In my last blog (last Wednesday) on the broad stock market I wrote:
"We are still due for some sort of sub-cycle correction soon. If this market can rally into next week, we may see a top then followed by a corrective dip as we enter another reversal zone for equities Nov. 9 - 18."
Well, the DOW rallied to a new high on Monday, but the S&P 500 and NASDAQ did not, thus creating a bearish divergence signal between these indices. All three are now taking a sharp correction down as we were expecting.
It looks like our new reversal zone (Nov. 9 - 18) may correspond to a bottom instead of a top. Unless something happens to scare the markets into a major sell-off, I think this correction will be brief and modest, and we could see more rallying into December (perhaps a seasonal "Santa Claus rally") before a potentially VERY severe correction.
Right now, a good downside target for the DOW would be around 35,000 - 35,500. We may consider going long if the correction stays above 35,000. (A break below there might lead to a bigger drop). In the S&P 500, 4,500 might be a good spot to buy. Somewhere between 15,000 and 15,500 could be a buying opportunity in the NASDAQ. We will watch for these targets within the time frame of our new reversal zone (now through next week). We are still on the sidelines of the broad stock market.
Gold and silver have recently been somewhat indecisive in their trend pattern, but that trend is looking more bullish this week as both metals have now broken to new weekly and monthly highs. Despite this bullish signal, we note that we are currently at the center of a reversal zone specifically for precious metals (Nov. 4 - 15), so a top and corrective drop could be imminent (the top may have been today). Last week I was projecting a possible corrective low to buy in this reversal zone, but it looks like both metals want to make a top instead. We may look for a buy spot in both metals on any significant dips that follow from a top that forms by the end of this week, but I think we may have missed a good buying opportunity at last week's lows. Gold is late in its current medium-term cycle, so we may just wait for its final cycle bottom before considering any long position. Silver's cycle is younger, however, so it might be worth chasing its current rally on any significant dips. We will remain on the sidelines of both metals for now.
The U.S. Dollar Index has been relatively flat for the last six weeks. It's current medium-term cycle seems to be young and slightly bullish, so it may be ready to rally soon. Any rally in the greenback usually puts downward pressure on gold and silver, so we will watch carefully to see if this limits any rallies in the precious metals over the next several weeks.
Today crude oil challenged its $85.41 (Dec. contract chart) high from Oct. 25 but did not exceed it and then closed near the bottom of today's range. This could be a double-top formation if prices can't exceed that Oct. high. This current medium-term cycle in crude is relatively young and could still rally towards the $90 mark, but if prices don't break to a new high soon or they start falling below $75, then the cycle high could be in, and the trend could be turning bearish. In that situation, we would probably wait for the cycle's final bottom for an opportunity to buy (as the longer-term trend still looks bullish into 2022). Let's stay on the sidelines of crude for now.