The Fed announced today that it would begin to taper its bond purchasing program (QE) this month. Normally, such hawkish news would send equity markets tumbling. Well, the broad stock market did look nervous and indecisive this morning and early afternoon, but once the Fed's announcement was made at 2:00 PM, it took off in a strong end- of-day rally. The Fed's tapering announcement was not unexpected, so after it was clearly stated (with no other surprises), it seems we had a case of "buy on the news" (i.e. the market had already factored in the taper). All three indices (DOW, S&P 500, NASDAQ) closed the day at new all-time highs. This bullish behavior seems to be aligned with our cycle analysis which is suggesting more rallying into the end of the year. 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. We are still on the sidelines of this market.
Hawkish rhetoric from the Fed is usually not favorable for precious metal prices, and today gold and silver did take a hit with both metals making new weekly lows. As discussed in Sunday's blog, we are looking for a sub-cycle low now in both gold and silver for a possible buying opportunity. But today's weekly lows negates any bullish divergence signal for the rest of this week. We may get that next week, however, when we are in the center of a reversal zone specifically for precious metals (Nov. 4 - 15). If prices keep falling from here, we will watch for that. Still on the sidelines of gold and silver.
Crude oil prices also took a substantial hit today. Prices closed below the lower channel trend line I mentioned in my last blog, and they also went below last week's $80.58 low. (Last week's low may have been a significant sub-cycle bottom). If that's the case, this cycle could be turning bearish with lower prices ahead. Another possibility is that the sub-cycle bottom was not last week and is forming now. In that situation, prices would start rising again soon. Prices need to start closing above $82 now to keep the trend bullish. We are on the sidelines of crude oil for now.