Healthy pause

The 17.5-week cycle on Wall Street is warning of a near-term top. This longstanding pattern has successfully identified lots of the significant highs and lows of the last couple of years, and indeed many more if we go back further back in time. I am not particularly concerned about its message at this point, however. While I respect the cycles-model, its signals need to be combined with other technical evidence. For starters, the US indices are not overbought right now, and I believe the current rally to be only in its early to middle stages. I therefore do not expect a peak around 14 January, at least not a significant one.

My bias remains towards buying the indices today, especially the Dow and Nasdaq.

for analysis of the Wall Street indices.

COMMODITIES OUTLOOK

09.49

One of the most influential cycles in the US Dollar – and hence in commodities – is one of roughly 77-days duration. This rhythm has been in evidence at least since the greenback became freely traded in the 1970s, and there are hints of it beforehand in the prices of various raw materials. Applying this cycle to the price of gold, we see the possibility of a cyclical turning-point occurring in the 24 January timeframe. As of now, a low seems the likeliest outcome, although it is harder to say when a price is in a messy, corrective phase such as the present one. Were gold to enter that window in a state of oversoldness on its daily chart, I would certainly be up for buying any convincing rally that ensued.

for analysis of commodities and EURUSD.

EUROPEAN OUTLOOK

07.21

I have been calling for the European indices to sell off a little more in order to set up another really decent leg of upside. And that is now what is happening, with both the DAX and the FTSE having shed their previously-overbought intraday momentum readings. This is entirely healthy stuff, as no rally can simply proceed in a straight line for all that long. I don’t think it’ll be long before we are on the way back up, though. As soon as we get evidence of a decent intraday revival, I shall go long once more. Fresh bull-market highs await both indices.

for analysis of the European markets.

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