MARKETS UPDATE (3:00 pm EST)
We are now entering the strong reversal zone for equities that runs from Jan. 9 - 17, and the broad stock market continues to rise. Although it's possible the DOW and S&P 500 started new medium-term cycles from their lows on Dec. 26, I am still favoring the alternative view that they are both in the middle of older cycles that started on Oct. 29 and are bearish and heading lower to their final cycle bottoms over the next 4 -13 weeks. In this bearish scenario, the current sub-cycle rally should end shortly. Our general target for the rally is around 24,500 in the DOW and 2,650 in the S&P 500. Let's see if we can get closer to those levels this week or next before attempting to sell short. If the DOW gets above 25,150, however, we may have to abandon our bearish view and switch to the bullish scenario of new cycles starting Dec. 26. I should point out here that even in our bearish scenario, once the medium-term cycle lows are in, we could see another strong multi-month rally possibly to new all-time highs before another very severe reversal that could rival or even exceed the 50% correction of 2008-2009. I will comment more on this longer-term cycle once our medium-term cycles become more clearly defined. Still on the sidelines of this market.
We are also now entering a reversal zone specifically for gold and silver (Jan. 9 - 17, same as for the broad stock market). As with equity markets, we have two possible scenarios for gold: a new medium-term cycle starting on Nov. 13 or an older cycle that started way back on Aug. 16. If it is an older cycle then that cycle is nearly complete and is ready to take a final steep plunge to its bottom. If it is a younger cycle starting on Nov. 13 then it is also ready to take a correction, but that correction will be a shallower sub-cycle "dip". Either way, we want to buy the bottom of the correction. Silver most likely started a new medium-term cycle on Nov. 14 and is also now due for a sub-cycle correction which could be substantial. If gold and silver prices continue to fall into this new reversal zone, we may get a good buy spot in both metals this week or next. If prices edge higher and exceed last week's highs (in one or both metals), we may instead get a top in this reversal zone and have to wait a little longer for a corrective bottom to buy. On the sidelines of precious metals for now but looking to buy soon.
In November the U.S. Dollar Index seemed to be on the verge of "breaking out" and soaring to new highs, but recent "dovish" comments from the Federal Reserve along with a possible growing lack of faith in the U.S. dollar's ability to maintain its status as the world's global reserve currency seems to be taking a toll on the greenback. If the U.S. Dollar Index can't get back above 96.5 quickly, it could start to break down. The medium-term cycle in the dollar also looks like it has turned bearish and could be pointed down now for many more weeks (maybe months). Does this mean gold and silver are ready to turn up right now? Maybe, but we note that today's new low in the dollar is happening in a reversal zone specifically for currencies (Jan. 8 - 16) so we could see a bottom and reversal back up sometime this week or next. Considering the bearish factors weighing on the dollar now, however, such a rally may not get very far before turning back down again. Ideally, a short-term dollar rally now could bring about the correction (and buy spot) we want to see in gold and silver prices, and a resumption of the dollar's fall could then drive a strong rally in these metals. We will watch for this.
Crude oil seems to want to rally into the current reversal zone for equities (Jan. 9 - 17). This reversal zone may influence crude, but there is a stronger reversal zone specifically for crude coming up next week (Jan. 14 - 25). What we could see here is crude making a high and then falling into next week's reversal zone to make a new low or perhaps a double bottom to the $42.36 low of Dec. 24. That Dec. low may have already been the final medium-term (and even longer-term) cycle low. If it was, any correction now should not fall below $42.36. Let's look to buy the bottom of any correction into next week's reversal zone. On the sidelines of crude for now.
We are now entering the strong reversal zone for equities that runs from Jan. 9 - 17, and the broad stock market continues to rise. Although it's possible the DOW and S&P 500 started new medium-term cycles from their lows on Dec. 26, I am still favoring the alternative view that they are both in the middle of older cycles that started on Oct. 29 and are bearish and heading lower to their final cycle bottoms over the next 4 -13 weeks. In this bearish scenario, the current sub-cycle rally should end shortly. Our general target for the rally is around 24,500 in the DOW and 2,650 in the S&P 500. Let's see if we can get closer to those levels this week or next before attempting to sell short. If the DOW gets above 25,150, however, we may have to abandon our bearish view and switch to the bullish scenario of new cycles starting Dec. 26. I should point out here that even in our bearish scenario, once the medium-term cycle lows are in, we could see another strong multi-month rally possibly to new all-time highs before another very severe reversal that could rival or even exceed the 50% correction of 2008-2009. I will comment more on this longer-term cycle once our medium-term cycles become more clearly defined. Still on the sidelines of this market.
We are also now entering a reversal zone specifically for gold and silver (Jan. 9 - 17, same as for the broad stock market). As with equity markets, we have two possible scenarios for gold: a new medium-term cycle starting on Nov. 13 or an older cycle that started way back on Aug. 16. If it is an older cycle then that cycle is nearly complete and is ready to take a final steep plunge to its bottom. If it is a younger cycle starting on Nov. 13 then it is also ready to take a correction, but that correction will be a shallower sub-cycle "dip". Either way, we want to buy the bottom of the correction. Silver most likely started a new medium-term cycle on Nov. 14 and is also now due for a sub-cycle correction which could be substantial. If gold and silver prices continue to fall into this new reversal zone, we may get a good buy spot in both metals this week or next. If prices edge higher and exceed last week's highs (in one or both metals), we may instead get a top in this reversal zone and have to wait a little longer for a corrective bottom to buy. On the sidelines of precious metals for now but looking to buy soon.
In November the U.S. Dollar Index seemed to be on the verge of "breaking out" and soaring to new highs, but recent "dovish" comments from the Federal Reserve along with a possible growing lack of faith in the U.S. dollar's ability to maintain its status as the world's global reserve currency seems to be taking a toll on the greenback. If the U.S. Dollar Index can't get back above 96.5 quickly, it could start to break down. The medium-term cycle in the dollar also looks like it has turned bearish and could be pointed down now for many more weeks (maybe months). Does this mean gold and silver are ready to turn up right now? Maybe, but we note that today's new low in the dollar is happening in a reversal zone specifically for currencies (Jan. 8 - 16) so we could see a bottom and reversal back up sometime this week or next. Considering the bearish factors weighing on the dollar now, however, such a rally may not get very far before turning back down again. Ideally, a short-term dollar rally now could bring about the correction (and buy spot) we want to see in gold and silver prices, and a resumption of the dollar's fall could then drive a strong rally in these metals. We will watch for this.
Crude oil seems to want to rally into the current reversal zone for equities (Jan. 9 - 17). This reversal zone may influence crude, but there is a stronger reversal zone specifically for crude coming up next week (Jan. 14 - 25). What we could see here is crude making a high and then falling into next week's reversal zone to make a new low or perhaps a double bottom to the $42.36 low of Dec. 24. That Dec. low may have already been the final medium-term (and even longer-term) cycle low. If it was, any correction now should not fall below $42.36. Let's look to buy the bottom of any correction into next week's reversal zone. On the sidelines of crude for now.
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