We have two fairly strong general reversal zones in the second half of this month - Sept. 13-21, and Sept. 22-30. These are back to back, so the rest of this month is essentially one big reversal zone, and this could affect all the markets we trade. (There is, however, a reversal zone specifically for currencies Sept. 20 - 28). This means that any market could make a significant high or low and a significant reversal at any time. Nevertheless, the center of these reversal zones are considered the most likely pivot points, and that would be around Sept. 15-16 and Sept. 27.
In the broad stock market, the DOW and S&P 500 are most likely older medium-term cycles that are nearing completion; however, the NASDAQ is almost certainly a young (new) cycle that began with its low of 14,424 on Aug. 19. This creates a little dilemma in determining whether the broad stock market is still bullish or is turning bearish. The older DOW and S&P 500 cycles may have already peaked and could be ready to turn down, but the NASDAQ's cycle just started, and new cycles are usually quite bullish. So will the NASDAQ take the lead and keep the other two indices bullish, or will the DOW and S&P 500 turn down and pull the NASDAQ down with them? We will have to wait and see. The DOW is currently the most bearish because it broke below its Aug. 19 low. The S&P 500 is still above its Aug. 19 low (4,368), but if it breaks below, it too will be supporting the bearish view. The NASDAQ breaking below its Aug. 19 low (14,424) would be VERY bearish and would be a strong signal that the broad stock market is starting a MAJOR longer-term correction.
Today, the market was bullish. The DOW seems to be finding support at 34,500. If that support holds, it may be the start of a new medium-term cycle, and this index could still be bullish (at least short-term) and possibly headed for a new all-time high. The S&P 500 is bouncing off its 45-day moving average yesterday and today, so that might be a significant sub-cycle low and reversal up supporting the bullish view. The NASDAQ may also be finding some support at the round number line of 15,000.
We will remain on the sidelines of all three indices for now until the trend - bullish or bearish - is more clearly established. Our main focus now in equities is to determine when a final LONG-TERM cycle top is in so that we can sell short a major correction in this market. That top may already be in for the DOW (the high of 35,631 on Aug. 16), but it is still a little to early to confirm that with certainty.
Gold prices made a new weekly low yesterday, and this negates our bullish divergence signal to silver from earlier in the week. Gold and silver both started new medium-term cycles in August and are therefore potentially very bullish now. Gold may have even started a new longer-term cycle, which would make it even more bullish. This is why we are holding long positions in both metals. A sub-cycle low is due in both cycles (it may have happened already with silver's low on Monday and yesterday's low in gold), and as long as prices don't go too low, we can expect a bullish rally soon. We are holding our long positions in gold and silver for now.
In my last blog on crude oil (Sept. 7) I wrote:
"...prices seem to be falling, so we may look to buy a low by the end of this week - UNLESS prices jump to a new high in the same time frame. In that case, we may wait for a second dip from that high. A clear break and close above $70 would be a bullish sign indicating higher prices ahead."
Well, this week prices did jump dramatically and have been closing well above $70. It's a bit too late to chase this rally now. Crude started a new medium-term cycle on Aug. 23, so it's first sub-cycle correction should be due soon. We will watch for that as a possible spot to buy as this market looks bullish and prices could get as high as $90 in this new cycle. Staying on the sidelines for now.