Patience

I am currently on the sidelines in the U.S. equity markets.

I am no longer looking to short the exchange traded funds which mirror the U.S. equity markets if the Dow Jones industrial Average pushes up into the 16,800-17,400 range. Short term I am starting to see a buy divergence on the daily charts for the U.S. equity markets. I do not think the U.S. equity markets are out of the woods yet. I do think new lows are coming, probably by sometime this summer.

I am waiting for the U.S. equity markets to get to an extreme oversold or an extreme overbought condition. At an extreme oversold condition I would be looking to buy the exchange traded funds which mirror the U.S. equity markets and at an extreme overbought condition I would be looking to short the exchange traded funds which mirror the U.S. equity markets. These exchange traded funds include DIA (mirrors Dow Jones Industrial Average), QQQ (mirrors NASDAQ Composite), SPY (mirrors S&P 500), and IWM (mirrors Russell-2000).

At one point early this morning the Dow Jones Industrial Average was down over 200 points and the S&P 500 futures traded down to a low of 1886.75. At 10:00am new home sales for the month of January were reported at 494 thousand, less than the expected 520 thousand. At 10:30 the EIA petroleum status report was released showing an increase in crude oil inventories of 3.5 million barrels from the prior week. Immediately following this bullish report crude oil shot up bringing the U.S. equity markets up off the lows with it. At around 11:30-12:00pm I got a buy signal on the 15 minute time frame on the U.S. equity markets and I knew the lows were in for the day.

The Dow Jones Industrial Average closed up 53.21 (0.32%) at 16,484.99, the NASDAQ Composite closed up 39.02 (0.87%) at 4,542.61, the S&P 500 closed up 8.53 (0.44%) at 1,929.80, and the Russell-2000 closed up 9.93 (0.98%) at 1,022.08.

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Crude Oil

I am currently on the sidelines in crude oil.

I am waiting for a significant move in crude oil before I would be looking to take a position in crude oil and the oil stocks.

There is heavy overhead resistance in crude oil. Crude oil is not out of the woods yet as there is a significant supply of crude oil. When we do get a push down in the U.S. equity markets I believe crude oil will lead the way.

There were no surprises in the EIA petroleum status report released at 10:30am this morning, showing an increase in crude oil inventories of 3.5 million barrels. Immediately following this report crude oil shot up bringing the U.S. equity markets up off the lows of the day.

Crude oil was up 0.85 (2.71%) today, closing at 32.20.

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Gold

I am currently on the sidelines in gold.

I would no longer be looking to buy gold in the 1,170-1,190 range, using a 1,135 stop. I am now waiting for gold to push down and get to an extreme oversold condition before I would look to buy gold and the gold stocks NEM (Newmont Mining), ABX (Barrick Gold), GLD (Gold ETF), KGC (Kinross Gold), and AUY (Yamana Gold).

After trading up to a high of 1254.30 gold closed at 1229.40 today, up 3.40 (0.28%).

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