Possible Big Change in Gold, Silver …

Good news and bad news: The good news – the precious metals still have a shot at a multi-month rally, according to my latest AI model run at 2:15 am EST this morning (yes, I’m often up that early watching Asian markets, currencies trade and catching up on work).

Take a look at gold’s AI model, it’s fascinating. Instead of now indicating a cycle inversion and further declines into December 2016/January 2017…

The models now strongly suggest that we saw a cycle extension instead, creating a double low between October 5 and the current period. The October 5 low came right on time, but the current November low is lagging behind a bit. Given the damage that was done in gold, I’m not surprised.

Now look to the right of the AI model, forecasting … a rally into early January … decline into February … then a sharp rally into early April. Overall, this is very good news.

The bad news: It’s not yet enough to convince me gold is on its way back up. The precious yellow metal is acting weak … trading heavy … and acting as if it can’t get out of its own way. The same can be said for silver and other metals. And many senior miners.

Bottom line: The metals are not strong enough yet to take a stab at either a long position, or even a short position based on their weak technical picture. It would be like me telling you to simply toss a coin, and see how it lands. That’s no way to trade and I won’t make recommendations like that.

As much as I love gold and silver, as you do, we have to remain patient and let the market do some more talking to us, revealing some more hands.

Whether they are headed lower still, or are going to bottom – rest assured I’ll be jumping all over whatever opportunity presents itself.

Now, let’s look elsewhere. The dollar is looking a bit toppy and the euro, a bit bottomy. You have modest gains on the inverse euro and the Dollar Index ETF positions. I may recommend grabbing those gains later this morning or tomorrow. That will include maximizing value of the remaining premium on the January 2017 EUO $28 calls. Stay tuned.

Next, the stock market, specifically, the Dow Industrials. In terms of the big picture, it looks like the Dow is finally going to give us a monthly close today above 18,500 – a long-waited breakout.

BUT, that does NOT mean a correction can’t come before blasting higher again. According to many historical measures, the Dow is more overbought than it was at the 2000 high and the October 2007 high.

Moreover, breadth – or the number of stocks advancing compared to those declining – is pathetic. On the NYSE yesterday …

1,470 stocks advanced compared to 1,558 that declined. Advancing volume was 1.43 million compared 2.09 million DECINING.

On the AMEX – 137 advanced, 190 declined. Advancing volume: 30.9 million shares; declining volume, 62.8 million shares.

On the NASDAQ – 1,375 advancing issues, 1,459 declining. Here, advancing volume did manage to beat out declining volume by almost a million shares, largely due to the big name tech stocks. But more shares fell than rose.

This has been the case with the major market averages for weeks, even months on end. So, although the Dow Industrials are breaking out, it does not preclude another sudden move to the downside, one which may last way longer than a few days, weeks, or even months. Hold all inverse stock ETFs.

Right now, I also have my eyes glued on crude oil. Oil got hit hard yesterday, and the AI models clearly show a low early next year, probably below $26.

OPEC cannot get its act together, and they have a new swing producer around, the United States. We’re in the catbird seat now, so any agreement OPEC comes up with … we can effectively derail.

That’s especially true given President-elect Trump’s policies toward energy – very bullish for America. We will be looking at all sorts of energy plays, starting as soon as next week.

You may hear from me again today or tomorrow, grabbing gains on dollar-related positions and staking out an inverse ETF on crude oil. So stay tuned.

Best wishes.

Larry