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Weekend Market Analysis 29 Oct 2017

Oct 29th, 2017 No comments

Conclusion

International markets continue to inch up and the decision in the EU to continue with QE until halving the quota in 2018 finally added a bit of euphoria there also. But we are now entering into a post-QE world with the interest rate cycle turning up, and this will become increasingly threatening as recognition of gargantuan total global debt and the debasement of money is fully understood. Political jitters continue in the EU with Spain this week and probably more in Eastern Europe soon.

The US$  index finally managed to increase through resistance at 94.2 to close at 94.82 from a high of 95.1. It has therefore broken up through the neckline of an inverted ‘head & shoulders’ pattern which is likely to take it higher by the depth of the head to about 97. This is negative for gold which is now likely to drift lower, probably towards a 6 month cycle low in Dec 2017.

The US interest rate hike in Dec 2017 is already priced in and this may end with gold continuing the next leg up in Jan 2018 just as happened in Jan 2016 and Jan 2017. The general equities worldwide continue towards the next collapse for a variety of reasons, one of which is described in this document.

 

US$

The US$ rally broke up strongly through resistance at 94.2 on the index and is likely now to be tested at 50-Wema and thereafter at 97.4 which is above the neckline of the inverted ‘head and shoulders’ pattern by the depth of the head. The oscillators are moving up to support this.

 

 

The Dollar daily chart illustrates the penetration through the neckline of the inverted ‘head and shoulders’ pattern and the likely increase towards 97.4. However, in this case, the oscillators have already moved up to higher levels and are perhaps not as encouraging.

 

 

Gold

The long term chart illustrates the gold price re-testing the breakout through long term resistance which may now be invalidated with the stronger Dollar. It would seem gold is likely to drop into a 6 month cycle low before the next leg up in Jan 2018.

 

 

The gold daily chart illustrates the price retreat this week closing with a double bottom and some support at 200-Dema. The region of support is lower down and gold is likely to drop further to a 6 month cycle low in Dec 2017 which is also supported by short term oscillators moving down.

 

 

GDX US miners ETF

GDX price retreated further this week away from resistance and is likely to now drop below support. A region of strong support is at 21.0 and the oscillators have also dropped to low levels which might provide some support.

 

 

DUST US Gold Miners bear index

The inverse picture in the US Gold Miners Bear Index (Dust) indicates a break up through resistance (blue diagonal) with a strong region of resistance at 200-Dema. The oscillators are mixed suggesting further strength before weakness, supporting lower gold prices.

 

 

Silver

Silver dropped down below 200-Dema and is set to move down further towards a 6 month cycle low in the region of support. The oscillators support further declines.

 

 

General Equities (Dow Jones)

There is nothing new in international equity markets which continue to advance, moving ever close to the next collapse for a variety of reasons described in earlier narratives. One such reason is in technical analysis of the ‘Jaws of Death’ pattern which indicates a potential collapse of 75% in the Dow Jones index. This pattern has developed over the past 18 years into a ‘monster’ which is about to collapse, and which has been described as the ‘Coming Economic Ice Age’.

 

 

A long term chart of the Dow ever since the creation of the US Federal Reserve in 1913 illustrates the big collapses in history, providing a perspective of the coming 75% collapse.

 

 

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Weekend Market Analysis 22 Oct 2017

Oct 21st, 2017 No comments

Conclusion

The US senate voted on Thursday to approve a budget blueprint that paves the way for tax cuts that will add up to $1.5 trillion to their Federal deficit over the next decade. This will of course further inject massive liquidity into their market and the Dow Jones shot up accordingly to close the week at 23328.

Thursday was also the 30 year anniversary of Black Monday (19 Oct 1987) when the Dow dropped 20% on the day. The euphoria has not been replicated by the other international markets which remain elevated, mostly displaying negative divergences, although higher prices will persist in the US markets for a while yet.

The US$  drifted into mid-week and then rose into the close at 93.58 with the tax vote, but it still remains below the critical 94 level. Gold moved lower this week but silver and the gold miners were somewhat less bearish, highlighting the poised nature of the markets at the moment. The pending US rate hike in Dec is fully priced into the markets already, but on balance gold is likely to falter further while general equities increase.

 

US$

The US$ recovered some lost ground this week to close at 200-Wema, still below key resistance at 94, and is still poised to rally up to 50-Wema or continue dropping through support to resume its bear trend. The oscillators are moving up to support a rally. If the Dollar breaks up through 94 decisively then it will trigger an inverted head and shoulders pattern and rise further towards the 96-97 level.

 

 

 

The Dollar daily chart illustrates the increase to short term resistance (diagonal red) with the head and shoulders neckline slightly higher at 94.2. Penetration through these levels could take the Dollar higher by 3%-4%, and the oscillators are hovering at normal to move either way, in support or otherwise.

 

 

US$ / Jap Yen currency pair

The US$/Jap Yen currency pair reversed up this week, as the Dollar increased, and are approaching a region of resistance at 114.0-114.50. The oscillators appear to support the move up to resistance levels, accompanied by weaker gold prices, with any rebound down accompanied by stronger gold prices.

 

 

 

Gold

The long term chart illustrates the gold price re-testing the breakout through long term resistance, with the new bull market support line much lower down.

 

 

The gold daily chart illustrates the price retreat this week closing with a bearish Engulfing candle which suggests more downside to come. The move down closed the gap which formed in the previous week, which needed doing before any price advance could commence. The oscillators are hovering at normal and, together with silver and gold miner price action, the gold price is in a holding position which has perhaps retarded progress toward $1400 until a later stage.

 

 

 

GDX US miners ETF

GDX price retreated this week and is hovering between 50- and 200-Dema, also in a holding position, like gold. The oscillators are hovering at normal with little to suggest progress direction either way, although caution is perhaps the better investment choice for now.

 

 

 

DUST US Miners bear index

The inverse picture in the US Miners Bear Index (Dust) indicates a similar situation to GDX, with price hovering at 50-Dema and the oscillators hovering at normal.

 

 

Silver

Silver moved down less than gold (positive) and is hovering at the confluence of both 50-Dema and 200-Dema, below a region of resistance. It needs to close higher than $17.75 before testing the previous high at $18.32. The oscillators are hovering at normal.

 

 

General Equities (Dow Jones)

There is nothing new in international equity markets which continue to advance, with ever smaller increases, except for US markets which surged on their tax vote. The elements in the Dow chart remain hostile:

  • Rising wedge formation going back 1 year (bearish);
  • Reducing volumes going back 2 years (negative);
  • Sky-high oscillators which have to plummet (negative):
    • Slow Stochastic range is normally 20 to 80, and is now above 99;
    • MACD range is normally -200 to +200, and is now 573;
  • MACD is in a negative divergence with the Dow going back 6 months, despite the sky-high MACD number of 573;
  • The Dow Jones Ind index is again in a negative divergence with the Dow Transport index and Dow Theory states that the market will drop when this is so;

 

 

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Weekend Market Analysis 15 Oct 2017

Oct 15th, 2017 No comments

Conclusion

Gold was strong this week and on the weekly chart it closed with a bullish Morning Star candle, but the miners are relatively not as strong which introduces a slight negative element. Also, the US$ is still poised and could breakout above 94 on the index which will delay further gold momentum. The precious metals complex is therefore still in a developing structure which may test the $1400 level in gold by year end if the miners strengthen in the near term.

International markets remain elevated, with ever smaller increases, as well as continuing negative divergences: All indicating a build-up to a correction soon.

 

US$

The US$ dropped down further from resistance at 94 to just below 200-Dema. This is still a relatively brief rally after the substantial decline since the start of 2017 and remains poised to still go either way. If it rallies decisively above 94 then it will complete an inverted ‘head and shoulders’ pattern which will intimidate the gold advance. The oscillators are moving up to support a rally.

 

 

The Dollar daily chart illustrates the stalling of Dollar decline just above weak support at 92.4 but, in contrast, the short term oscillators are high and due to drop.

 

 

US$ / Jap Yen currency pair

The US$/Jap Yen currency pair continues to drop with dropping oscillators in support, which in turn supports higher gold prices.

 

 

Gold

The long term chart illustrates the gold price rally up from re-testing long term resistance, together with the new bull market support line much lower down.

 

 

The gold weekly chart illustrates the strong week, closing with a bullish Morning Star candle, together with the strong short term support line and oscillators appearing to turn up. A higher close next week will support the move up to test $1400 by year end.

 

 

The short term chart illustrates gold’s move up through support lines, having bottomed at 200-Dema. The oscillators support the advance up. There is resistance towards the previous high at $1364.

 

 

GDX US miners ETF

GDX has advanced up through support levels, similarly to gold, but less powerfully. It needs to penetrate resistance levels ahead and while the MACD is turning up the slow Stochastic appears to be topping out.

 

 

DUST US Miners bear index

The inverse picture in the US Miners Bear Index (Dust) indicates a similar reversal to GDX, and this needs also to accelerate somewhat.

 

 

Silver

Silver turned up into region of resistance and needs to breakout through $17.75 to test previous high at $18.32. MACD is turning up but the slow Stochastic appears to be topping out.  

 

 

General Equities (Dow Jones)

There is nothing new in international equity markets which continue to advance, with ever smaller increases, towards a major correction soon.

 

 

 

 

 

 

 

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Weekend Market Analysis 8 Oct 2017

Oct 8th, 2017 No comments

Conclusion

International markets remain elevated in a powerful bull trend but continue to show signs of a correction soon, with prominent negative divergences. The bond market continues to edge lower in anticipation with the US Treasury 10 year yield inching up to 2.37%.

The US$ continued with some strength in its mini-bounce but has hit resistance in touching its previous high just above 94 before closing the week slightly down. It needs to break up decisively above 94 for the rally to gain momentum. The US jobs report indicated 33 000 jobs lost because of the hurricane season (especially Harvey damage in Texas), and this prompted Dollar weakness into the close.

Gold responded inversely with some strength into the close but with a stronger silver close and even stronger close in the gold miners. The gold market is now reaching the end of its final approach to the start of the next leg up in the bull market. Technical analysts are now confidently predicting a breakout to $1400 before year end with a powerful run up to $1800 and beyond in 2018.

One of the powerful impacts supporting this concerns China’s intention to switch from its oil imports for US$ to oil imports for Yuan, convertible to gold at the Shanghai Gold Exchange. This is to commence at the start of 2018 and will have powerful and wide-ranging impacts on a number of fronts which may be the catalyst for massive changes in the financial and monetary world. This is a game changer.

 

US$

The US$ mini-bounce hit resistance at the previous high, just above 94, and remains poised to either break up or down. It needs to break out above this resistance decisively to provide momentum to the rally up to 50-Wema, or potentially continue down through support to much lower levels. The oscillators are moving up to support the former.

 

 

The Dollar daily chart illustrates penetration up and the reversal down from resistance at the previous high just above 94. However, the short term oscillators are high and due to drop. The coming week is critical in defining continued direction.

 

 

US$ / Jap Yen currency pair

The Japanese Yen closed the week on a Shooting Star candle which suggests some Yen strength in the coming week. This is supported by the oscillators which are beginning to move down. However, penetration down through support lines (blue), as indicated, is required to prompt higher gold prices.

 

 

Gold

The long term chart illustrates the gold price correction down to re-test the resistance line. This is holding, for now, together with the new bull market support line much lower down.

 

 

The short term chart illustrates the current correction down, penetrating support lines and reversing at 200-Dema at $1265. The oscillators support the reversal in beginning to turn up from low points.

 

 

The gold market is now reaching the end of its final approach to the start of the next leg up in the bull market. Technical analysts are now confidently predicting a breakout to $1400 before year end with a powerful run up to $1800 and beyond in 2018.

One of the powerful impacts supporting this concerns China’s intention to switch from its oil imports for US$ to oil imports for Yuan, convertible to gold at the Shanghai Gold Exchange. This is to commence at the start of 2018 and will have powerful and wide-ranging impacts on a number of fronts which may be the catalyst for massive changes in the financial and monetary world. This is a game changer.

It might be good to remember gold moves in cycles and you see this in a recent 20 year chart, with:

  • 8 year cycles (in blue);
  • each cycle followed 11 years later by a significant high (in red);

Expect a significant high in Dec 2019 (give or take 3-6 months either way) probably somewhere in the vicinity of $4 000.

 

 

GDX US miners ETF

Gold miners (in the US GDX) continue ahead of the gold curve in rallying up from 200-Dema and closing the week with a bullish Engulfing candle. This is supported by the oscillators turning up.

 

 

DUST US Miners bear index

The inverse picture in the US Miners Bear Index (Dust) indicates a similar reversal to GDX, closing the week with a bearish Engulfing candle (bullish for gold). This is supported by the oscillators beginning to turn down.

 

 

Silver

The silver price, which tends to lead gold, is turned up from the bottom of the region of support just below 200-Dema, together with supportive oscillators beginning to turn up.

 

 

General Equities (Dow Jones)

The longer term weekly 2 year chart of the Dow illustrates the powerful bull market in the US, but it also illustrates a number of characteristics which point to a major correction soon:

  • The upward thrust in 2017 is in a bearish rising wedge;
  • During this time the MACD is in a negative divergence;
  • Both oscillators are very high and due to turn down;
  • Volumes in the Dow have reduced markedly in the 2 year view;

All this points to a major correction soon.

 

 

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Weekend Market Analysis 1 Oct 2017

Oct 1st, 2017 No comments

Conclusion

International equity markets remain elevated with signs of the bond market yields rising whilst precious metals correct down as the US$ shows some strength. The US Fed intends to hike rates further and the bond market should drop to reflect higher yields soon in accordance with this, which will eventually reduce equities.

The US$ is in a mini-bounce within the strong region of support which could still either rally further or continue to resume the bear trend. Gold has corrected down in sympathy and appears to be set to decline further towards 200-Dema at about $1260. Gold miners (in the US GDX) are ahead of this curve in dropping to 200-Dema already and may be therefore leading a reversal, failing which further more severe drops may still be inflicted. The inverse picture in the US Miners Bear Index (Dust) indicates the latter because it is still substantially below 200-Dema.

US$

The US$ is in a mini-bounce within the strong region of support from which penetration up or down will indicate either a stronger rally towards 50-Wema or resumption of the bear trend below 200-Wema. The oscillators are in pre-bounce mode and indicate the former.

 

 

The Dollar daily chart illustrates penetration up through resistance but a reversal down from the previous high at 93.3. The short term oscillators are mixed with the slow Stochastic turning down with further downside with the MACD still below normal. The coming week is critical in defining direction.

 

 

US 10 Year Treasury Bond

The bond market has been in a very long bull market stretching back to the early 1980’s when interest rates were at a peak, compared to rates which are now at historic lows. US rates bottomed in Jul 2016 but, although there has been some increase in bond yields since then, there is still substantial increases required to indicate the end of the bull market and the start of the bear market.

The short term chart illustrates US bond yields are still directionless but should be rising further in sympathy with the US Fed’s intention to continue hiking rates. The 10 year yield closed at 2.33% above 200-Dema and if the previous cycle peak at 2.95% is eclipse then this will create an increasing trend that, given the fundamentals, has to happen.

As increased bond yields peak to new highs so bond prices will drop to new lows and equities will be sold off to replenish losses.

 

 

US$ / Jap Yen currency pair

The gold correction down is reflected in the up cycle indicating Dollar strength and Yen weakness. Higher gold prices need penetration down through support lines, as indicated, with the higher less powerful support imminent and the lower more powerful support a bit further down. Both oscillators are high and indicate downward breakouts.

 

 

Gold

The long term chart illustrates the gold price correction down from the breakout through resistance back to re-test the resistance line. This is critical in that decisive penetration will increasingly tend to invalidate the breakout, while the support in that area will boost chances of a decisive rebound up.

 

 

The short term chart illustrates the current correction down, penetrating the first line of support and stopping short of the second. It seems likely that penetration through the second line of support will occur down towards rising 200-Dema, perhaps short of the third line of support at a price in the region of $1260. This is assisted by the slow Stochastic well below 20 and the MACD moving down below normal.

 

 

GDX US miners ETF

Gold miners (in the US GDX) are ahead of the gold curve in dropping to 200-Dema already and may be therefore leading a reversal, failing which further more severe drops may still be inflicted. There is now a confluence of price, third support line, and 200-Dema, suggesting that the gold miners might be leading gold in the potential for a rally. This is supported by a very low slow Stochastic and MACD below normal.

 

 

 

DUST US Miners bear index

The inverse picture in the US Miners Bear Index (Dust) indicates a gold bottom is not there yet as the index is at a confluence within a strong region of resistance well below 200-Dema with some upside potential still left. The slow Stochastic is very high but MACD is only just above normal.

  

 

Silver

The silver price, which tends to lead gold, is within a region of support just below 200-Dema, suggesting price is close to a bottom. The oscillators tend to support this with a very low slow Stochastic but MACD only just below normal.

 

 

General Equities (Dow Jones Ind Ave)

The Dow Jones is looking strong, moving up the trading channel (green) ever higher from support, with seemingly no resistance. The threat of higher bond yields is simply argued away as providing more funds for equity investment. There is a small double top and the oscillators are high which indicate potential for a correction. Otherwise, expect higher prices.

 

 

The longer term is represented below in a weekly 10 year chart which supports the proposition of a major correction any time soon. Note the following:

  • The trading channel since the last financial crisis ending in 2009 points ever upward;
  • The last 2 years is in a threatening ‘rising wedge’ pattern (red);
  • The oscillators are very high and due to move down;
  • Trading volume keeps falling (negative);
  • The major support at 15 500 was critical during the 2 year consolidation period, and probably will become again;

All this points to a major correction.

 

 

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