MARKETS UPDATE (6:00 pm EDT)
The broad stock market has been quiet this week (so far) as it waits for the U.K.'s "Brexit" vote on Thursday. Polls remain equally divided between those favoring a British exit from the EU and those who do not. Even though the vote is on Thursday, we will not know the results until early in the morning on Friday (Eastern U.S. time).
Right now there are two ways to interpret the cycle patterns in both the DOW and S&P 500, and this week's Brexit vote will likely resolve this ambiguity. It is possible that both indices started new medium-term cycles with their lows on May 19, and if so, these markets could be bullish and ready to rally strongly off of last Thursday's dip. If Britain votes to remain in the EU, this could give a strong lift to equities and would support this idea of a new cycle. A vote to leave the EU, however, could send markets tumbling back down and would support our original interpretation of these cycles bottoming in the last week of June/early July. Note that the DOW and S&P 500 have both exceeded their highs from last week, but the NASDAQ has not (yet). This could be a case of intermarket bearish divergence and suggests a market turndown (until the NASDAQ exceeds 4,895). Still holding my short position in the broad stock market.
Gold and silver prices dropped sharply yesterday. Today gold has been stable at a support level around $1,260.
If Britain remains in the EU, we could see precious metal prices start to rally again from this support (or perhaps a lower point). If the "Brexit" passes, however, the U.S. dollar could surge and we could see these metal prices fall further. We need to keep in mind now that the overall medium-term to long-term trend of gold and silver seems to be turning bullish. Unless gold prices start to break below $1,200, we should be looking to buy any corrections in both metals. While gold probably started a new medium-term cycle on May 29, silver seems to be still completing an older cycle so if silver can make a new weekly high over the next few days or next week, we may have an opportunity to sell it short for a short-term but possibly steep correction into its medium-term cycle bottom. Still on the sidelines of both metals.
Crude oil prices were down a bit today, but they are still close to our entry price (around $49) for our short position.
As I mentioned in Monday's blog, it is possible that last week's low of $45.83 was the medium-term cycle bottom and the start of a new cycle, and if it was, this market could now be bullish and ready to rally some more. Technically, it would be a better fit in terms of timing and cycle structure for a cycle bottom to happen late next week or the first week of July within our target area of $40 - $45, but markets don't always give us "ideal" patterns. Nevertheless, that scenario is still a possibility. The Brexit vote may determine which scenario is correct and could push prices sharply one way or the other. Traders holding a short position in crude may now want to set an automatic tight stop loss somewhere above $49 (our break even point) according to their own tolerance for a loss should the vote trigger a sudden surge in prices. Holding my short position in crude with a tight stop loss.
The broad stock market has been quiet this week (so far) as it waits for the U.K.'s "Brexit" vote on Thursday. Polls remain equally divided between those favoring a British exit from the EU and those who do not. Even though the vote is on Thursday, we will not know the results until early in the morning on Friday (Eastern U.S. time).
Right now there are two ways to interpret the cycle patterns in both the DOW and S&P 500, and this week's Brexit vote will likely resolve this ambiguity. It is possible that both indices started new medium-term cycles with their lows on May 19, and if so, these markets could be bullish and ready to rally strongly off of last Thursday's dip. If Britain votes to remain in the EU, this could give a strong lift to equities and would support this idea of a new cycle. A vote to leave the EU, however, could send markets tumbling back down and would support our original interpretation of these cycles bottoming in the last week of June/early July. Note that the DOW and S&P 500 have both exceeded their highs from last week, but the NASDAQ has not (yet). This could be a case of intermarket bearish divergence and suggests a market turndown (until the NASDAQ exceeds 4,895). Still holding my short position in the broad stock market.
Gold and silver prices dropped sharply yesterday. Today gold has been stable at a support level around $1,260.
If Britain remains in the EU, we could see precious metal prices start to rally again from this support (or perhaps a lower point). If the "Brexit" passes, however, the U.S. dollar could surge and we could see these metal prices fall further. We need to keep in mind now that the overall medium-term to long-term trend of gold and silver seems to be turning bullish. Unless gold prices start to break below $1,200, we should be looking to buy any corrections in both metals. While gold probably started a new medium-term cycle on May 29, silver seems to be still completing an older cycle so if silver can make a new weekly high over the next few days or next week, we may have an opportunity to sell it short for a short-term but possibly steep correction into its medium-term cycle bottom. Still on the sidelines of both metals.
Crude oil prices were down a bit today, but they are still close to our entry price (around $49) for our short position.
As I mentioned in Monday's blog, it is possible that last week's low of $45.83 was the medium-term cycle bottom and the start of a new cycle, and if it was, this market could now be bullish and ready to rally some more. Technically, it would be a better fit in terms of timing and cycle structure for a cycle bottom to happen late next week or the first week of July within our target area of $40 - $45, but markets don't always give us "ideal" patterns. Nevertheless, that scenario is still a possibility. The Brexit vote may determine which scenario is correct and could push prices sharply one way or the other. Traders holding a short position in crude may now want to set an automatic tight stop loss somewhere above $49 (our break even point) according to their own tolerance for a loss should the vote trigger a sudden surge in prices. Holding my short position in crude with a tight stop loss.
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