Today was the first day of a reversal zone that runs from Nov. 14 - 21. This reversal could apply to all the markets we trade.
Today silver broke briefly below the $13.95 Sept. 11 low that started its current medium-term cycle then closed in the upper part of today's trading range ($14.13). Gold tested the $1200 level Monday, Tuesday, and today and closed today at a new weekly high ($1210). This is all bullish behavior, and because silver broke the low that started its medium-term cycle while gold remained well above the low that started its cycle ($1161 on Aug. 15), we have a strong case of bullish divergence and a strong buy signal in a reversal zone. Although we could make an argument to buy both metals now, the fact that silver went below the start of its cycle means that even if it rallies from here, that rally may be brief (but possibly sharp) and prices could turn down again to make a final cycle low well below $13.95. Gold's current medium-term cycle, however, is a little older than silver's (it started a month earlier), and there is a possibility that yesterday's low was the end of the cycle and start of a new one. If that is the case, gold would be ready to rally strongly now. My point here is that at the moment a bullish position in gold is less risky than one for silver. Let's buy gold now for tomorrow's market open and stay on the sidelines of silver for now. A good stop loss for this long position in gold would be a close below $1181.
The broad stock market continued lower today, and the DOW and S&P 500 are now touching our target points for a normal correction in a bullish market. But it is still possible for this market to turn bearish if this correction goes deeper and breaks those Oct. 29 lows (24,122 in the DOW, 2,603 in the S&P 500 and 6,922 in the NASDAQ) that may have started new medium-term cycles in all three indices. Since this current reversal zone extends into Wednesday of next week, there is plenty of time for the market to plunge lower before reversing. Let's wait a few more days and see if these target areas (25,000 in the DOW and 2,700 in the S&P 500) can hold the correction before we consider going long in this market. Staying on the sidelines for now.