to maintain austerity measures over the long-term. We will have to wait and see if they can. If economic statistics start to turn gloomy, we may see the U.S. Treasury firing up the printing presses again before the year is over.
People following this blog over the last few weeks know that I am on the verge of going long in several markets now (gold, silver, crude oil and the broad stock market) and am waiting for an ideal entry point to buy. Strategically I am focused on the end of this month as the next likely timing zone or turning point for a major reversal in all of these markets. This is important to keep in mind in the discussion of the markets below.
Many technical indicators and chart patterns are now clearly showing gold and silver to be in a "breakout" mode. Directional momentum in both gold and silver is now nearly 100% bullish as prices have broken important resistance areas over the last two weeks. Both metals, however, are overbought, and cycle analysis as well as some short-term technical signals are suggesting a small pullback over the next week or two. Ideally I would like to see a brief pullback for a bottom to buy at the end of next week, but if prices keep rising we may instead see a top into that time frame and then a correction into March. The pullback could go as low as $1270 - $1280 in gold and $20 - $21 in silver, which would be ideal entry points to buy these metals. I should mention here that many technical studies are now suggesting that the final bottom in the long-term cycle of gold could be in (that would be the $1183 low of June 27, 2013), and if so, the precious metals are set to rise dramatically and make new all-time highs over the next several years. Still on the sidelines of precious metals and waiting to buy.
In my last blog I stated that I wanted to see more bullish signals in the DOW before going long in the broad stock market. We are getting that this week, but the DOW is still not 100% bullish (it is now mixed bullish and bearish). The NASDAQ and some contract charts for the S&P 500, however, are 100% bullish which continues to suggest an underlying strength in this market. So this market does appear to be turning bullish, but because the end of next week could be a major market turning point, we need to choose any entry point carefully. I am reluctant to trade until we are closer to that time frame. One important thing to keep in mind here is that the DOW needs to break above its Dec.31 high at 16,588 soon to confirm that this market is bullish; otherwise we may be seeing a setup for another significant correction. Still on the sidelines of this market.
Crude oil prices continue to rise this week due to the unusually persistent cold weather in many parts of the U.S.
In my last blog I stated that crude should be taking a short-term correction soon and I speculated that the top could have been at the Feb.12 high of $101.38. Prices are now greatly exceeding that high (today's prices approached $104), so this market is very bullish and we may be seeing a top to this rally into the end of next week and then a correction into March. An alternative scenario would be a sudden sharp decline starting anytime now and bottoming into the end of the month. Either way we will be looking to go long on any correction as long as momentum remains bullish. Still out of this market for now.
I mentioned in my last blog that the U.S. Dollar Index had dropped down to strong support at 80 and could possibly react with a short-term bounce that might push precious metal prices down a bit and give us a good entry point to buy. That 80 level appears to be holding and there are some short-term technical signals today suggesting a brief relief rally in the dollar. Directional momentum in the dollar is now nearly 100% bearish so any rally here would probably be weak and possibly followed by another downturn that could break through the 80 level. If such a breakdown occurs it would likely kick start a very strong rally in gold and silver.
Considering the potential bullishness of precious metals, crude oil, and the broad stock market right now, one might pose the question: What could cause all of these markets to rise simultaneously? There may be several answers to this, but one factor that could have a bullish impact on many markets would be the Federal Reserve cutting back on QE tapering (i.e. tapering the "taper"). New Federal Reserve Chairwoman Janet Yellen has a reputation for being dovish, and in recent statements she has said that continued tapering is dependent on supportive data from the economy. I am speculating here, of course, but there are many financial analysts these days who doubt the ability of the Fed to maintain austerity measures over the long-term. We will have to wait and see if they can. If economic statistics start to turn gloomy, we may see the U.S. Treasury firing up the printing presses again before the year is over.
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