MARKETS UPDATE (11:30 pm EST)
In last Wednesday's blog on the broad stock market I wrote:
"We cannot rule out this market turning back down to make a final medium-term and long-term cycle bottom in this upcoming strong reversal window."
However, I also noted:
"If the current rally gains legs and starts closing above the 14-day and 45-day moving averages, we could see a significant top form in the upcoming reversal zone, and that would be even more reason to stay out of the market as another steep drop could be in the cards."
It looks like the second scenario is playing out as this market is rallying strongly this week. All three indices are now above their 15-day and 45-day moving averages. Furthermore, the S&P 500 is making a new all-time high while the DOW and NASDAQ are not (the NASDAQ is close) which is giving us a strong intermarket bearish divergence signal as we enter a new strong general reversal zone (Jan. 22 - 30).
Right now it makes no difference whether these are old medium-term cycles or newer ones. Even if they are new ones starting with last week's lows on Jan. 13, there is a strong possibility of an imminent high between now and next Friday and then a sharp reversal back down. If that reversal becomes serious, we might see the deep correction we were expecting sometime this year come sooner rather than later. For now, we are staying out of this market.
It looks like gold started a new medium-term cycle with Nov. 14's low at $2541 as well as a new longer-term 50-week cycle that same day. If true, prices could be bullish now and ready to move as high as $3000 sometime this year, although there are other technical factors that could cap any rally around $2800 if the new cycle(s) turn bearish. Either way, cycle analysis tells us that a significant sub-cycle top is due soon to be followed by a 3-8 day sub-cycle correction. There is a reversal zone specifically for the precious metals that overlaps precisely with this new general reversal zone (Jan. 22 - 30), so that sub-cycle high and correction could happen anytime now. If we get a substantial 3-8 day correction that holds above $2585, it may be a good spot to buy. We are still on the sidelines of gold.
The labeling of silver's medium-term cycle is still not clear. If it started with the double-bottom lows of Nov. 14 and Nov. 28 ($29.74 and $28.70, respectively), then the cycle has turned bearish because it has already gone well below those lows. On the other hand, if a new medium-term cycle began with the double-bottom lows of Dec. 19 and Dec. 31 ($28.78 and $28.80, respectively), it could be bullish, but prices have to start closing above $32.31 soon to make this valid. Because we just entered a reversal zone for gold and silver, a new high could be forthcoming, but so could a new low. I am staying on the sidelines of silver until the medium-term cycle is more clearly defined.
On Jan. 9, I wrote about crude oil:
"It looks like crude oil started a new medium-term cycle with its low of $66.71 on Dec. 6 (Feb. contract chart). Prices have been rising sharply from there and they broke through a congestion zone ($66 - $72) last Friday. This week the price is testing strong resistance at $74. A sub-cycle crest and corrective dip can be expected anytime now over the next few weeks, so this resistance line would be a good place for it to happen."
Well, crude prices were not held back very long by that resistance at $74 but instead soared much higher - to $79.39 on Jan. 15 (March contract chart) before falling back (they closed below $76 today). That high was a significant sub-cycle top, and a 3-8 day correction is in progress that is now testing the 15-day moving average. We have just entered a strong general reversal zone (Jan. 22 - 30) and will also enter a reversal zone specifically for crude next week (Jan. 28 - Feb. 6). We should be looking for a corrective bottom to buy - likely between the 15-day and 45-day moving averages.
Several longer-term cycles in crude look quite bullish, and the current medium-term cycle is still young and also looks very bullish. This means we should be looking to buy any significant corrections in crude. Prices could rise to $110 - $130 this year, and possibly go even much higher. We are currently on the sidelines of crude, but I will be looking for a spot to buy this week or next.
In last Wednesday's blog on the broad stock market I wrote:
"We cannot rule out this market turning back down to make a final medium-term and long-term cycle bottom in this upcoming strong reversal window."
However, I also noted:
"If the current rally gains legs and starts closing above the 14-day and 45-day moving averages, we could see a significant top form in the upcoming reversal zone, and that would be even more reason to stay out of the market as another steep drop could be in the cards."
It looks like the second scenario is playing out as this market is rallying strongly this week. All three indices are now above their 15-day and 45-day moving averages. Furthermore, the S&P 500 is making a new all-time high while the DOW and NASDAQ are not (the NASDAQ is close) which is giving us a strong intermarket bearish divergence signal as we enter a new strong general reversal zone (Jan. 22 - 30).
Right now it makes no difference whether these are old medium-term cycles or newer ones. Even if they are new ones starting with last week's lows on Jan. 13, there is a strong possibility of an imminent high between now and next Friday and then a sharp reversal back down. If that reversal becomes serious, we might see the deep correction we were expecting sometime this year come sooner rather than later. For now, we are staying out of this market.
It looks like gold started a new medium-term cycle with Nov. 14's low at $2541 as well as a new longer-term 50-week cycle that same day. If true, prices could be bullish now and ready to move as high as $3000 sometime this year, although there are other technical factors that could cap any rally around $2800 if the new cycle(s) turn bearish. Either way, cycle analysis tells us that a significant sub-cycle top is due soon to be followed by a 3-8 day sub-cycle correction. There is a reversal zone specifically for the precious metals that overlaps precisely with this new general reversal zone (Jan. 22 - 30), so that sub-cycle high and correction could happen anytime now. If we get a substantial 3-8 day correction that holds above $2585, it may be a good spot to buy. We are still on the sidelines of gold.
The labeling of silver's medium-term cycle is still not clear. If it started with the double-bottom lows of Nov. 14 and Nov. 28 ($29.74 and $28.70, respectively), then the cycle has turned bearish because it has already gone well below those lows. On the other hand, if a new medium-term cycle began with the double-bottom lows of Dec. 19 and Dec. 31 ($28.78 and $28.80, respectively), it could be bullish, but prices have to start closing above $32.31 soon to make this valid. Because we just entered a reversal zone for gold and silver, a new high could be forthcoming, but so could a new low. I am staying on the sidelines of silver until the medium-term cycle is more clearly defined.
On Jan. 9, I wrote about crude oil:
"It looks like crude oil started a new medium-term cycle with its low of $66.71 on Dec. 6 (Feb. contract chart). Prices have been rising sharply from there and they broke through a congestion zone ($66 - $72) last Friday. This week the price is testing strong resistance at $74. A sub-cycle crest and corrective dip can be expected anytime now over the next few weeks, so this resistance line would be a good place for it to happen."
Well, crude prices were not held back very long by that resistance at $74 but instead soared much higher - to $79.39 on Jan. 15 (March contract chart) before falling back (they closed below $76 today). That high was a significant sub-cycle top, and a 3-8 day correction is in progress that is now testing the 15-day moving average. We have just entered a strong general reversal zone (Jan. 22 - 30) and will also enter a reversal zone specifically for crude next week (Jan. 28 - Feb. 6). We should be looking for a corrective bottom to buy - likely between the 15-day and 45-day moving averages.
Several longer-term cycles in crude look quite bullish, and the current medium-term cycle is still young and also looks very bullish. This means we should be looking to buy any significant corrections in crude. Prices could rise to $110 - $130 this year, and possibly go even much higher. We are currently on the sidelines of crude, but I will be looking for a spot to buy this week or next.
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