BROAD STOCK MARKET and CRUDE OIL UPDATES (9:00 pm EST)
The broad stock market was relatively flat on Monday and Tuesday, but today we saw a significant rally in all three of our market indices (DOW, S&P 500, NASDAQ). The S&P 500 and NASDAQ broke to new weekly highs while the DOW came close but did not. This gives us a bearish divergence signal (but one that could easily be negated tomorrow if this rally continues). We still have another even stronger bearish divergence signal between these indices as the NASDAQ is still below its all-time high from Nov. 2021 (16,212) while the DOW and S&P 500 are well above their previous all-time highs from Jan. 2022. We are also in the center of a relatively weak reversal zone (Feb. 2 - 13) that is being enhanced by a strong potential "pivot point" or turning point for equities that was in effect yesterday and today.
It is VERY late in the current medium-term cycles of all three indices, and their final tops are now due (overdue). A significant correction down should be imminent and could start from today's highs or from any new highs over the next three or four trading days. We are expecting a 2 - 5 week corrective decline that could take the DOW back to the 37,000 level and the S&P 500 close to 4,700. We will watch for these targets as good potential buy spots as we expect this bullish market to continue its rally at least into April, and maybe considerably longer. Our next strong reversal zone is coming up at the end of this month (Feb. 19 - 29), so that would be an ideal time to see a corrective low and the final bottoms to the current medium-term cycles. We will watch for it. We are currently on the sidelines of the broad stock market.
We are still not certain if crude oil began a new medium-term cycle with its low of $68.28 (March contract chart) on Dec. 13 or if crude is near the end of an older medium-term cycle that started back on Oct. 5 at $76.93. If it's an older cycle, then it is bearish and prices will go lower and soon (within the next four weeks) form a final bottom below $68.28. But if crude started a new cycle on Dec. 13, it most likely completed its first sub-cycle corrective dip with Monday's $71.41 low and is now starting a rally that will soon test the $80 level. Prices are now closing above the 45-day moving average, but they are still below the 15-day moving average (which is very close to a strong resistance line at $75). It could go either way here. I would like to see the older cycle play out because that would soon give us a good buy spot at the bottom of the older medium-term cycle (and maybe even the longer-term 4-year cycle). If instead the market rallies and breaks above $80, we will have to wait longer for another significant correction to buy. We are keen to buy crude oil now because we are either at or near the bottom of a longer-term 4-year cycle in crude, and that means we expect a strong rally this year that could challenge or exceed the 2022 high of $130.
Considering all the recent tension and fighting in the Middle East, crude prices have been remarkably stable. But that could change, and we need to be on guard for large and sudden fluctuations in prices (and those moves could be both up and down). We are currently on the sidelines of crude.
The broad stock market was relatively flat on Monday and Tuesday, but today we saw a significant rally in all three of our market indices (DOW, S&P 500, NASDAQ). The S&P 500 and NASDAQ broke to new weekly highs while the DOW came close but did not. This gives us a bearish divergence signal (but one that could easily be negated tomorrow if this rally continues). We still have another even stronger bearish divergence signal between these indices as the NASDAQ is still below its all-time high from Nov. 2021 (16,212) while the DOW and S&P 500 are well above their previous all-time highs from Jan. 2022. We are also in the center of a relatively weak reversal zone (Feb. 2 - 13) that is being enhanced by a strong potential "pivot point" or turning point for equities that was in effect yesterday and today.
It is VERY late in the current medium-term cycles of all three indices, and their final tops are now due (overdue). A significant correction down should be imminent and could start from today's highs or from any new highs over the next three or four trading days. We are expecting a 2 - 5 week corrective decline that could take the DOW back to the 37,000 level and the S&P 500 close to 4,700. We will watch for these targets as good potential buy spots as we expect this bullish market to continue its rally at least into April, and maybe considerably longer. Our next strong reversal zone is coming up at the end of this month (Feb. 19 - 29), so that would be an ideal time to see a corrective low and the final bottoms to the current medium-term cycles. We will watch for it. We are currently on the sidelines of the broad stock market.
We are still not certain if crude oil began a new medium-term cycle with its low of $68.28 (March contract chart) on Dec. 13 or if crude is near the end of an older medium-term cycle that started back on Oct. 5 at $76.93. If it's an older cycle, then it is bearish and prices will go lower and soon (within the next four weeks) form a final bottom below $68.28. But if crude started a new cycle on Dec. 13, it most likely completed its first sub-cycle corrective dip with Monday's $71.41 low and is now starting a rally that will soon test the $80 level. Prices are now closing above the 45-day moving average, but they are still below the 15-day moving average (which is very close to a strong resistance line at $75). It could go either way here. I would like to see the older cycle play out because that would soon give us a good buy spot at the bottom of the older medium-term cycle (and maybe even the longer-term 4-year cycle). If instead the market rallies and breaks above $80, we will have to wait longer for another significant correction to buy. We are keen to buy crude oil now because we are either at or near the bottom of a longer-term 4-year cycle in crude, and that means we expect a strong rally this year that could challenge or exceed the 2022 high of $130.
Considering all the recent tension and fighting in the Middle East, crude prices have been remarkably stable. But that could change, and we need to be on guard for large and sudden fluctuations in prices (and those moves could be both up and down). We are currently on the sidelines of crude.
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