MARKETS UPDATE (7:30 pm EDST)
We have a close eye on equity markets this week as we could see a significant top and an opportunity to sell short. Today the DOW, S&P 500 and NASDAQ all managed to rally a bit, with the S&P 500 making a new weekly high, but the NASDAQ closed well below yesterday's high. The market could be getting ready to roll over here. Our strongest bearish signal now is the fact that both the DOW and S&P 500 are still well below their all-time highs from February while the NASDAQ cleared its February high in June and even made a new all-time high this week. The DOW will have to break above 29,568 and the S&P 500 will have to break above 3,389 to negate this bearish divergence. That seems unlikely at the moment (especially for the DOW), but I don't want to underestimate the power of the Fed to print money and keep this market buoyant and even bullish in these economically turbulent times. Let's remain on the sidelines of the broad stock market for now.
The big action in markets today was clearly focused in precious metals. Both gold and silver prices surged up strongly. Gold has now broken several resistance levels and is clearly in a "break-out" mode. We could now easily see gold challenge and even exceed its $1920 high from Sept. 2011. Despite this bullish surge, it is late in the medium-term cycle of gold so a top and a sharp decline down to the final cycle bottom is due soon (over the next three weeks). The top could be this week, but prices could go higher into next week which has another strong reversal zone specifically for the precious metals (July 28 - Aug. 4). It's a little late to be buying into this rally so we will wait for a top, a sharp reversal and possibly a cycle low to buy.
It could also be late in silver's medium-term cycle, but there's also the possibility that silver ended that cycle on June 15 at $16.96 and started a new one from there. If its an older cycle, like gold, silver is ready to take a sharp correction down over the next few weeks to the final cycle bottom. A newer cycle, however, might only take a modest sub-cycle dip before resuming its bullish rally to new highs. Either way, we will be on the lookout for a spot to buy. Still on the sidelines of gold and silver.
Not surprisingly, the U.S. Dollar Index has been dropping as precious metal prices rise. The greenback breaking below its 96 support level on Monday has contributed to the surge in gold and silver. Nevertheless, there is still a lot of support between 94 and 96. If this area can hold the dollar into next week's reversal zone, we could see the greenback reverse back up and push the precious metals down.
We are still waiting for a sub-cycle top in crude oil to be followed by some type of correction and a low to buy (unless prices go TOO low). That top could have happened already on Monday at $42.51 (in our last general reversal zone), but we've just entered another reversal zone specifically for crude today (July 22-30) so we could see a higher top before any correction starts. Either way, we will stay out of this market until we see some sort of corrective low as a possible buy spot. Still on the sidelines of crude.
We have a close eye on equity markets this week as we could see a significant top and an opportunity to sell short. Today the DOW, S&P 500 and NASDAQ all managed to rally a bit, with the S&P 500 making a new weekly high, but the NASDAQ closed well below yesterday's high. The market could be getting ready to roll over here. Our strongest bearish signal now is the fact that both the DOW and S&P 500 are still well below their all-time highs from February while the NASDAQ cleared its February high in June and even made a new all-time high this week. The DOW will have to break above 29,568 and the S&P 500 will have to break above 3,389 to negate this bearish divergence. That seems unlikely at the moment (especially for the DOW), but I don't want to underestimate the power of the Fed to print money and keep this market buoyant and even bullish in these economically turbulent times. Let's remain on the sidelines of the broad stock market for now.
The big action in markets today was clearly focused in precious metals. Both gold and silver prices surged up strongly. Gold has now broken several resistance levels and is clearly in a "break-out" mode. We could now easily see gold challenge and even exceed its $1920 high from Sept. 2011. Despite this bullish surge, it is late in the medium-term cycle of gold so a top and a sharp decline down to the final cycle bottom is due soon (over the next three weeks). The top could be this week, but prices could go higher into next week which has another strong reversal zone specifically for the precious metals (July 28 - Aug. 4). It's a little late to be buying into this rally so we will wait for a top, a sharp reversal and possibly a cycle low to buy.
It could also be late in silver's medium-term cycle, but there's also the possibility that silver ended that cycle on June 15 at $16.96 and started a new one from there. If its an older cycle, like gold, silver is ready to take a sharp correction down over the next few weeks to the final cycle bottom. A newer cycle, however, might only take a modest sub-cycle dip before resuming its bullish rally to new highs. Either way, we will be on the lookout for a spot to buy. Still on the sidelines of gold and silver.
Not surprisingly, the U.S. Dollar Index has been dropping as precious metal prices rise. The greenback breaking below its 96 support level on Monday has contributed to the surge in gold and silver. Nevertheless, there is still a lot of support between 94 and 96. If this area can hold the dollar into next week's reversal zone, we could see the greenback reverse back up and push the precious metals down.
We are still waiting for a sub-cycle top in crude oil to be followed by some type of correction and a low to buy (unless prices go TOO low). That top could have happened already on Monday at $42.51 (in our last general reversal zone), but we've just entered another reversal zone specifically for crude today (July 22-30) so we could see a higher top before any correction starts. Either way, we will stay out of this market until we see some sort of corrective low as a possible buy spot. Still on the sidelines of crude.
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