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Weekend Market Analysis 16 Apr 2017

Apr 16th, 2017

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.

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