We have now entered a new reversal zone (April 13 - 27) for all markets. The broad stock market is rallying and could form a top (and maybe also a bottom) in this time frame. All three indices (DOW, S&P 500, NASDAQ) made new highs yesterday so we will not get an intermarket bearish divergence signal this week. Could we still get a top this week? Yes, but I would prefer to wait until next week for a possible bearish divergence signal that would be a better point for a reversal. When the reversal occurs, we will be looking for a brief sub-cycle correction to buy close to the 15-day moving average or near the targets mentioned in my last blog (21,900 in the DOW and 2,500 in the S&P 500). (Note - If these indices start to fall below their 3/23 lows, we will abandon this bullish buy strategy). The idea here is that we have started new medium-term cycles and the market could rally for at least several more weeks (or longer).
On the sidelines for now.
In my last blog on gold and silver (April 7) I wrote:
"It does look like gold started a new medium-term cycle with its low of $1453 on March 16. It is therefore early in this new cycle. New cycles always start off bullish, and this one has rallied strongly from that $1453 bottom over the last three weeks. In order to remain bullish, however, gold has to exceed the high of the previous cycle which was $1701 (from March 9)."
Gold is now pushing above $1701 as we enter our new reversal zone. We may have seen a significant top yesterday at $1744, but there is plenty of time left in this reversal zone for it to go higher. As with the broad stock market, we will now watch for a brief sub-cycle correction and a spot to buy. We might see that back down around $1600+/- 35.
Silver does not look as bullish as gold at the moment, and it too could top and make a sub-cycle correction anytime now. A target to buy silver could be around $14 +/- 0.50. For now, we are on the sidelines of both metals.
In my last blog on crude oil (April 8), I wrote:
"Crude oil made a new low at $19.27 (May contract chart) last Monday (March 30) right at the center of our reversal zone and then rallied strongly off that low. That could easily be the start of a new medium-term cycle (unless prices soon drop back below $19.27)."
Well, today prices did edge a bit lower (to $19.20 - May contract chart), and it is happening in a new reversal zone. It's a little tempting to go long here, but there's plenty of time for prices to go lower in this new reversal zone (especially if the broad stock market starts to turn south). Let's stay on the sidelines of crude for now.