Today is the last day of a strong reversal zone for the broad stock market, but there is another coming up May 25 - June 5. The peak and turning point for the current reversal zone was Monday (May 14) when the DOW. S&P 500, and NASDAQ all made new highs (note no bearish divergence signal). The dip down so far has been minor and does not qualify as a significant sub-cycle correction. A minimal sub-cycle correction would go to at least 24,280 in the DOW and 2,660 in the S&P 500. Assuming this market continues to fall, our original plan was to unload our short positions and take a small profit at those levels; however, equities seem to be bullish again today. There is a good chance this market could rally into the next reversal zone to form another top before a significant correction happens. COT (Commitment of Traders) charts for the S&P 500 have turned bullish recently, and some other chart formations are also making a case for this short-term bullish view. For all these reasons, I am going to cover (unload) my short position in the broad stock market today. We are almost exactly where we entered this position on April 18 so we can cover our trade with little or no loss here. If the market does correct down to those minimal levels mentioned above and stabilizes, we will look to go long. If instead it rallies into the next reversal zone (May 25 - June 5), we will consider selling short again.
Even though we were prematurely stopped out of our precious metals trade yesterday, we may be looking to get back in once gold's cycle bottoms and as long as silver's cycle remains bullish. The cycle patterns in both these metals should become more clear over the next few weeks, and this will tell us how to trade. The medium and long-term picture for gold and silver continues to look very bullish. Out of both gold and silver for now.
Crude oil seems to be taking its cues from the broad stock market and will likely follow any rally in equities. President Trump's recent pulling out of the Iran nuclear deal is also a factor buoying oil prices now. The next reversal zone for crude oil is May 23 - June 1. We could easily see prices edge higher to a new top in that time period. On the sidelines of crude oil for now.