We are now entering the center of our new strong reversal zone (July 13-21) for the broad stock market (and other markets). Positive news of progress on a COVID-19 vaccine most likely helped propel equity markets up today. The DOW pushed through its "gap zone" today (but closed a tad below the gap's upper limit of 26,938). The S&P 500 also broke briefly above its June 8th high (3,233) but then closed slightly below it. Some of our bearish signals are thus being negated, but even if the DOW also succeeds in breaking above its June high this week, both the DOW and S&P 500 are still below their all-time highs from February (29,568 and 3,393, respectively) while the NASDAQ made a new all-time high earlier this week. That is still a strong bearish divergence signal.
It is late in the medium-term cycles of all three market indices (DOW, S&P 500, NASDAQ), and because we in the middle of our reversal zone, there is a good chance we will get a final top over the next several trading days (if it didn't happen today) followed by a sharp correction down to the final cycle bottom where we will be looking to buy. But if this market continues to rally past next Tuesday, we will have to consider the possibility of this reversal zone being a "break-out" which could lead to a "blow-off" final cycle top and then a very sharp correction down. I don't think that will happen, but I don't want to underestimate the bullish potential of this market now, so it is a possibility. For now, we will stay on the sidelines as we wait for the final cycle bottom to buy.
It is also late in the current medium-term cycles of gold and silver, and both metals are rallying into this week's general reversal zone. We are also in the center of a reversal zone specifically for the precious metals (July 9-17) so it is very likely a top is now forming and will be followed by a sharp correction down to a final cycle bottom in both metals soon. Silver made a new weekly high yesterday, but gold is still below its high from last week so we are seeing bearish divergence. Let's wait to see if these metals can turn down now and allow us to fish for a final corrective bottom to buy in our target zones (around $1675 in gold and $16 - $17.50 in silver). Still on the sidelines here.
The U.S. Dollar index seems to be finding support at a baseline near 96. We are in a reversal zone so if that support can hold, we could see the dollar bounce and rally now. If this happens, it will help push gold and silver prices back down.
Taking its cue from the broad stock market, crude oil rallied today and broke above its previous cycle high of $41.45 from June 23 (June contract chart). Nevertheless, it is rallying into the current reversal zone and is thus susceptible to topping out this week. If instead prices push higher into next week, there is a reversal zone specifically for crude July 22-30 that starts next Wednesday, and we might see a top then. Either way, we will wait for a significant sub-cycle correction in crude before considering any trade. Still on the sidelines of this market.