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Weekend Market Analysis 25 Mar 2018

Mar 25th, 2018 No comments

Executive summary

 World equity markets all moved down significantly this week, with an increased degree of US arrogance, as negative signs start to proliferate. The US hiked the rate this week and continues to shake the world trade order by raising tariffs, whilst Trump signed a $1.3trn spending bill on Friday. There is indeed a dark and terrifying future ahead as the crashing markets are greeted with nothing more than a gigantic yawn. The US bond market yield continues to consolidate with the benchmark 10 year US sovereign bond closing at 2.82% with a bottom at 2.80% and projected to move up to 3.0% and then 5.0%, destroying all asset values in its path.

The US$ index moved down this week to close at $89.03 but with no corresponding strength in the Euro it keeps alive a meaningful Dollar rally. Conversely, the Jap Yen continues to strengthen against the Dollar, breaking to a new high at 104.81 Yen / US$1, which supports a continuing weaker Dollar as well as stronger gold. Gold closed up at $1349.90 and even the US miners closed up which all looks promising. However, silver continues to underperform gold which retards the whole complex, but the gold / silver ratio is due to start turning down with the silver price ‘coiled’ and overdue for a resurgence.

Much depends on Dollar movements in the short term.

 

US$

The US$ index continued to move down this week to close at $89.03, and in the process broke below the previous low into the support zone. Correspondingly, the Euro / US$ gained this week but failed to break up, which keeps alive a meaningful Dollar rally. Conversely, the Jap Yen continues to strengthen against the Dollar, breaking to a new high at 104.81 Yen / US$1, which supports a continuing weaker Dollar.

The US rate hike did little to support the Dollar and US Fed commentary seems to suggest that the likelihood of 4 hikes this year may only turn out to be 3. The chart structure looks more bearish than bullish and the chance of rallying to the erstwhile resistance target of $91.5 now looks unlikely.

The oscillators are dropping to support further Dollar weakness.

 

 

 

The long term picture in the 14 year chart illustrates the US$ rally petering out to close at the bottom of the consolidation at the interim support level (black). Also, a ‘dead cross’ is forming with 50-Wema about to penetrate 200-Wema suggesting more downside.

Fundamentally, the range of negative pressures continue to mount by creating trade wars and other huge expenditures like the $1.3trn spending bill signed on Friday, which all end in increased deficits, rising inflation, and a weaker Dollar.

 

 

 

Japanese Yen

The Jap Yen strengthened to a new high this week against the US$ by breaking down through the previous low to close at 104.81 Yen to the Dollar. This presupposes a continued weaker Dollar and stronger gold price. The oscillators turning down to suggest this continues.

 

US Treasuries

The US bond market yield continues to consolidate with the benchmark 10 year US sovereign bond closing at 2.82% with a bottom at 2.80% and projected to move up to 3.0% and then 5.0%, destroying all asset values in its path.

The ‘pause and wait’ attitude of the consolidation in the yield is caused partly because of the strong climb up to that level but also because with the stock market collapsing there is a flurry of switching from stocks to bonds as a safe haven.

 

 

 

Gold

The recent stronger gold price and bond yield consolidation is causing the small right shoulder in the H&S pattern to close quicker in the chart of the Gold / US 10 year bond yield ratio. This is bullish for gold in the meantime, but the chart climb will be retarded as the bond yield restarts its climb. The implication in breaking the neckline of the H&S pattern is that the ratio will climb by the depth of the head, which will eventually take the ratio up to 16+.

 

 

Gold punched up through the previous high to close at $1349.90 in its duel between support and the cycle highs at $1367.50. It has moved decisively above the moving averages with 3 successive closes above 10-Dema. The oscillators are rising fast which supports more upside.

 

 

 

The 3 year weekly gold chart illustrates the price move closer to main resistance well above the moving averages, as well as the ‘Gold cross’ which developed in Sep last year, promising higher prices. The chart structure illustrates clearly the diagonal support lines (blue) which appear safe from attack with each passing week.

The oscillators are turning up in preparation for testing the main resistance line above.

 

 

 

The gold price is now closing in on the neckline of the massive 5 year long Pentagon Base Pattern with the target breakout at $1375. Penetration through this level should take the gold price up by the depth of the pattern towards the region of $1800.

 

 

 

GDX US miners ETF

US miners closed up on the week at $22.12 into the resistance zone (green), but with an indecisive Friday candle after creating a small gap which needs to be filled. This is good news on balance but might only be a hesitant small beginning. A substantial support base has been developed and downside might only be minimal from here.

The oscillators are positive.

 

 

The longer term GDX chart illustrates the strong support base above the support line and the potential for upside from here. The oscillators are also turning up. The 15 month range-bound pattern does need to be broken and the resistance line is some way up still.

GDX is somewhat coiled to respond upwards powerfully in due course once the gold triggers are ignited.

 

DUST US Gold Miners bear index

Dust penetrated decisively down through the bottom of the triangle but, like GDX, has created a gap which needs to be closed. The oscillators are pointing down illustrating further downside.

 

Silver

Silver moved up this week to close at $16.58 and continues to build a substantial support base between short term support and resistance in a highly ‘coiled’ price that will spring up powerfully once the gold / silver ratio starts to reverse down.

 

Gold : Silver Ratio

Silver continues to underperform gold with the ratio still above 80, in a chart structure that needs to be broken before the whole precious metals complex can move up energetically. But lower highs are becoming evident over the last 7 trading day (blue), and this might just be the beginning of a long overdue reversal.

The trigger for penetration through the bottom of the rising wedge is 77.

 

General Equities

World equity markets all moved down significantly this week as negative signs start to proliferate. The Dow Jones plummeted down through the bottom of the triangle in dropping 5.67% this week with more to come next week. There is indeed a dark and terrifying future ahead as the crashing markets are greeted with nothing more than a gigantic yawn.

 

The bottom is about to fall out of the American market as all the factors are in place to complete the set-up. We all know that as the US collapses so too will the rest of the world. The Dow closed at a new low on Friday which dropped below the Nov 2017 low, and this indicates the underlying weakness in the chart structure. There is a zone of some support (red) between 23650 and 23250 and if the Dow penetrates this (as seems very likely) then there will be serious further declines.

The oscillators are now dropping fast.

 

The VIX moved up rapidly this week to close at 24.87, indicating much higher volatility. It touched the previous high at 26.3 and appears set to penetrate this level which indicates much higher volatility and lower stock market prices.

 

 

 

 

 

 

 

 

 

 

 

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 18 Mar 2018

Mar 18th, 2018 No comments

Executive summary

 World equity markets all moved slightly down this week, taking a breather in waiting mode together with the bond markets as well as the VIX (US volatility index). The Trump circus continues as does world politics, trade war threats, and all else. Equity and bond markets have all moved sideways for about 5 weeks now in a kind of suspended quiet mode, presumably awaiting the next US FOMC meeting on Wed 21 March: This is Jerome Powell’s first with the virtual certainty of a rate hike, despite Larry Kudlow (new chief economic advisor to Donald Trump) advising the slowing down of rate hikes.

The US$ index moved down slightly this week to close at $89.80 but maintains a developing position which might rally to $91.50 or $92.50, and some even predict $95. Gold remains weak to close down at $1313.94 and the gold : silver ratio continues up which promises further weakness with silver continuing to underperform gold.

This is a period of disquieting pause, providing the sensation of eerie menace, as the ills of the financial and monetary world impact upon everyone who cares to notice:

  • What will the US$ rally amount to in what appears to be long term decline;
  • Will gold be hit hard by a strong US$ rally in what appears to be very close to the beginning of a strong gold bull market;
  • Will the US bond market continue to rally in what appears to be the beginning of a long term collapse, affecting all other asset classes;
  • Will equity markets rally to new highs in what appears to be the beginning of a long term collapse, with some forecasting the Dow to drop to 1987 levels (90% down);

 

US$

The US$ index moved down slightly this week to close at $89.80 but maintains a developing position which might rally to $91.50 or $92.50, and some even predict $95. It closed at 10-Dema, midway between support and resistance as it moves slowly up from a double bottom. If it penetrates the cycle top at $90.92 it will enter the major resistance zone (green) and could reach the red line resistance at $91.50.

The US Fed FOMC meeting on 21 Mar 2018 will hike the rate and much depends on how and the associated commentary. The oscillators continue to be directionless, suggesting a measure of dither in the short term.

 

 

 

Long term Dollar charts indicate future weakness, with the current rally consolidating before either moving up or down. Major resistance lies above at $91.00-$95.00 (red) with additional pivots within at $91.50 or $92.50 which may provide rally peaks before continued decline thereafter. A stronger rally towards $95 is possible but less likely, as the range of fundamental negative pressures gather momentum in increased deficit spending and rising inflation.

 

 

 

Japanese Yen

The Jap Yen has been relatively strong against the US$ since Nov 2017, and continued to strengthen last week to close at $106.04 ever nearer the cycle peak at $105.20. The oscillators are mixed with the MACD rising but the slow Stochastic is turning down in support. This of course suggests better gold prices and a weaker Dollar.

 

 

US Treasuries

The benchmark 10 year US Sovereign bond yield correction has formed a bottom at 2.80%, ending the week at 2.85% after a 5 week sideways drift. This suggests the increase in yield could resume with the 1st stage target at 3.0% (being the increase above the H&S by the depth of the head). The US long term bond bear market is well entrenched in the climate of rising inflation, and the 10 year yield will thereafter test the 2nd stage target at 5.2%.

This collapse in the bond market will devastate other asset classes, most notably the stock markets.

 

 

 

Gold

The gold price dropped this week to $1312.30 towards short term support at the previous low $1303.60. The US FOMC meeting on 21 Mar is affecting sentiment negatively and if price penetrates $1303.60 then it could drop further towards $1280.00.

Failure to break below $1303.60 will prevent this although the oscillators are turning down again which suggests penetration may well occur. If history is correct then a rate hike will propel gold higher from anything between immediately to (say) 2 weeks later.

There are basically 2 triggers in technical analysis which will ignite the gold price:

  1. Silver starts to outperform gold, and breaks the mould detailed in the gold : silver ratio chart later in this document (77 is key level);
  2. Gold penetrates the neckline in the 5 year Pentagon Base Pattern chart later in this document ($1375.00 is key level);

 

 

 

The 3 year weekly gold chart illustrates the price dropping towards diagonal support (blue) as we approach the FOMC meeting on 21 Mar. The oscillators are turning down in support of this with the potential of gold dropping towards $1280. Once this is worked through the system the next task will be to test and penetrate main resistance (black) which is achieved at $1375.00.

 

 

 

The massive 5 year long Pentagon Base Pattern is intact with the gold price trigger at $1375.00. This pattern illustrates the bullish Gold Cross created at $1265.00 when 50-Wema crossed up through 200-Wema, in contrast to the bearish Dead Cross created at $1420.00 when 50-Wema crossed down through 200-Wema.

 

 

 

GDX US miners ETF

GDX had another dithering week, with US miners continuing to underperform metals, closing down below 10-Dema midway between support and resistance. However, it did close with a Dragonfly Doji candle which indicates a potential rise next week, together with positive oscillators. On balance the likelihood of this is remote with price probably continuing down further towards the FOMC meeting on 21 Mar.

The implication of penetrating down through support is reasonably dire.

 

 

 

The longer term GDX chart illustrates how the miners have been range-bound for 15 months now, and that the next up cycle is imminent. But probably only bad news awaits until the FOMC meeting.

If support is breached at $20.80 then price is likely to plummet into the drop zone at about $18.50. But, like silver in many ways, GDX is somewhat coiled to respond upwards powerfully in due course once the gold triggers are ignited.

 

 

 

DUST US Gold Miners bear index

Dust looks positive with a clear up bias and holding well above 10-Dema. The triangle awaits a breakout (probably up) and should form and penetrate a triple top. However, once the gold triggers are ignited DUST will be one of the more profitable shorts.

 

 

 

Silver

Silver dropped down to the support zone and looks bearish. If support is breached then silver will drop down to test $15.63 encouraged by negative oscillators.

However, the silver price is coiled and ready to spring up powerfully, and as the gold triggers are ignited so too will silver increase price more powerfully than gold.

 

 

 

Gold : Silver Ratio

Silver continues to underperform gold with the ratio above 80. Much depends on the US FOMC meeting on 21 Mar and probably nothing will change until it passes. The ratio is characterised by an upward sloping reducing wedge (red) and to break the mould of this pattern the bottom parameter must be penetrated. This will occur at a ratio of 77, and this therefore becomes the trigger.

The oscillators are also pointing in the right direction.

 

 

 

 

General Equities

World equity markets all moved slightly down this week, taking a breather in waiting mode together with the bond markets as well as the VIX (US volatility index). Equity and bond markets have all moved sideways for about 5 weeks now in a kind of suspended quiet mode, presumably awaiting the next US FOMC meeting on Wed 21 March: This is Jerome Powell’s first with the virtual certainty of a rate hike, despite Larry Kudlow (new chief economic advisor to Donald Trump) advising the slowing down of rate hikes.

This is a period of disquieting pause, providing the sensation of eerie menace, as the ills of the financial and monetary world impact upon everyone who cares to notice. The Dow is poised in an equilateral triangle awaiting either an up or down breakout. The index sits between very short term resistance and support and the next move is critical. If the previous high is not penetrated this will encourage penetration of the previous low, with dire consequences.

 

 

The VIX rocketed up from below 10 to 50 during the Dow’s initial plunge, and has since meandered back down to close the week at 15.80 below all the moving averages. The next moves are critical in either penetrating the previous high and low levels.

Failure to penetrate the previous low will encourage penetration of the previous high, with dire consequences for the Dow.

 

 

 

 

 

 

 

 

 

 

 

 

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 11 Mar 2018

Mar 11th, 2018 No comments

Executive summary

 World equity markets all moved up this week, although technically still in a bear trend, despite the US bond market starting to decline again. The fear of a trade war seems to be moderating and the US jobs report on Friday indicated a positive spin causing the Dow to end a better week with a strong Friday. The next US FOMC meeting is on 21 Mar, with the virtual certainty of a rate hike, which is likely to ‘spook’ markets somewhat.

Markets are not moved by earnings or PE ratios, markets are moved by liquidity. And liquidity is starting to diminish as interest rates rise and US bond yields move up again, setting the stage for a long term decline in asset prices.

The US$ index moved down slightly on Friday and ended the week flat, which begs the question of whether the Dollar is likely to rally mildly or strongly, or whether the next rate hike is already priced in. Gold was assisted slightly but most views are that a continued move lower is likely until the US Fed meeting on 21 Mar. On a positive note, silver has been outperforming gold slightly during the past 5 weeks.

 

US$

The US$ index moved down slightly on Friday and ended the week flat, which begs the question of whether the Dollar is likely to rally mildly or strongly, or whether the next rate hike is already priced in. A rally is anticipated as the price moves up to close above 10-Dema, midway between support and resistance. The key level cycle top is at $90.92 and the double bottom (red) could be the propellant to breach that level and begin the climb to a mild rally target at minor resistance at $91.5 (red lines), or a strong rally target at $94 or $95. The US Fed FOMC meeting is 21 Mar 2018 and Dollar strength is more likely to peak then at about $91.5 – $92.0. The oscillators are directionless, suggesting a measure of dither in the short term.

 

 

Long term Dollar charts are not positive for future strength, and the rally from interim support towards the major resistance zone (red) may only reach $91.5 or $92.5 before withering. A stronger rally towards $95 is possible but less likely. As the range of fundamental pressures gather momentum in increased deficit spending and rising inflation, so the 2nd and 3rd stage decline targets will be reached and penetrated.  

 

 

 US Treasuries

The benchmark 10 year US Sovereign bond yield correction has ended with the yield starting to increase again to close the week at 2.90%, en route to its immediate target of 3.0% based on the depth of the H&S pattern. The US long term bond bear market is now well entrenched in the climate of rising inflation, and will increasingly devastate asset prices (most notably the US stock market).

 

 

US bond market values (as opposed to yield), as illustrated in the chart below, are once again dropping towards the neckline of the H&S pattern (and confluence of 200-Wema) after the short correction.

It may be that the correction is not quite complete yet because of mixed signals from the oscillators, but penetration of the H&S neckline and 20-Wema will be the confirmation for bond values to drop further as the bear market settles in.

 

Gold

Gold tested the previous high at $1342.90 but failed to penetrate, and is now positioned midway between the previous high and low points. Penetration of the previous low at $1303.60 could drop prices a lot further to $1280 by the time of the next FOMC meeting on 21 Mar.

Failure to break below $1303.60 will prevent this although the slow Stochastic is turning down again which suggests penetration may well occur, while the long Dragonfly candle on Friday suggests increased gold prices next week.

 

 

The 3 year weekly gold chart, with 2 consecutive weekly Doji candles, illustrates the indecision in the gold market as we approach the FOMC meeting on 21 Mar. The next move could be up or down and, with the oscillators turning down, it looks like it will be down.

Prices are likely to hold above the previous cycle lows as well as the diagonal supports (blue) until the FOMC meeting, with the potential of perhaps dropping towards $1280.

 

 

GDX US miners ETF

GDX broke above 10-Dema during the week but closed below it again, in a mode of apparent immobilisation midway between resistance and support. The challenge is to reach and penetrate the interim high at $23.18, but that seems just too far away, and any breakout is likely to be delayed until the FOMC meeting on 21 Mar.

However, the more likely scenario is that price moves lower in the next 2 weeks until the meeting, but if support is penetrated at $20.72 then it is possible to drop much further in a collapse towards $18.50.

 

The longer term GDX chart illustrates the how the miners have been range-bound for 15 months now, and any breakout must wait for the FOMC meeting. The chart indicates a potential up cycle could start next, but it is actually likely to be a downside break first.

Like silver, in many ways, GDX is somewhat coiled to respond upwards in due course. Once gold breaks out the miners will respond powerfully.

 

 

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, with a clear up bias and holding above 10-Dema. There is a degree of immobilisation around 10-Dema leaving the impression of price coiled and ready to jump up. If GDX drops further towards the FOMC meeting then DUST will continue to rise.

If GDX price penetrates support and collapses toward $18.50 then DUST will jump up, well beyond previous highs at $31 and $32.

 

 

Silver

Silver tested $16.95 but failed to penetrate and could now move lower to test supports. If $16.13 is penetrated then price could move much lower towards $15.50 in the next 2 weeks. Both oscillators are drifting sideways and this may provide good news in the silver price doing likewise.

On a positive note, silver has actually outperformed gold during the last 5 week period to close on Friday below a ratio of 80.

 

 

Gold : Silver Ratio

Silver has started to outperform gold over the last 5 week period to close the week below a ratio of 80. The mould is still characterised in an upward sloping reducing wedge (red) and this pattern needs to be decisively broken before the metals can start an aggressive advance.

The oscillators are also pointing in the right direction.

 

 

 General Equities

World equity markets all moved up this week, although technically still in a bear trend, despite the US bond market starting to decline again. The fear of a trade war seems to be moderating and the US jobs report on Friday indicated a positive spin causing the Dow to end a better week with a strong Friday. The next US FOMC meeting is on 21 Mar, with the virtual certainty of a rate hike, which is likely to ‘spook’ markets somewhat.

Markets are not moved by earnings or PE ratios, markets are moved by liquidity. And liquidity is starting to diminish as interest rates rise and US bond yields move up again, setting the stage for a long term decline in asset prices.

The Dow Jones has enjoyed a 6 day upward correction, and failure to penetrate the previous high will encourage the next price plunge.

 

 

 

 

 

 

 

 

 

 

 

 

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 4 Mar 2018

Mar 4th, 2018 No comments

Executive summary

World equity markets all moved down this week because US bond yields started to increase again after a small correction. The primary ignition was Donald Trump’s comments on tariff hikes in the US which everyone else regards as the potential onset of a trade war. The new US Fed chair (Jerome Powell) did start market nervousness in his opening testimony which indicated a more hawkish approach compared to his predecessor, which meant more rate hikes which are not market friendly. The benchmark 10 year US Treasury yield was pushed up by Powell and closed the week at 2.86% (from 2.81%) but this still might not be the end of the correction yet: Next week is important, as this yield upturn also kick-started gold slightly on Friday.

The US$ index moved down slightly which assisted gold to close up at $1322.50. Also, the US$ index weekly chart was up very slightly but ended in a Doji candle with potential Dollar weakness to follow. Gold closed down at $1322.50 but with an up Friday. Unfortunately for gold investors, silver still continues to underperform gold, and this has to change for the metals complex to start accelerating up aggressively. The present gold cycle may have bottomed and it is supported by a stronger Japanese Yen which is enjoying a breakout. Much also depends upon whether the US 10 year bond yield has completed its correction and is now climbing higher.

But nothing except drifting lower is likely to occur until the US Fed FOMC meeting on 21 Mar 2018.

The world is edging closer to the next global financial crisis with all the impact factors in place:

  • The US bond market is now well into a long term bear market since yields bottomed 20 months ago;
  • The US stock market has began to collapse with some analysts predicting a fall of up to 90%;
  • The interest rate cycle has firmly turned up with others soon to follow the US lead;
  • Total global debt increases continue unabated, and now increasingly with service costs during a time of increased interest rates;

 

US$

The US$ index weakened in the latter part of the week to close just below resistance (green) at $89.91, just below 10-Dema. It reversed down from 50-Dema to close below 10-Dema. The key level cycle top is at $90.92 and the ominous double bottom (red) could be the propellant to breach that level and begin the climb to earlier rally targets at $94 and $95. But the US Fed FOMC meeting is 21 Mar 2018 and Dollar strength is more likely to peak then at about $91.5 – $92.0. The oscillators are turning down which suggests that this climb might not be just yet.

 

 

 

Long term Dollar charts are not positive for future strength, but the decline during 2017 has been severe at 13.5% which might develop into a rally towards $95. This will disrupt the message in the chart below which suggests a strong decline towards $62 by the year 2024. This is based on repeating the negative RSI divergence during 2000 – 2001 which appears to be unfolding nearly exactly right now.

For now the message in the chart remains secure and is supported by a range of fundamentals, the principal ones being increased deficit spending and rising inflation.  

 

 

 

US$ : Jap Yen Currency par

Much has been said about the Euro weakening over the next period, which will provide reciprocal Dollar strength. While this might be true, not nearly as much has been said about Jap Yen strength which provides reciprocal Dollar weakness.

The chart below illustrates the consecutive breaks below previous lows as the Yen continues to strengthen. This, by the way, usually provides gold strength which has not been happening. So, is this a signal for continuing Yen strength to be followed soon by gold strength, or for a reversal providing Yen weakness and a Dollar rally?

 

 

 

US Treasuries

The benchmark 10 year US Sovereign bond yield correction continued into this week moving down to 2.81%. This reversed towards week end to close at 2.86% after hawkish comments from the US Fed chair. The correction can be seen on the weekly chart which begs the question as to whether more downside is to come with the oscillators also turning down.

However, the bond bear market is well entrenched and the 10 year yield will continue towards 5% in this phase, as inflation is increasingly recognised and the interest rates continue to move up.

 

 

 

US bond market values (as opposed to yield), as illustrated in the chart below, corrected up off the neckline of the H&S pattern (and confluence of 200-Wema) as bond yields stopped for a pause.

It may be that the correction is not complete yet, despite higher yields toward the week’s close, with the oscillators turning up. However, once the neckline is penetrated this will drop bond values as the bear market settles in.

 

 

Gold

Gold broke down through the Oct high support line during the week, which is bearish, although it closed above on Friday. The close at $1323.40 is also below 10-Dema, and it appears the cycle has not bottomed yet. The likely cycle bottom will coincide with the FOMC meeting on 21 Mar in a price range around $1285.

The oscillators appear to be turning up and there may well be some upside before the drop to the cycle low.

 

 

 

The relationship between US bonds and gold is important because since the ‘cross-over’ point in mid-2013 the bond yields and gold have been correlated positively.

If we look at the ratio of Gold : 10 year US bond yield we can see the development of an inverted H&S, with the right shoulder still to be completed. We know the bond yields are rising and as the right shoulder in the chart completes, we can expect both gold and bond yields to rise by the depth of the head in this phase. This is positive for both gold and US bond yields.

 

 

The 3 year weekly gold chart illustrates gold’s retreat from the main resistance line, ending the week with a Doji candle which suggests indecision. The next move could be up or down and, with the oscillators turning down, it looks like it will be down.

Prices are likely to hold above the previous cycle lows as well as the diagonal supports (blue) until the FOMC meeting.

 

 

 

GDX US miners ETF

GDX prices seem to be driven by 10-Dema at the moment with 9 consecutive below, and price is immobilised somewhat between the regions of resistance (green) and support (red). Any breakout is lkely to be delayed until the FOMC meeting on 21 Mar.

 

 

 

The longer term GDX chart illustrates the how the miners have been range-bound for 15 months now, and any breakout must wait for the FOMC meeting. The chart indicates a potential up cycle could start next, but it is actually likely to be a downside break first.

Like silver, in many ways, GDX is somewhat coiled to respond upwards in due course. Once gold breaks out the miners will respond powerfully.

 

 

 

Silver

Silver continues to underperform gold although it closed above 10-Dema for the first time in 9 days. Price seems to be coiled in anticipation of a major breakout which in turn will ignite the whole precious metals complex. The COTs now indicate a more positive silver situation, and one can only imagine the status is engineered by the big banks. It seems un-natural.

Much will depend on reaching the FOMC meeting on 21 Mar. Until then the silver price is likely to drop further but will probably hold at the confirmed low at $15.63.

 

 

 

Gold : Silver Ratio

Silver continues to underperform gold in a trend which has lasted more than a year now. The mould needs to be broken and this is likely not to begin until the FOMC meeting. The pattern is in an up-sloping reducing wedge which will last a while longer.

There may be some interim relief with the oscillators topping out.

 

 

 

 

General Equities

World equity markets all moved down this week because US bond yields started to increase again after a small correction. The primary ignition was Donald Trump’s comments on tariff hikes in the US which everyone else regards as the potential onset of a trade war. The new US Fed chair (Jerome Powell) did start market nervousness in his opening testimony which indicated a more hawkish approach compared to his predecessor, which meant more rate hikes which are not market friendly. The benchmark 10 year US Treasury yield was pushed up by Powell and closed the week at 2.86% (from 2.81%) but this still might not be the end of the correction yet: Next week is important, as this yield upturn also kick-started gold slightly on Friday.

The world is edging closer to the next global financial crisis with all the impact factors in place:

  • The US bond market is now well into a long term bear market since yields bottomed 20 months ago;
  • The US stock market has began to collapse with some analysts predicting a fall of up to 90%;
  • The interest rate cycle has firmly turned up with others soon to follow the US lead;
  • Total global debt increases continue unabated, and now increasingly with service costs during a time of increased interest rates;

 

Categories: Currency, Equity, Gold Tags: