Weak labor force numbers in last Friday's jobs report for December triggered a pessimistic mood on Wall Street, and the DOW gave up nearly 200 points on Monday. It is recovering sharply from that plunge, however, and is now approaching its all-time high of Dec. 31 at 16,588. The S&P 500 and NASDAQ indices are already making new highs for the year and exceeding their Dec. 31 peaks. If the DOW remains below its all-time high, this will be a strong case of intermarket bearish divergence suggesting a major reversal to the downside now. Also favoring this idea is the fact that the market is rising strongly into the center of this week's reversal zone. Working against the idea of a strong reversal is the fact that while strong bearish signals appeared in the S&P 500 and NASDAQ indices on Monday, directional momentum in these indices is now switching back to 100% bullish. The surge in the broad stock market today seems related to reports of stronger than expected retail sales, so this effect may be short-lived. My strategy here will be to wait and see if the DOW can break clearly above its Dec. 31st high. If it doesn't, I will still consider selling this market short. Still on the sidelines.
Crude oil prices also surged up today in response to positive retail sales numbers as well as what is expected to be a decline in U.S. crude inventories to be reported later in the week. This sharp rise in crude is pushing us quickly into an ideal short-selling price range from $94 -$96, and the price is rising into a reversal zone that could extend into early next week. I will now watch for a short-term trade signal to sell this market short (assuming momentum remains bearish). On the sidelines for now.
Gold and silver prices are down a bit today, but this may be a good directional move into this week's reversal zone which could turn the market back up. Recent bullish momentum signals appearing in the charts of both metals as well as in the charts of the major gold and silver mining company stock indices remain intact. I am long in gold right now but I am holding back buying silver for the moment as there is still a possibility here of prices turning down and making a deeper bottom, and in such a scenario silver's loss could be substantial. I am being very cautious with gold as well, and I have a watchful eye on any nearby support zones as possible stop-loss points if short-term trade signals warrant this. There is currently support in the $1220 -$1230 area. Holding long positions in gold but out of silver.