Archive

Archive for Apr, 2017

Weekend Market Analysis 23 Apr 2017

Apr 23rd, 2017 No comments

Conclusion

World equity markets continue to move sideways with US equities particularly restricted by a down-sloping resistance line since early March. This is somewhat energised by increased volatility due to geo-political-terror events and the first round French election today. The gold price is holding up but silver has broken down (which usually leads) indicating the precious metals complex is still moving down to a 6-month cycle low in May / Jun, with exciting prospects after that. This view is further supported by miners looking more negative than the metals.

This primary interpretation has been delayed slightly by the increased geo-political-terror events and should further events cause further volatility then the delay may be further exaggerated. The US Dollar looks set to weaken over the medium term (with the less likelihood now of rate hikes as planned) but equally set to strengthen slightly first in the short term, providing credence to the gold cycle low soon.

 

US$ 

The Dollar Index is creating a bullish reducing wedge in the ‘head & shoulders’ pattern which suggests short term strength before medium term weakness. The Dollar has not broken down below the neckline and instead has moved up. To remain bullish it needs to break up through the resistance trendline at 101.4, with a prior small hurdle at 100.

 

The long term picture for the Dollar indicates significant downside potential, with the first stage target at about 94.5.

 

Treasuries

Recent increased volatility caused bond markets to rise with yields dropping below their recent horizontal trading range. This reversed slightly at the end of the week.

 

Gold Price

Gold has reached long term resistance and is poised to turn down lower, moving potentially into a 6-month cycle low with exciting buying opportunities thereafter.

Short term indications for gold moving down before up are supported by significant divergence with the miners. Also. silver is retreating more than gold which adds to negativity, and the gold oscillators are trending down.

 

 

Silver price

Silver continues to underperform gold (negative) and has broken back below the 9 month megaphone resistance line, with accompanying declining oscillators (negative).

Silver has a confirmed top and continues reacting down from the bearish double top formation. Like gold, price is likely to move down to a 6-month cycle low in May / Jun with exciting buying opportunities thereafter.

 

US General Equities

The Dow Jones Industrial Ave. continues down, reacting from negative divergence (pink area) as it hovers at support within the green trading channel en route to the 200-Dema.

However, the short term chart illustrates the normally bullish reducing wedge pattern which could see a break up through resistance.

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 16 Apr 2017

Apr 16th, 2017 No comments

Conclusion

World markets continue sideways to down with precious metals up. The US$ has weakened after Donald Trump’s comments calling for a weaker Dollar, but remains well above the neckline of its ‘head & shoulders’ pattern. Geo political ‘flashpoints’  added ‘grist to the mill’ for market turmoil, but relative quiet prevails.

There was some demand for Dollars, and hence its relative strength, and even more demand for US Treasuries which saw yield come down (against the trend of rising interest rates). There is also now stronger perceptions of precious metals breaking up through resistance because of the potential for turmoil, but technical factors indicate otherwise. Both gold and silver ended the week with clear top Candle Dojis and the charts have strong negative divergence with the oscillators. This needs careful watching  but analysis still indicates gold and silver prices will move down to 6 month cycle lows in May / June. If tensions mount dramatically then this will of course prove to be incorrect.

 US$ 

The Dollar has not broken down below the neckline of its ‘head & shoulders’ pattern and instead has moved up. To remain bullish it needs to break up through the resistance trendline at 101.5, which is probable before long term decline.

Geo-political tensions seem likely to continue in the short term which will increase demand for safe-haven currency which for the time being remains the Dollar.

 

The long term picture for the Dollar indicates significant downside potential, firstly to the halfway stage at about 94, and then to long term support at about 86.

Treasuries

The bond market bottomed in Jul 2016 worldwide with yields increasing to Dec 2016, followed by a sideways drift until now. With the recent geo-political tensions the demand for bonds increased and yields actually dropped below resistance against the trend of rising interest rates.

Gold Price

Gold is on the verge of something spectacular in that price has now reached the long term resistance trendline from the all-time high in Aug 2011. A break above this will herald the start of the next leg up in the current bull market.

Despite stronger perceptions of precious metals breaking up through resistance, technical factors indicate otherwise in the short term. Both gold and silver ended the week with clear top Candle Dojis which indicate short term reversals. Gold volumes declined during the break above the trading channel resistance line.

The gold charts have strong negative declines in the oscillators which support downside before upside. This needs careful watching  but analysis still indicates gold and silver prices will move down to 6 month cycle lows in May / June.

Silver price

Silver has underperformed gold in the recent past (negative) and although breaking up through the 9 month megaphone resistance line, it has formed a double top (negative) with accompanying declining oscillators (negative).

Like gold, silver closed the week with a clear Doji indicating a top reversal as well as a micro megaphone also indicating a downside reversal. Closing below $18.42 will confirm a top, provided prices don’t exceed Thursday’s $18.60 high.

US General Equities

The Dow Jones Industrial Ave. is looking negative, hovering just above support, below which it is likely to drop further down to the 200-Dema at the bottom of its 1 year trading channel (green lines).

The negative divergence during the period Dec 2016-Mar 2017 is playing out suggesting further decline. All the US transportation indices are looking even more negative, adding credence to further declines in accord with Dow Theory.

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 2 Apr 2017

Apr 2nd, 2017 No comments

Breaking news today from one of the well-respected market commentaries is that Donald Trump wants the US back on the Gold Standard by 2021, exactly 50 years after it was abolished by Richard Nixon. This apparently is to be declared at the G20 Summit in Hamburg Germany in July, and is of course a dramatic development with profound consequences for the world. It will be ignored by this market update until confirmed.

US$

The US$ index failed to penetrate the threatening ‘head & shoulders’ neckline and has reacted up to close the week at 100.22. This upward correction was tempered somewhat on Friday by comments from William Dudley (NY US Fed Chair) indicating no hurry toward further rate hikes this year. This had the effect of dropping Dollar value by the close and increasing gold and silver prices.

However when we look at the longer term 9 year view we notice:

  • Price movement is probably limited to remain below the long term resistance trendline (ltrt);
  • The triple top breakout is false reacting down from the ltrt;
  • The ‘head & shoulders’ pattern neckline at 99.25 is still likely to be penetrated :
    • with the first stage decline target at 94.5;
    • at support roughly equal to the height of the head;
    • at the confluence of the resistance / support trendline roughly mid-way between the long term resistance / support trendlines;
    • final support roughly in the region of 87;

Bond Market

Bond yields worldwide continue to move sideways extending the drift since mid-Dec 2016. This continues to retard the conviction that interest rates are increasing and confirms NY US Fed chair Dudley’s comments on Friday.

Gold Price

The gold price moved down from a double top and is likely to test support at $1194 sooner than resistance at $1267 with the US$ currently showing strength.

Gold is likely to move down into a 6 month cycle low during May / Jun in tandem with miners, after recent divergent tops. This is probably going to signal the final bottom before the next major leg up in the bull market.

 

Silver price

The silver price has held up better than gold and is hovering just below the megaphone resistance trendline to close the week at $18.26. Like gold, silver is likely to move down into a 6 month cycle low during May / Jun.

 

US Gold Miner Index (XAU)

The divergence between metals and miners remains, and miners like metals are now likely to move down into a 6 month cycle low in May / Jun.

US General Equities

World equities remain elevated and the Dow Jones Ind Ave continues to drift sideways to close the week at 20663.22. The oscillators are neutral but all other technical analysis indications are for yet further movement higher.

The ‘Inverted Head & Shoulders’ pattern ranging from May 2015 – Jul 2016 has achieved it’s potential and the index has retreated since, as indicated in the green trading channel. The oscillators show clear and distinctive divergence with the index (red lines) and the Dow is therefore likely to continue drifting to the bottom trading line which is superimposed on the 200-Dema in the region of 19350 at the moment (another 6.3% down).

 

Conclusion

The US$ index has reacted up from the neckline of the ‘head & shoulders’ pattern for now although the longer term view indicates Dollar weakness in the region of 94.5 (first stage) and perhaps as low as 87 finally. Bond yields worldwide continue to move sideways for now which retards the conviction that interest rates are increasing quickly.

Gold and silver prices are likely to test support sooner than resistance and are likely to move down into a 6 month cycle low during May / Jun. The divergence between metals and miners remains which supports the move down, which is probably going to signal the final bottom before the next major leg up in the bull market.

World equities remain elevated and the Dow Jones Ind Ave continues to drift sideways with the oscillators in neutral positions and all other technical analysis indications for yet further movement higher. However, the ‘Inverted Head & Shoulders’ pattern has achieved it’s potential and the index has retreated since. There is clear and distinctive divergence between the index and the oscillators and the Dow is therefore likely to continue drifting to the bottom of the trading channel which is superimposed on the 200-Dema in the region of 19350 at the moment (another 6.3% down).

Categories: Currency, Equity, Gold Tags: