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Weekend Market Analysis 2 Apr 2017

Apr 2nd, 2017

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).

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