In Monday's blog I suggested that a one or two day rise towards the recent highs in the broad stock market could set up an ideal shorting opportunity. This has indeed happened in the DOW, S&P 500 and NASDAQ indices, but there are persistent bullish signals in this market that are making me apprehensive to sell short now. Momentum remains strongly bullish in all three indices, and cycle timing could allow for several more weeks of rallying before a significant correction is due. I was hoping this week to see one or two of these indices make a new high without the other(s) which would be a case of intermarket bearish divergence and be a good sell signal, but so far this hasn't happened. If all three indices can break clearly above their Dec. 31 highs then we may see more rallying into the end of the month. Still on the sidelines of this market and waiting for a stronger bearish technical signal to sell short.
Crude oil prices continue to fall lower into this week's reversal zone and I am still waiting for a significant bounce here to present us with a good point to sell short. Unlike the broad stock market, directional momentum in crude charts is 100% bearish, so I have more confidence in a short sell here. Cycle patterns are also suggesting a short-term bounce (rally) in this market soon, so this is what we will wait for. Crude prices are now approaching the $92 level that started the current cycle. A clear break below there would be a very bearish sign and point to significantly lower prices. Still out of this market.
As discussed in today's earlier blog (Silver Trade Alert, below), gold and silver seem to in the process of forming a significant bottom now, and I am waiting for a decisive technical signal to go long in both these metals. I am now out of both gold and silver.