GOLD TRADE ALERT and MARKETS UPDATE (9:00 pm EST)
Today gold prices dropped to $1254 and silver broke below its May 1 low of $16.06 and made an intraday low at $15.98. This is a bearish warning for these metals. Since our gold stop loss was based on gold breaking below $1264 and silver breaching that $16.06 low, some traders may have sold their long positions in gold today. If not, they should place an order tonight to sell at tomorrow's market open (or just wait to sell early tomorrow). There is still a chance of a bounce here as today was the last day of the reversal zone, but that seems far less likely now. As I mentioned in yesterday's update, there is a good chance gold and silver are now aborting their massive bullish inverted "head and shoulders" chart formations and are therefore turning bearish. We should be out of both silver and gold now.
Today's dip in prices was triggered by a sudden surge in the U.S. Dollar Index to a new high of 95.29. We are just leaving a reversal zone for currencies (June 14 - 26), and it looks like we had two reversals in this period -a significant drop from last Wednesday's high and a strong bounce from this week's low on Monday- which is a bit unusual but demonstrates just how volatile markets are recently. Some precious metal analysts are speculating that a severe correction in the broad stock market looks imminent and that gold and silver prices could go down with it as they did in the 2008 - 2009 crash when frightened investors liquidated equities and commodities and fled to the perceived safety of the U.S. dollar. This scenario is quite possible, especially since the Federal Reserve's new chairman, Jerome Powell, seems to be considerably more hawkish than the the Fed's previous chairwoman Janet Yellen. We need to keep in mind, however, that gold (and silver) bottomed considerably ahead of equities in that crash, and gold prices rapidly shot back up from $700 to an all-time high of $1900 in less than three years. My point is that even if precious metals fall with equities again, they will be a very good buy at their bottom, especially when investors realize that equity markets won't be able to be coaxed back up by the lowering of interest rates (they are already low).
Speaking of a falling stock market, the broad stock market was down again today. We are now leaving our recent reversal zone for equities, and it looks like this market still wants to go lower. We are quite late in the medium-term cycles of the S&P 500 and NASDAQ and their bottoms are due soon. Unless this market reverses up right now, it looks like we could see the final bottoms in our next reversal zone coming up July 4 -13. We enter that time period next Wednesday so we won't have to wait long for another potential buy spot. We are already close to our suggested target bottom for the S&P 500 around 2,680. Unlike the S&P 500 and NASDAQ cycles, the DOW's normal medium-term cycle is not due to bottom soon, but it could easily contract and synchronize its bottom with the other two indices in this upcoming reversal period. We will look for that. Still on the sidelines of this market.
Our long position in crude oil (entered on June 5) is doing extremely well. In Monday's blog I wrote:
"The low at $63.40 (August contract chart) on June 18 appears to be the start of a new medium-term cycle in crude. Directional momentum in crude's chart is now 100% bullish so we should at least see a rally to test the last cycle high of $72.70 on May 22."
And indeed we are seeing that high tested today. It's a little too early in the cycle to see a significant top and correction (and we are not in a reversal zone) so I suspect prices will continue higher, perhaps after a brief dip (there is resistance around $72). If prices can clear the May 22 high, we could see them move to $75 or even higher. Holding my long position in crude oil.
Today gold prices dropped to $1254 and silver broke below its May 1 low of $16.06 and made an intraday low at $15.98. This is a bearish warning for these metals. Since our gold stop loss was based on gold breaking below $1264 and silver breaching that $16.06 low, some traders may have sold their long positions in gold today. If not, they should place an order tonight to sell at tomorrow's market open (or just wait to sell early tomorrow). There is still a chance of a bounce here as today was the last day of the reversal zone, but that seems far less likely now. As I mentioned in yesterday's update, there is a good chance gold and silver are now aborting their massive bullish inverted "head and shoulders" chart formations and are therefore turning bearish. We should be out of both silver and gold now.
Today's dip in prices was triggered by a sudden surge in the U.S. Dollar Index to a new high of 95.29. We are just leaving a reversal zone for currencies (June 14 - 26), and it looks like we had two reversals in this period -a significant drop from last Wednesday's high and a strong bounce from this week's low on Monday- which is a bit unusual but demonstrates just how volatile markets are recently. Some precious metal analysts are speculating that a severe correction in the broad stock market looks imminent and that gold and silver prices could go down with it as they did in the 2008 - 2009 crash when frightened investors liquidated equities and commodities and fled to the perceived safety of the U.S. dollar. This scenario is quite possible, especially since the Federal Reserve's new chairman, Jerome Powell, seems to be considerably more hawkish than the the Fed's previous chairwoman Janet Yellen. We need to keep in mind, however, that gold (and silver) bottomed considerably ahead of equities in that crash, and gold prices rapidly shot back up from $700 to an all-time high of $1900 in less than three years. My point is that even if precious metals fall with equities again, they will be a very good buy at their bottom, especially when investors realize that equity markets won't be able to be coaxed back up by the lowering of interest rates (they are already low).
Speaking of a falling stock market, the broad stock market was down again today. We are now leaving our recent reversal zone for equities, and it looks like this market still wants to go lower. We are quite late in the medium-term cycles of the S&P 500 and NASDAQ and their bottoms are due soon. Unless this market reverses up right now, it looks like we could see the final bottoms in our next reversal zone coming up July 4 -13. We enter that time period next Wednesday so we won't have to wait long for another potential buy spot. We are already close to our suggested target bottom for the S&P 500 around 2,680. Unlike the S&P 500 and NASDAQ cycles, the DOW's normal medium-term cycle is not due to bottom soon, but it could easily contract and synchronize its bottom with the other two indices in this upcoming reversal period. We will look for that. Still on the sidelines of this market.
Our long position in crude oil (entered on June 5) is doing extremely well. In Monday's blog I wrote:
"The low at $63.40 (August contract chart) on June 18 appears to be the start of a new medium-term cycle in crude. Directional momentum in crude's chart is now 100% bullish so we should at least see a rally to test the last cycle high of $72.70 on May 22."
And indeed we are seeing that high tested today. It's a little too early in the cycle to see a significant top and correction (and we are not in a reversal zone) so I suspect prices will continue higher, perhaps after a brief dip (there is resistance around $72). If prices can clear the May 22 high, we could see them move to $75 or even higher. Holding my long position in crude oil.
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