MARKETS UPDATE (3:30 pm EDT)
We are currently at a crossroads in the longer-term picture of the broad stock market. Our premise that we have already started a severe long-term correction or "crash" in equities from the all-time highs of 36,953 in the DOW (Jan. 5, 2022), 4,819 in the S&P 500 (Jan. 4, 2022) and 16,212 in the NASDAQ (Nov. 11, 2021) is still intact. This correction could exceed 70% by next year. A correction of this magnitude does not happen overnight, and it usually proceeds in down waves with periodic up-swings. A significant wave up was in mid-August 2022 when the DOW went up to 34,821, the S&P 500 got back up to 4,325, and the NASDAQ rose to 13,181. These highs were followed by another wave down into October 2022, but the market has climbed back up since then to challenge those mid-August highs. The DOW already slightly exceeded it's Aug. 2022 high in Dec. 2022 before backing down again. The NASDAQ is now testing and challenging its Aug. 2022 high of 13,181 (today's high got to 13,362). The S&P 500 is also very close to its Aug. 22 high.
My point here is that those Aug. 22 highs are important resistance. If all three indices break clearly above those highs, it might distort the normal chart pattern of a severe long-term correction and bring it into question (or at least delay the final bottom). We need to watch this carefully now. If the S&P 500 cannot break above 4,325 soon, we will have bearish divergence with the DOW and NASDAQ (as both have broken their Aug. 2022 highs). Another bearish divergence signal is in place now as the S&P 500 and NASDAQ continue to make new yearly highs while the DOW remains well below its yearly high from January this year. If we were inside a reversal zone, I would give these bearish divergence signals more weight; but the next strong reversal zone for this market is not until the end of this month into the Fourth of July holiday. For that reason, I think this market could do some more rallying and possibly negate these bearish signals. We will stay on the sidelines for now as we watch how this unfolds.
Gold and silver prices are down today, but gold remains above last week's low and silver is staying above its 15-day moving average. Let's hold our long positions in both metals for now.
The U.S. Dollar Index seems to be finding strong support at 104, but there are some bearish technical signals suggesting it might break below that line soon. If it does, that would give a lift to gold and silver prices. But if instead the greenback rallies from this support, gold and silver could be in trouble.
Crude oil prices have been giving us a roller coaster ride over the last two weeks. Last week's low at $67.03 (July contract chart) may have been a "triple-bottom" to the lows of May 4 and March 20. If that's the case, crude could be very bullish now as it starts a new medium-term and even longer-term (3 year) cycle. But after a strong rally on Monday that broke briefly above the 45-day moving average, prices are falling today and testing the 15-day moving average. The medium-term cycle labeling for this market is still not clear. There is a reversal zone specifically for crude coming up next week (June 13 - 22). Let's wait and see if it will correlate to a new low or new high. if it's a low, we may be looking to buy. We remain on the sidelines of crude for now.
We are currently at a crossroads in the longer-term picture of the broad stock market. Our premise that we have already started a severe long-term correction or "crash" in equities from the all-time highs of 36,953 in the DOW (Jan. 5, 2022), 4,819 in the S&P 500 (Jan. 4, 2022) and 16,212 in the NASDAQ (Nov. 11, 2021) is still intact. This correction could exceed 70% by next year. A correction of this magnitude does not happen overnight, and it usually proceeds in down waves with periodic up-swings. A significant wave up was in mid-August 2022 when the DOW went up to 34,821, the S&P 500 got back up to 4,325, and the NASDAQ rose to 13,181. These highs were followed by another wave down into October 2022, but the market has climbed back up since then to challenge those mid-August highs. The DOW already slightly exceeded it's Aug. 2022 high in Dec. 2022 before backing down again. The NASDAQ is now testing and challenging its Aug. 2022 high of 13,181 (today's high got to 13,362). The S&P 500 is also very close to its Aug. 22 high.
My point here is that those Aug. 22 highs are important resistance. If all three indices break clearly above those highs, it might distort the normal chart pattern of a severe long-term correction and bring it into question (or at least delay the final bottom). We need to watch this carefully now. If the S&P 500 cannot break above 4,325 soon, we will have bearish divergence with the DOW and NASDAQ (as both have broken their Aug. 2022 highs). Another bearish divergence signal is in place now as the S&P 500 and NASDAQ continue to make new yearly highs while the DOW remains well below its yearly high from January this year. If we were inside a reversal zone, I would give these bearish divergence signals more weight; but the next strong reversal zone for this market is not until the end of this month into the Fourth of July holiday. For that reason, I think this market could do some more rallying and possibly negate these bearish signals. We will stay on the sidelines for now as we watch how this unfolds.
Gold and silver prices are down today, but gold remains above last week's low and silver is staying above its 15-day moving average. Let's hold our long positions in both metals for now.
The U.S. Dollar Index seems to be finding strong support at 104, but there are some bearish technical signals suggesting it might break below that line soon. If it does, that would give a lift to gold and silver prices. But if instead the greenback rallies from this support, gold and silver could be in trouble.
Crude oil prices have been giving us a roller coaster ride over the last two weeks. Last week's low at $67.03 (July contract chart) may have been a "triple-bottom" to the lows of May 4 and March 20. If that's the case, crude could be very bullish now as it starts a new medium-term and even longer-term (3 year) cycle. But after a strong rally on Monday that broke briefly above the 45-day moving average, prices are falling today and testing the 15-day moving average. The medium-term cycle labeling for this market is still not clear. There is a reversal zone specifically for crude coming up next week (June 13 - 22). Let's wait and see if it will correlate to a new low or new high. if it's a low, we may be looking to buy. We remain on the sidelines of crude for now.
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