-MARKETS UPDATE (11:30 pm EST)
The broad stock market has been a bit volatile over the last three days with short price swings up and down although overall movement has been down. Markets are obviously nervous as we approach next week's Fed meeting and possibly the first interest rate increase in nine years. Both the DOW and S&P 500 made new weekly lows today. If prices continue lower into the end of the week and especially into early next week, we will probably look for a low to buy as this is a strong reversal zone for all markets. Any break below 17,210 in the DOW and 2019 in the S&P 500 would mean that the top of the current medium-term cycle is in and that we should be watching for a correction and cycle bottom. Until that happens, however, these markets could still rally and make new cycle highs or double tops at or above 17,978 in the DOW and 2116 in the S&P 500. If this happens by early next week, we will look to sell short for a final correction into the cycle bottoms of both indices (as well as the NASDAQ). It is hard to predict how markets will react to the first interest rate hike. If equities fall steeply into next week they may already be factoring in a rate hike announcement, and the actual announcement on Wednesday could send the markets up (a classic case of sell on the rumor and buy on the news). On the other hand, if we see a rally into next week, a rate hike could be the catalyst that triggers a sell-off. Either way, it looks like next week could be an important pivot point for the broad stock market that could correspond to a new cycle high or a cycle bottom. We will trade accordingly.
On the sidelines for now.
After a strong rally last Friday, precious metal prices backed down a bit this week with gold now holding just above $1070 and silver above $14. The Dec. 2 low in gold at $1046 and in silver at $13.84 still look like cycle bottoms, but we need to see more rallying to confirm this. Our minimal short-term target for gold was (is) $1100, and I was (am) hoping to see silver near $15. One thing that concerns me at the moment is that today's steep drop in the U.S. Dollar Index did not seem to have much of an effect on gold and silver prices. One would normally expect such a dollar plunge to drive a rally in the precious metals. This may be signaling some weakness in the metals, or perhaps there will be a delayed response to the dollar as we saw last week (when the dollar plunged on Thursday but gold surged on Friday). This week (and early next week) is a reversal zone for gold and silver so it is still possible to see one or both metals make a deeper cycle bottom before rallying significantly. In fact, having gold or silver (but not both) make a new low would be an ideal case of bullish intermarket divergence. We will watch these prices carefully over the next several days. Holding my long position in both gold and silver for now.
The broad stock market has been a bit volatile over the last three days with short price swings up and down although overall movement has been down. Markets are obviously nervous as we approach next week's Fed meeting and possibly the first interest rate increase in nine years. Both the DOW and S&P 500 made new weekly lows today. If prices continue lower into the end of the week and especially into early next week, we will probably look for a low to buy as this is a strong reversal zone for all markets. Any break below 17,210 in the DOW and 2019 in the S&P 500 would mean that the top of the current medium-term cycle is in and that we should be watching for a correction and cycle bottom. Until that happens, however, these markets could still rally and make new cycle highs or double tops at or above 17,978 in the DOW and 2116 in the S&P 500. If this happens by early next week, we will look to sell short for a final correction into the cycle bottoms of both indices (as well as the NASDAQ). It is hard to predict how markets will react to the first interest rate hike. If equities fall steeply into next week they may already be factoring in a rate hike announcement, and the actual announcement on Wednesday could send the markets up (a classic case of sell on the rumor and buy on the news). On the other hand, if we see a rally into next week, a rate hike could be the catalyst that triggers a sell-off. Either way, it looks like next week could be an important pivot point for the broad stock market that could correspond to a new cycle high or a cycle bottom. We will trade accordingly.
On the sidelines for now.
After a strong rally last Friday, precious metal prices backed down a bit this week with gold now holding just above $1070 and silver above $14. The Dec. 2 low in gold at $1046 and in silver at $13.84 still look like cycle bottoms, but we need to see more rallying to confirm this. Our minimal short-term target for gold was (is) $1100, and I was (am) hoping to see silver near $15. One thing that concerns me at the moment is that today's steep drop in the U.S. Dollar Index did not seem to have much of an effect on gold and silver prices. One would normally expect such a dollar plunge to drive a rally in the precious metals. This may be signaling some weakness in the metals, or perhaps there will be a delayed response to the dollar as we saw last week (when the dollar plunged on Thursday but gold surged on Friday). This week (and early next week) is a reversal zone for gold and silver so it is still possible to see one or both metals make a deeper cycle bottom before rallying significantly. In fact, having gold or silver (but not both) make a new low would be an ideal case of bullish intermarket divergence. We will watch these prices carefully over the next several days. Holding my long position in both gold and silver for now.
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