As I mentioned in my last blog, we are nearing the end of the current medium-term cycle in both gold and silver, and so we want to watch for a significant bottom to buy as the start of a new cycle is always bullish. We may be close to those bottoms now. This week is a major reversal zone for the precious metals, and both metals appear to be finding support in an acceptable price range for a cycle bottom after a steep fall over the last several weeks. A major reversal to the upside is therefore likely, and short-term signals are suggesting this could be on Friday or next Monday. The chart of the U.S. Dollar Index is also supporting the idea of gold and silver turning up now as today the dollar broke briefly above 100 intraday but then quickly retreated back down, and it appears to be closing in the lower half of the day's range. This is a bearish signal, and it could be signaling the start of a significant correction as the dollar is very overbought and a corrective dip is possible now. Such a correction in the dollar could drive a strong rally in the precious metals. For all of these reasons, I am going to enter long positions in gold and silver today. We can use a close stop loss around $1060 in gold and $13.90 in silver. Prices could drop lower on Friday or even Monday, but since the reversal zone ends next Monday, we don't want to see prices drop lower beyond that day. We also don't want to see the dollar break and close above 100. That would also be a signal to abandon our long position in the precious metals. Risk adverse traders may just want to go long in gold as silver tends to be more volatile and would incur more loss should this trade turn south. Going long in both gold and silver today.
The broad stock market has been quiet and stable so far this week. Tomorrow is a holiday in the U.S. (Thanksgiving Day) and the markets will be closed. Equities often rally on the day after Thanksgiving so on Friday we will watch for signs of intermarket bearish divergence. This is when one or two of the three major stock indices- DOW, S&P 500, NASDAQ- make(s) a new high, but not all three. If this happens Friday or Monday, it will be a good signal to sell short the broad stock market. If all three indices make new highs and/or a rally continues past Monday, we will likely wait until mid-December (the next strong reversal date) and sell short then. On the sidelines for now.