Our bearish divergence signal in the broad stock market continues today as both the S&P 500 and NASDAQ leap to new all-time highs while the DOW still remains below its high from last week and also below its all-time high from May 20 (40,077). Our current strong general reversal zone ends Friday. It's not unusual for equities to rally into a holiday week-end (the Fourth of July celebration in the U.S.), but both the holiday and our reversal zone come to an end next Monday. This suggests we may be seeing a top by the end of this week followed by a significant correction down. We note, however, that another strong reversal zone starts early next week (July 9 - 18). A rally could continue pushing up into that time frame, but I think it's more likely we will see a corrective bottom inside that window. I am remaining on the sidelines of this market as we wait to see how this plays out. Until the DOW makes a new all-time high, I am very reluctant to buy into this market as a serious long-term correction in equities could be coming soon.
Gold and silver are finally breaking through their 15-day and 45-day moving averages. This is a bullish sign and could indicate that a new medium-term cycle has begun in both metals (from their recent lows on June 7 for gold and June 26 for silver). Both those lows were in strong reversal zones, but if we make new highs in our current reversal zone or in the new one starting next week, it could put a damper on any rally. We have to be careful here and keep a close eye on our long position in gold. We are currently on the sidelines of silver.
The U.S. Dollar Index may have made a significant high at 106.13 (inside our genera reversal zone), and if so,a corrective drop could be in progress. Any downturn in the greenback can give a boost to gold and silver prices.
Crude oil has until Friday to make a top in our current reversal zone, but that could have happened with yesterday's high of $84.38 (Aug. contract chart)as prices have pulled back from there. We are still waiting for a corrective sub-cycle bottom to buy crude. That bottom could be imminent. A 2 - 8 day correction testing the 45-day and/or 15-day moving average would likely be a good buying opportunity. For now, I am on the sidelines of crude oil