MARKETS UPDATE (3:00 pm EST)
Today Fed Chairman Jerome Powell made some public comments on interest rate policy that many are interpreting as strikingly dovish compared to his normally hawkish enthusiasm for raising interest rates. Perhaps he's responding to Donald Trump's recent criticism that the Fed has been raising rates too quickly, or maybe he simply realizes that Wall Street is not ready for a rapid increase in interest rates and has shown its displeasure with the recent equity plunge. Either way, his dovish comments seem to be boosting the broad stock market today. The DOW is up over 500 points at the time of this writing. This rally is supporting the idea that the DOW and S&P 500 started new medium-term cycles with their lows on Oct. 29, but there are reasons to be cautious here. A dramatic rally triggered by some minor comments from Powell may not last. Furthermore, the market is rising steeply into the center of the current strong reversal zone for equities (Nov. 26 - Dec. 5). This means we could see a top by next Wednesday and possibly a dramatic reversal back down. The fact that we are in an unusually volatile trading environment that will probably last at least through the second week of December is also making me cautious about this rally. Let's stay on the sidelines of this market for now and see if this rally gains any momentum. If we are starting new medium-term cycles in the broad stock market, it is early in the cycle and there will be time to go long on any corrective dips later.
Not surprisingly, Powell's sudden dovish tone pushed down the U.S. Dollar Index and thus boosted gold and silver prices. But, as with the stock market, we have to ask ourselves if Powell's comments will trigger a legitimate rally in the metals or will the rally be a brief "flash in the pan". Our reversal zone for the precious metals also extends into next Wednesday so we have time to wait and see if it will correlate with a top or bottom (either one is still possible). Still on the sidelines of gold and silver.
Crude oil prices are down today despite Wall Street's rally. Because crude prices often take their cue from the broad stock market, this may be telling us that the equity rally is superficial and won't last. Crude may have made a medium-term and longer-term cycle bottom with Monday's low of $50.10 (Jan. contract chart), but it could also dip lower before next Wednesday (Dec. 5). We will probably be looking to go long over the next five trading days. On the sidelines of crude for now.
Today Fed Chairman Jerome Powell made some public comments on interest rate policy that many are interpreting as strikingly dovish compared to his normally hawkish enthusiasm for raising interest rates. Perhaps he's responding to Donald Trump's recent criticism that the Fed has been raising rates too quickly, or maybe he simply realizes that Wall Street is not ready for a rapid increase in interest rates and has shown its displeasure with the recent equity plunge. Either way, his dovish comments seem to be boosting the broad stock market today. The DOW is up over 500 points at the time of this writing. This rally is supporting the idea that the DOW and S&P 500 started new medium-term cycles with their lows on Oct. 29, but there are reasons to be cautious here. A dramatic rally triggered by some minor comments from Powell may not last. Furthermore, the market is rising steeply into the center of the current strong reversal zone for equities (Nov. 26 - Dec. 5). This means we could see a top by next Wednesday and possibly a dramatic reversal back down. The fact that we are in an unusually volatile trading environment that will probably last at least through the second week of December is also making me cautious about this rally. Let's stay on the sidelines of this market for now and see if this rally gains any momentum. If we are starting new medium-term cycles in the broad stock market, it is early in the cycle and there will be time to go long on any corrective dips later.
Not surprisingly, Powell's sudden dovish tone pushed down the U.S. Dollar Index and thus boosted gold and silver prices. But, as with the stock market, we have to ask ourselves if Powell's comments will trigger a legitimate rally in the metals or will the rally be a brief "flash in the pan". Our reversal zone for the precious metals also extends into next Wednesday so we have time to wait and see if it will correlate with a top or bottom (either one is still possible). Still on the sidelines of gold and silver.
Crude oil prices are down today despite Wall Street's rally. Because crude prices often take their cue from the broad stock market, this may be telling us that the equity rally is superficial and won't last. Crude may have made a medium-term and longer-term cycle bottom with Monday's low of $50.10 (Jan. contract chart), but it could also dip lower before next Wednesday (Dec. 5). We will probably be looking to go long over the next five trading days. On the sidelines of crude for now.
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