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Weekend Market Analysis 26 Nov 2017

Nov 26th, 2017 No comments

Conclusion

World equity markets are moving sideways in a phase of indecision compounded by a continued variety of ‘excesses’ and kept aloft by excessive liquidity in a world of still substantial QE and interest rates that have not quite yet turned up sufficiently. The post QE world lies immediately ahead in 2018 and the interest rate cycle actually bottomed in mid 2016.

Two negative aspects this week were the Chinese market index plunging more than 2% on Wednesday (after some credit tightening), and in the US two triggers flashed red in the ‘Titanic Syndrome’ and the ‘Hindenburg Omen’ which is the first time this has happened simultaneously since just before the 2007 crash. This indicates acute indecision. The Chinese market can and presumably will be stabilised, but the event illustrates just how vulnerable things are.

The US$ remains very weak closing down at 92.71 on the index, and gold looks correspondingly weak. US gold miners are moving sideways and silver is the weakest of them all closing down on the day and on the week at $16.99, which is all puzzling given the Dollar weakness.

Also, the minutes from the US Fed FOMC meeting (released this week) state they are now concerned at the level of financial market prices and that a sharp reversal could damage the economy.

 

US$

The US$ index rally has completely dissipated and not only dropped down through support at 94.2 as well as 50-Dema, but also down to previous support at 92.55, forming a double bottom in the process. The earlier rally target at 97 seems relegated to history with the previous low at 91.0 being the next ratchet level further down. The oscillators are moving down, suggesting more price downside in the coming week.

 

 

The long term US$ chart illustrates how the 1st stage decline target has been penetrated with the index moving back to test and then dropping down into a region of support and closing the week at 92.71. The 200-Wema has also been penetrated to now become resistance with the 2nd stage decline target lower down at 87.5, in the longer term drift toward the 3rd stage decline target at 77.0.

 

 

Gold

The 2 year weekly gold chart illustrates price consolidation above both 50-Wema and 200-Wema midway between the Oct high and low as well as midway between the previous high at $1362.50 and strong support at $1200. This is also well above the long term support connecting the 8 year cycle low in Dec 2015 with the low at Dec 2016.

Technically, if gold breaks up through the Oct high at $1308.40 then further price gains are likely to test the next high at $1362.50. If this happens then gold is definitely en route in the next leg up in the bull market. However, if gold fails to penetrate $1308.40 then it is likely to test the Oct low and thereafter $1200 or even lower. This all depends on whether the US$ can gather sufficient strength to arrest the current decline and re-launch an attempt at the earlier rally target of 97.

 

 

The short term daily gold chart illustrates the Oct high and low points as well as the threatening neckline of the ‘head and shoulders’ pattern. But more importantly, the price consolidation over the past month is in the shape of a potential ‘bear flag’ and a break below the bottom red diagonal is extremely bearish. Much depends upon the US$ index strength/weakness in the next period.

 

 

The medium term potential for gold is very strong as illustrated in the massive pentagon-shaped base pattern which is a powerful launch pad for further gold strength, whether gold breaks downwards to test $1200 in the short term, or not. Gold closed the week again halfway down the right flank at $1287.30, and whether there is still further weakness or not, it is likely to propel gold to $1800 eventually (being the price rise equivalent from the neckline to the single point bottom of the pattern at $1045).

 

 

GDX US miners ETF

GDX, representing US gold miners,  is similarly positioned to gold itself except that it has rallied less strongly:

  • It is below 50-Dema and 200-Dema (gold is above);
  • It is closer to the Oct low (gold is closer to the Oct high);
  • It is closer (than gold is) to the threatening neckline of the ‘head and shoulders’ pattern;

This is all negative, and therefore indicates further gold weakness before strength (despite excessive Dollar weakness).

 

 

DUST US Gold Miners bear index

The inverse picture in the US Gold Miners Bear Index (Dust) indicates the exact opposite of the GDX chart. It too has not dropped powerfully (as gold rallied powerfully), and therefore supports lower gold prices in the short term.

 

 

Silver

Silver is responding to Dollar weakness less powerfully than gold, which is negative. Like gold, if it fails to break out above the Oct high then it is likely to drop down to test previous lows at $16.58 and $16.34.

So, the short term silver chart still represents some trepidation.

 

 

General Equities (Dow Jones)

World equity markets are moving sideways in a phase of indecision compounded by a continued variety of ‘excesses’ and kept aloft by excessive liquidity in a world of still substantial QE and interest rates that have not quite yet turned up sufficiently. The post QE world lies immediately ahead in 2018 and the interest rate cycle actually bottomed in mid 2016.

Two negative aspects this week were the Chinese market index plunging more than 2% on Wednesday (after some credit tightening), and in the US two triggers flashed red in the ‘Titanic Syndrome’ and the ‘Hindenburg Omen’ which is the first time this has happened simultaneously since just before the 2007 crash. This indicates acute indecision. The Chinese market can and presumably will be stabilised, but the event illustrates just how vulnerable things are.

The Dow Jones Industrial Ave is at its high point but is enduring high levels of indecision at the moment, as evidenced by the two red flashing triggers mentioned above. Also, there is a prominent MACD negative divergence and Dow volumes have plummeted (although obviously dampened by the holidays). The upward grind may well continue but there are now disturbing signals that may finally impact negatively.

 

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 19 Nov 2017

Nov 19th, 2017 No comments

Conclusion

All international markets continue to falter just off their highs, with attendant divergent signals suggesting some kind of correction. But the top patterns will no doubt continue until we move further into the post QE world with stronger indications of higher interest rates. New leadership at the US Fed is more ‘hawkish’ which means US interest rate hikes will be more frequent, with the next likely to go ahead in December.

The US$ index has now dropped down through support at 94.2 and closed the week at $93.57. The earlier expectation of a Dollar rally up to 97 is dwindling fast (although still not impossible) and gold is strengthening accordingly to close strongly up at $1296.50. This is supported by the Jap Yen which is finally strengthening.

So, this moment of dither will result in either:

  • the Dollar continuing to struggle to rally and in fact continuing to drift into long term weakness which means gold has already started the next leg up in the bull market;

or

  • the Dollar musters sufficient strength to complete the expected rally to about 97 on the index which means gold will weaken and test the Oct low at $1262 and perhaps even the $1200 level;

It is good to re-visit the US$ long term chart which illustrates where it is now and where it might go. Whether it resumes the rally in the short term up to 97 or not, the Dollar is positioned to weaken considerably in the long term.

 

 

US$

The US$ index rally has dissipated and dropped down through support at 94.2 as well as 50-Dema. The earlier rally target at 97 seems unlikely now with the oscillators dropping with perhaps more to come. Jap Yen strength and current optimism in the Euro zone will continue to dampen US$ prospects.

 

 

Gold

The massive pentagon-shaped base pattern, stretching down from the ‘inverted head and shoulders’ pattern at the top, is a powerful launch pad for further gold strength. Gold closed the week halfway down the right flank at $1296.50, and whether there is still further weakness or not down to test $1200, it is likely to propel gold to $1800 eventually (being the price rise equivalent from the neckline to the single point bottom of the pattern at $1045).

 

 

The long term chart illustrates the key buy and sell points, against the super slow Stochastic at the bottom, with the position of the pentagon shaped base pattern at right illustrating the expected price rise to $1800.

 

 

 The short term chart illustrates gold’s position between the Oct high of $1308.40 and low of $1262.80 with the neckline of the ‘head and shoulders’ formation (HS) just below 200-Dema. The powerful gold rally is still short of the Oct high where it is likely to encounter resistance, and therefore, if it fails to break out above the Oct high then it is likely to drop down below the Oct low which will take it through the HS. Thereafter, gold is likely to drop down to retest support in the region of $1200 in dropping down into a 6-month cycle low in Dec 2017.

So, the short term gold chart still represents some trepidation.

 

 

GDX US miners ETF

GDX, representing US gold miners,  is similarly positioned except it has not rallied strongly, as gold and silver have done. This is negative, and therefore indicates further gold weakness before strength.

 

 

DUST US Gold Miners bear index

The inverse picture in the US Gold Miners Bear Index (Dust) indicates the exact opposite of the GDX chart. It too has not dropped powerfully (as gold rallied powerfully), and therefore supports lower gold prices in the short term.

 

 

Silver

Silver also rallied powerfully up towards the Oct high where it is likely to encounter resistance. Like gold, if it fails to break out above the Oct high then it is likely to drop down to test previous lows at $16.58 and $16.34.

So, the short term silver chart still represents some trepidation.

 

 

General Equities (Dow Jones)

International markets continue to falter just off their highs, with attendant divergent signals suggesting some kind of correction. But the top patterns will no doubt continue until we move further into the post QE world with stronger indications of higher interest rates. New leadership at the US Fed is more ‘hawkish’ which means US interest rate hikes will be more frequent, with the next likely to go ahead in December.

The oscillators are moving down rapidly from extraordinarily high levels, with perhaps some more to come.

 

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 12 Nov 2017

Nov 12th, 2017 No comments

Conclusion

International markets continue to inch up with continued negative divergences which indicate a downward correction soon, but the upward grind continues in the meantime. The US$ holds above the neckline of its breakout but remains weak in a consolidation pattern with seemingly no power to rally towards its target region around 97. This also provides no momentum to the expected gold decline to test the $1200 level, which has resulted in both the Dollar and gold dithering with no clear direction.

There are a number of short term factors supporting a meaningful Gold decline into a 6-month cycle low soon which will complete a very exciting V-shaped pentagon base pattern which is now nearing completion. This has developed over the last 4 years and is the springboard for the next leg up in the historic bull market which is likely to ignite in Dec 2017.

 

US$

The US$ is consolidating above the breakout at 94.2 and still remains weak without any seeming strength to rally towards a region of resistance at 97, which is higher by the equivalent depth of the inverted ‘head and shoulders’ pattern it has just broken through. The oscillators are moving up to support this, and final strength may be available with the expected US Fed rate hike in Dec 2017.

 

 

The Dollar daily chart illustrates the consolidation actually moving down to support at 94.2 to retest. However, the oscillators have already started to turn down which suggests further price weakness, but the Dollar may be energized by the rate hike in Dec and reach the target zone (red square).

 

 

Gold

This 30 year view of the gold price illustrates the key buy and sell signals in tandem with a super-slow Stochastic below. This highlights the key turnaround point at Dec 2015 which coincides the 8 year cycle low and the V-bottom of the 4 year long pentagon base pattern described in the conclusion. This base pattern is the launch pad for the next leg up in the historic gold bull market which is likely to gain momentum from the US Fed rate hike in Dec 2017.

 

 

The recent price movements include an Oct high of $1308.40 and low of $1262.80 with the neckline of the ‘head and shoulders’ formation (HS) just below 200-Dema. This set up suggests that if gold fails to break out above the Oct high then it is likely to drop down below the Oct low which will take it through the HS. Thereafter, gold is likely to drop down to retest support in the region of $1200 in dropping down into a 6-month cycle low in Dec 2017.

 

 

GDX US miners ETF

GDX, representing US gold miners,  is similarly positioned and likely to drop down through the Oct low as well as the neckline of the ‘head and shoulders’ formation. This will retest support at 21 and even the previous low at 18.6.

 

 

DUST US Gold Miners bear index

The inverse picture in the US Gold Miners Bear Index (Dust) indicates the exact opposite of the GDX chart, in supporting lower gold prices in the short term. Price will likely break up through the Oct high and test resistance at 200-Dema.

 

 

Silver

This 30 year view of the silver price illustrates the key buy and sell signals in tandem with a super-slow Stochastic below. This highlights the key turnaround point at Dec 2015 and the likely price trajectory in the new year.

 

 

Silver penetrated the short term trendline and is now likely to test previous lows at $16.58 and then $16.34, and possibly lower.

 

 

General Equities (Dow Jones)

International markets, characterised by the Dow Jones, continue to inch up with continued negative divergences which indicate a downward correction soon, but the upward grind continues in the meantime.

The oscillators have finally turned down from extraordinarily high levels to suggest further declines from these ‘insane’ equity levels.

 

 

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Weekend Market Analysis 5 Nov 2017

Nov 5th, 2017 No comments

Conclusion

International markets continue to inch up with continued negative divergences, so no change there, while Trump’s tax cut plan and the US Fed chair elect Jerome Powell is being digested by markets. The US$ consolidates its breakout and closes the week up at 94.86 with every likelihood of moving higher, whilst gold closed down at $1269.20 in breaking down through a bear flag with every likelihood of moving lower.

Gold is likely to break down through the neckline of a short term ‘head & shoulders’ pattern as it continues to build a consolidation pattern, stretching back to mid-2013, which includes a massive ‘inverted head & shoulders’ pattern with the neckline at $1350 which it is likely to penetrate up through in early 2018 which in turn will take gold to $1800.

 

US$

The US$ rally is consolidating above the breakout at 94.2 and should now move higher towards a region of resistance at 97, which is higher by the equivalent depth of the inverted ‘head and shoulders’ pattern it has just broken through. 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 the region of resistance (red). The rally consolidation closed the week at 94.86 with a bullish ‘Hammer’ candle which should see a further advance.  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 drop from a bear flag on Friday which is likely to drop further through the neckline of the ‘head & shoulders’ pattern. The region of support is lower down at $1200 and gold might test this level in dropping into a 6 month cycle low in Dec 2017.

 

 

GDX US miners ETF

GDX is poised to penetrate the neckline of a ‘head & shoulders’ pattern which is likely to drop further towards support at 21. The oscillators are already at low levels though which might provide some support.

 

 

DUST US Gold Miners bear index

The inverse picture in the US Gold Miners Bear Index (Dust) indicates the exact opposite of the GDX chart, in supporting lower gold prices in the short term.

 

 

 

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 little change in the international equity markets which continue to inch up with continued negative divergences, pointing to a correction soon. The 2 year weekly chart of the Dow Jones illustrates this with a threatening ‘rising wedge’ pattern, plus super-high oscillators. The graph itself shows no sign of topping but it is a simple matter of time before a correction; Perhaps even a huge correction, as detailed in many earlier narratives.

 

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