Today crude oil prices dropped to $29.40 then snapped back up and are closing above $31. We are now entering the first day of a reversal zone for all markets (Feb.3 - Feb.11) so this may be a good spot to go long in crude. Crude's low on Jan. 20 ($27.56) seems to be the start of a new medium-term cycle, and it may even be the start of a new longer-term cycle which would mean that crude oil prices could rally significantly from here. Yes, there are still six trading days left in this reversal period, and prices could fall further and even make a new low, but there is now support at the $30 level, and even if prices go lower, that final low should be in by next Thursday. If Jan. 20 was the cycle bottom, then we should a least see a rally to the $36 - $39 area. If this is the start of a longer-term cycle, the rally could go even higher. Entering a long position in crude oil today. Traders may chose a stop loss based on their own risk tolerance knowing that there is support at $30 and then $27.56 (March contract) but should also keep in mind that the final bottom will likely be in by the end of next week (if it didn't happen on Jan. 20).
Gold and silver prices rallied strongly today as they were given a strong boost by a plunging U.S. dollar. The U.S. Dollar Index took a serious dive as investors pondered whether or not the U.S. Federal Reserve will attempt to rescue floundering equity markets by backing down on its plan to raise interest rates, perhaps inspired by the Bank of Japan's recent announcement of a negative interest rate policy as a desperate measure to prop up its own stock market. Gold is now near the top of our target range for a rally ($1127- $1147), and we are entering a reversal zone so we could see a sharp correction any day now. The cycle structure, however, indicates that this correction could be very brief (although steep) and followed by another rally to new highs. Directional momentum in gold has now turned 100% bullish which also supports this idea. Our strategy, therefore, will now be short-term bullish, and we will wait for a short-term corrective low to buy, possibly next week. If instead gold rallies into next week without a correction, we will consider selling it short. The current target for silver's rally is around $15 which we could see before or after a brief but steep correction which could happen any day now. As I've been saying in recent blogs, silver and gold have the potential to be extremely volatile this week and next so we have to be very flexible and nimble with our trading strategies. Still on the sidelines of gold and silver.
I will comment on the broad stock market later this evening. We are still out of this market.