In last Thursday's blog on the broad stock market I wrote:
"We are getting close to our target for a sub-cycle bottom in the DOW in the 24,400 - 24,500 area. A good target for the S&P 500 would be 2,650 - 2,700...A low in those target areas would be a buy spot ..."
Yesterday's new weekly lows in the DOW and S&P 500 are meeting those targets, and the NASDAQ did not make a new weekly low so we have an intermarket bullish divergence signal as well. Should we buy here? No, not yet. We need to observe that while the DOW may have started a new medium-term cycle on April 2 (and thus could be bullish), both the S&P 500 and NASDAQ are older cycles nearing their tops to be followed by a steep corrective fall from those tops soon. The S&P 500 may have already topped out with its high of 2743 on May 22. The NASDAQ is making a new weekly high today but the S&P 500 and DOW are not so we also have a bearish divergence signal (until the S&P 500 and DOW exceed last week's highs). It is still possible for the S&P 500 and NASDAQ to fall further into their final cycle bottoms and maybe even pull the DOW down with them. I know I'm giving a confusing and conflicted picture here, but that's what the market is presenting us. If today's rally gains some legs and can push the DOW and S&P 500 to new weekly highs this week or next, we will have a more bullish picture moving into the summer. Right now, however, a bearish scenario is still possible. We will stay on the sidelines of the broad stock market for now.
The precious metals market is also currently presenting a short-term indecisive picture for traders (longer-term we are still bullish). We are now at the center of a reversal zone for gold and silver (it ends early next week). Gold made a new weekly high last Friday early in the reversal zone and prices have been falling so that could be a turning point. Silver also made a new high then and is falling. Neither one has made a new weekly low yet. If one metal can do that without the other this week or next, that would be a good buy signal (bullish divergence). We know now that gold is now ending (or has just ended) an older medium-term cycle so we are looking to go long. If last week's low of $1282 was not the cycle bottom, we could see a lower low this week or early next week and a good buy spot. Silver's current medium-term cycle may have started with its low of $16.13 on March 20, but it also could have started a new cycle on May 1 at $16.07 (yes, I know, more ambiguity here). If prices can stay above $16.07 it will confirm May 1 as the new cycle and that would be bullish. We will remain on the sidelines of both metals until this picture becomes more clear, but we are still looking to go long in both metals soon.
Crude oil prices are rallying today in sync with today's rally in equities. Crude's medium-term cycle is old and nearing completion, and its May 22 high at $72.90 (July contract chart) could have been the top of the cycle. If so, today's rally won't get very far before reversing down again to make a final cycle low sometime over the next several weeks. If prices do push higher, we could see a new top above $72.90 soon which could be an opportunity to sell short (especially if it happens in a reversal zone). Please see my update on crude oil from May 28. On the sidelines of this market.