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Weekend Market Analysis 29 Apr 2018

Apr 29th, 2018 No comments

Executive summary

The benchmark US treasury 10 year yield finally penetrated the psychologically important level of 3.0% this week, closing at 2.96% after reacting to increased resistance at that level. This is important because this is no ordinary bond; it is the global bond market’s primary benchmark and if its yield goes up then other interest rates also increase making the burden of debt heavier for everyone from individuals to households to corporations and to governments. Global debt is astronomic and servicing this debt is rising with increasing interest rates. The US is leading the way with rate hikes and the rest of the world is beginning to follow gingerly with all eyes on the EU and Japan (with some yields still negative) as we continue to move up into the increased rates cycle which started in mid-2016. The long term bond bull market has ended after more than 35 years and we are now into a long term bond bear market which continues to collapse. The US 10 year yield bottomed at 1.358% on 8 Jul 2016 and at 3.0% (en route to 5% and much higher thereafter) is evidence of a collapse in progress, whilst the stock markets are still at or near their peaks. The process is slow however with the EU indicating this week to again hold rates steady.

World equity markets continued sideways, but are looking precarious with many on sell signals, as they remain largely on the edge of the abyss with the inevitable drawing nearer. Volatility, as measured by the VIX, is also moving sideways as it continues to bounce up off 200-Dema.

The US$ is rallying and has broken up through resistance to close at $91.36, just short of the 200 day moving average at about $92.60. Technically, there are resistances at $91.50 and $92.40, plus 200-Dema, and if it breaks through then it may increase to the $94 / $95 region with considerable reciprocal pressure on other currencies and gold, which is drifting down to close at $1323.40.

 

US$

The US$ rallied up through the previous cycle top to penetrate into the resistance zone (green) where it appears to have stalled just below the 1st resistance target at $91.50. It closed on a Gravestone Doji which suggests it may now be in correction mode. The rally has been vigorous and is due a correction, but it still needs to clear the 2nd resistance at $92.40 if it is to mount an attempt at $94 or $95.

The slow Stochastic is turning down which supports some short term downside.

 

 

 

The long term picture in the 14 year chart illustrates the penetration into the resistance zone (green) with a number of resistance lines within. The foreboding ‘dead cross’ lies just above together with powerful resistance in the moving averages themselves. So the chart supports the fundamentals which continue to mount towards a weaker dollar in the long term. except in the case of collapsed equity and bond markets causing a flight to safety in the US dollar.

 

 

 

US Treasuries

The benchmark US treasury 10 year yield finally penetrated the psychologically important level of 3.0% this week, closing at 2.96% after reacting to increased resistance at that level. This is important because this is no ordinary bond; it is the global bond market’s primary benchmark and if its yield goes up then other interest rates also increase making the burden of debt heavier for everyone from individuals to households to corporations and to governments. Global debt is astronomic and servicing this debt is rising with increasing interest rates. The US is leading the way with rate hikes and the rest of the world is beginning to follow gingerly with all eyes on the EU and Japan (with some yields still negative) as we continue to move up into the increased rates cycle which started in mid-2016. The process is slow however with the EU indicating this week to again hold rates steady.

The 5 year chart illustrates numerous breakouts, including the large H&S which presumes a yield increase to 5.0% is now underway. But the rate of increase has been rapid and is probably due a correction, assisted by the reluctance of the EU and Japan to start hiking rates in pursuit of the US. Even the UK recently indicated no rate hike is imminent.

 

 

 

The long term bond bull market has ended after more than 35 years and we are now into a long term bond bear market which continues to collapse. The US 10 year yield bottomed at 1.358% on 8 Jul 2016 and at 3.0% (en route to 5% and much higher thereafter) is evidence of a collapse in progress, whilst the stock markets are still at or near their peaks. The process is slow however with the EU indicating this week to again hold rates steady.

The 40 year chart illustrates the end of the 35 year long bull market with a double bottom (red) ending in mid-2016. The projection is now towards 5.0% yield, being the height above the H&S neckline equal to the depth, as US bonds move into a long term bear market. There is a double top (blue), still needing confirmation, which will be invalidated by penetration up through that level. If confirmed, it could lead to a substantial downward correction which would delay everything for quite a long while.

 

 

 

US Treasuries and Gold

As the gold price increases and as the US Treasury 10 year price decreases so the ratio increases. This relationship is illustrated in the chart below which is bullish gold and bearish US bonds. There is a large inverted ‘head & shoulders’ pattern that is ready to penetrate the neckline. This will propel the ratio up by the depth of the head, reinforced also by the recent ‘gold cross’ in Aug 2017 at a ratio of about 9.9.

Any interruption in either the gold price increase or the US bond price decrease will of course delay the process.

 

 

 

Gold

Gold has weakened during the dollar rally and has penetrated down through previous lows to close at $1323.40. The gold price has endured 6 consecutive closes below 10-Dema and is positioned between support and resistance.

The slow Stochastic seems to be bottoming but the MACD is still dropping so gold does not look strong. It may be due an upward correction as the dollar corrects down.

 

 The longer term 3 year chart remains strong with the gold price continuing to build a large consolidation just below main resistance (black), with all the diagonal supports and prominent previous lows still intact and holding.

 

 

 

The yet longer term massive pentagon base pattern continues to hold as it illustrates the gold price build up over the last 5 years towards penetrating the neckline at $1375.00 which, once penetrated, will propel gold up by the depth of the head to $1800.00

The next 6 month cycle low due in Jun / Jul is approaching and will of course threaten this pattern

 

 

 

GDX US miners ETF

The GDX is still maintaining a positive bias as it moves up further within the resistance zone (green) with the moving averages still positively crossed over. But the oscillators are negative suggesting another move lower is imminent.

 

 

The longer term GDX chart illustrates how miners have been range bound for 16 months and how stronger price moves could test either support or resistance. Much depends on movement in the US$, metal prices and the gold / silver ratio.

The oscillators are positive.

 

 

 

DUST US Gold Miners Bear Index

DUST is maintaining a negative bias which suggests a lower US$ and higher metal prices. The oscillators are beginning to rise which suggests the opposite.

 

 

 

Silver

The silver surge breakout was false and price has returned to the 3 month old mould between support and resistance once again. The price move up was accompanied by an increase in volume but the price move down was with a volume collapse, which is positive.

But for now the substantial support base and its highly ‘coiled’ nature continues to build which should generate powerful price increases from here, once due.

 

 

 

The bullish reducing wedges over the last 2 years remain intact, as the penetration of 50-Wema is again proved false. Price remains between support and resistance within the reducing wedge patterns, while the oscillators look positive. The MACD is continuing an 18 month process of honing to a point which is likely to break out strongly, either up or down.

 

 

 

Gold : Silver Ratio

The ratio is above 80 once again after the silver false breakout. Nevertheless, there appears to be a positive in the chart pattern which suggests a breakout to below 77 is imminent.

Both oscillators are pointing down in support.

 

 

 

General Equities

World equity markets continued sideways, but are looking precarious with many on sell signals, as they remain largely on the edge of the abyss with the inevitable drawing nearer.

The Dow has penetrated down from the region of critical confluence and the move lower appears to be underway. The final approach to the zone of support is in the region of 23600 down to 23250 (red), and penetration of these levels will trigger further serious declines.

The oscillators are turning down in support of price declines.

 

 

 

Volatility as measured by the VIX is moving sideways as it bounces up repeatedly off 200-Dema. The indicator is still positioned between support and resistance with the oscillators also moving sideways. The next resistance is at 26.2 at the previous highs, and penetration here will trigger large declines in the Dow.

 

 

 

 

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 22 Apr 2018

Apr 22nd, 2018 No comments

Executive summary

World equity markets continued to correct up this week but are now all on short term sell signals, whilst the bond market started to collapse again with the benchmark US Treasury 10 year yield spiking up to 2.96% (penetrating the earlier high of 2.94%). Remember the yield corrected down to 2.73% on 2 April and has therefore jumped 8.42% in 15 trading days which is huge. So, the markets are on the edge of the abyss again and need to be watched carefully in the coming days and weeks. Volatility has also started to edge up as measured by the VIX.

The US$ had an up week with a strong Thurs / Fri to close at $90.07 which put pressure on gold, closing down at $1338.30. Much depends on the extent of the dollar rally but the precious metals charts are looking very positive with the added benefit of a surge breakout in silver. This has dropped the gold / silver ratio to 77.98 (after spending 11 weeks above 80) which now confirms the double top with the added attraction of a final breakout below 77.0, lurking very close just below.

There probably will be short term gyrations but gold seems well positioned for the next period despite a 6 month cycle low due in Jun/Jul. The titanic struggle between gold and the dollar continues, and the victor could be gold representing logic or the dollar representing the printing ‘Ponzi’ scheme. However, should a dollar rally gain momentum through 91.5 up to 95, as some would have it, this will cause gold to break down to test various support levels.

If we are to have a stronger dollar, a potential market concept for 2018/2019 could look like this:

Phase 1

  • General equities now start serious declines comparable with the worst in history;
  • Treasury collapse gains momentum in like fashion to match real inflation gains, as the effect of decades of central bank ‘easing’ finally kick in;
  • Interest rate increases accelerate;
  • Debt levels continue to spiral exponentially;
  • Flight to safety supports the US dollar (as is usual in cases such as this), and the dollar index reaches 95 or higher;
  • Gold penetrates support levels and drops toward $900;

Phase 2

  • General equities remain in a long term bear market;
  • Bonds remain in a long term bear market;
  • Interest rates remain high;
  • Debt defaults begin to multiply;
  • Central banks accelerate money printing exponentially causing hyperinflation;
  • The international monetary system begins to break down and finally collapses;
  • Currencies crumble and the US dollar collapses;
  • Gold bottoms before increasing against the dollar to unbelievably high levels;
  • Eventually, a new monetary system emerges after virtually complete re-tooling of the old;

 

US$

The US$ once again cycled up to penetrate 50-Dema as the consolidation continues sideways in closing the week at $90.07, which remains below the cycle top at $90.92. The oscillators are rising which supports further gains towards resistance in the cycle top and the large resistance block above between $91 and $95 (green).

The question remains whether the Dollar:

  • rallies strongly towards 95;
  • rallies weakly towards 91.5 or diagonal resistance (red);
  • drops into support (red) or below, which fundamentals support;

A rise in dollar value above 90.597 will add impetus to the rally, whilst a drop below 89.229 will void the dollar rally for now.

 

 

 

The long term picture in the 14 year chart remains static, illustrating continued consolidation just above the interim support line at $89.35 and below the major resistance block (red). The minor resistance lines at $91.50 and $92.50 are well above, just below the ‘dead cross’ which has now completed its formation at about $93.00, suggesting more long term downside.

Fundamentals supporting a weaker Dollar continue to mount, rendering any rally to last only temporarily, except in the case of collapsed equity and bond markets causing a flight to safety in the US dollar.

 

 

 

Japanese Yen

The Yen weakened slightly further into resistance (green) to close at 107.60 against the US$, but in doing so continues to develop a rising wedge / bull flag pattern (red) with bullish implications of an imminent reversal. However, the oscillators are still rising which supports still more Yen weakness first.

Yen strength is supportive of gold and a weaker Dollar.

 

 

 

US Treasuries

The US bond market started to collapse again with the benchmark US Treasury 10 year yield spiking up to 2.96% (penetrating the earlier high of 2.94%). Remember the yield corrected down to 2.73% on 2 April and has therefore jumped 8.42% in 15 trading days which is huge. Yield is likely to reach and penetrate the target 3.0% very soon to start the ensuing climb beyond to the next target at 5.0% which in process will destroy all asset values in its path.

 

 

 

Gold

Gold dropped this week to close at $1338.30 but in the chart structure exhibits increased strength in developing an attack on the short term cycle high at $1367.50 as well as the long term resistance at $1375.00. In the case of further US dollar rally strength gold has support just below at previous lows at $1335.00 and $1322.00.

The oscillators are generally moving sideways with an upward bias in support of yet higher prices.

 

 

 

The longer term 3 year chart is strong with the gold price building a large consolidation just below main resistance (black), after the ‘gold cross’ formed in Sep 2017. All the diagonal supports and prominent previous lows are intact and holding.

 

 

 

The yet longer term massive pentagon base pattern illustrates the gold price build up over the last 5 years towards penetrating the neckline at $1375.00 which, once penetrated, will propel gold up by the depth of the head to $1800.00

 

 

 

GDX US miners ETF

US miners closed up on the week again at $22.89, well into the short term resistance zone (green) and approaching the interim high at $23.18. US gold miners have displayed increased strength in powering up through the resistance zone (green) to finally react down from the interim high at $22.18 to close at the up-sloping line (black). Progress through this advance has enabled the moving averages to all cross over from bearish to bullish, and the next leg up will close the 2 gaps higher up en route to resistance at $24.86.

 

 

The longer term GDX chart illustrates the stronger recent bias in the range-bound chart structure that has lasted 16 months now. The coiled nature of the GDX price may soon be released if gold starts to rise energetically. Much depends on the US$ and whether gold breaks up through the $1375.00 neckline, and also whether the gold / silver ratio penetrates down through 77.

The oscillators are also turning up.

 

 

 

DUST US Gold Miners Bear Index

The powerful price down turn, including 16 consecutive closes below 10-Dema, has developed into a negative chart structure with the moving averages crossing over from bullish to bearish. However, the oscillators appear to be turning up which will support a correction soon.

 

 

Silver

Silver enjoyed a surge breakout through resistance to close up at $17.16. If it holds above resistance it should increase further after a short delay, and if not, it will have to test resistance at the diagonal top of the reducing wedge at about $16.70. The mould of the last 9 months has been broken and the oscillators are positive in support .

The substantial support base and its highly ‘coiled’ nature should generate powerful price increases from here. But silver needs to increase above $17.40 to confirm the rally, and if this is not achieved impetus will be lost or delayed.

 

 

 

The longer term 3 year chart illustrates the powerful penetration of 50-Wema, but price is still between support and resistance within the reducing wedge pattern. The built-up energy in the system and the positive oscillators should propel prices higher rather than lower.

 

 

 

USLV US Silver Miners Bull Index

The development of the chart structure and the positive divergence that has built up over the last 2 months finally created a surge breakout gaining 9.1% in the week. Gaps were created however which will need to be closed eventually. The oscillators remain positive which should propel higher in due course. This remains strong for silver and strong for the gold / silver ratio.

 

 

 

Gold : Silver Ratio

The ratio dropped down below 80 after 11 weeks and penetrated the previous low at 78.7 to confirm the double top, which is all very bullish for precious metals. It still needs to break the upward sloping reducing wedge pattern which requires a ratio drop to 77.0, which now seems imminent. This will signal the start of the long overdue reversal which has eluded for so long.

The oscillators are also pointing down in support.

 

 

 

General Equities

World equity markets continued to correct up this week but are now all on short term sell signals, whilst the bond market started to collapse again which is likely to assist in pushing equities down next week.

The Dow is still at critical confluence and started to decline in the 2nd half of last week. It appears to have finished its correction up and from here is likely to start declining in longer and stronger declines than earlier declines since the market peak on 26 Jan 2018.

The next zone of some support is in the region of 23600 down to 23250 (red), and penetration of these levels will trigger further serious declines.

The oscillators are turning down in support of price declines.

 

 

 

Volatility is likely to start increasing strongly with the VIX turning up. The next resistance is at 26.2 at the previous highs, and penetration here will trigger large declines in the Dow.

 

 

 

 

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 15 Apr 2018

Apr 15th, 2018 No comments

Executive summary

World equity markets continued to correct up this week while the bond market started to drop again. The Dow Jones moved up slightly, with the collapse structure still intact whether there is further upside or not. Volatility (measured by the VIX) also dropped slightly in line with the market correction, while the political pressure continues to build on Trump as it assumes more of a personal nature. Minutes from the last US FOMC meeting were released this week and they conveyed unanimous agreement amongst members that the rate hike program is correct and will continue. You do not ever get unanimous agreement, and this apparent ‘coup d Etat’ means further tightening of US market conditions, not easing. Tightening, rate hikes, trade wars, actual wars, and much more, are not what booming markets are made of.

The US$ had a flat week again to close slightly down at $89.50 which in a way represents the ‘be-calmed’ nature of all the markets out there. Some continue to caution of a powerful Dollar rally soon, and others the opposite. Gold improved because of Syria and even the gold / silver ratio improved slightly, but remains above 80. There are just too many questions out there and the poised nature of things promises much but still does nothing.

But there are a number of factors now pointing to an improvement in the silver price in addition to the bullish COT report last week. So, it appears the gold / silver ratio is soon to start dropping which is bullish for the whole precious metals complex.

 

US$

The US$ once again failed to rally as it extended its sideways consolidation to close down at $89.50. It not only failed to penetrate 50-Dema but had 5 consecutive closes below 10-Dema into the close. The previous cycle top at $90.92 remains untouched at the bottom of the large resistance block between $91 and $95 (green), and the question remains whether the Dollar:

  • rallies strongly towards 95;
  • rallies weakly towards 91.5 or diagonal resistance (red);
  • drops into support (red) or below, which fundamentals support;

The oscillators are mixed.

 

 

 

The long term picture in the 14 year chart remains static, illustrating continued consolidation just above the interim support line at $89.35 and below the major resistance block (red). The minor resistance lines at $91.50 and $92.50 are well above, just below the ‘dead cross’ which has now completed its formation at about $93.00, suggesting more long term downside.

Fundamentals supporting a weaker Dollar continue to mount, rendering any rally to last only temporarily.

 

 

 

Japanese Yen

The Yen weakened into resistance (green) to close at 107.35 against the US$, but is now showing signs of strengthening. It has moved into a rising wedge pattern (red) and ended the week with a Shooting Star candle which indicates a reversal. However, the oscillators are rising which supports still more Yen weakness first.

Yen strength is supportive of gold and a weaker Dollar.

 

 

 

US Treasuries

The US bond market continues to consolidate but the benchmark US 10 year Treasury yield has started to increase from a recent low of 2.73% to close at 2.82%. This has been assisted by the equity market correction with increased switching from bonds back into stocks.

The short term (1 year) chart structure yield increase from 2.05% to the target 3.0% is intact, and the consolidation will breakout any time soon to resume its yield climb. The ensuing climb beyond 3.0% to the next target at 5.0% will in due course destroy all asset values in its path.

 

 

 

US Treasuries and Gold

As the gold price increases and as the US Treasury 10 year price decreases so the ratio increases. This relationship is illustrated in the chart below which is bullish gold and bearish US bonds. There is a large inverted ‘head & shoulders’ pattern that is ready to penetrate the neckline. This will propel the ratio up by the depth of the head, reinforced also by the recent ‘gold cross’ in Aug 2017 at a ratio of about 9.9.

 

 

 

This is viewed alternatively in the long term chart of the US$ gold price which is edging up to the neckline at $1375. The correlation between the gold price and bond prices was positive until mid-2013 after which it turned negative. So, penetration of the neckline will propel gold up and bonds down.

 

 

 

Gold

Gold increased this week to close at $1347.90 and continues to nudge higher towards resistance. It had 6 consecutive closes above 10-Dema into the close and continues further away from the previous low at $1322.60 which it is important to hold if it is to avoid having to test $1303.60.

The oscillators are generally moving sideways with an upward bias in support of yet higher prices.

 

 

 

The longer term 3 year chart is strong. It has fleetingly penetrated main resistance and remains elevated above 50-Wema for 17 trading days into the close, since the ‘gold cross’ in Sep 2017. The diagonal supports are both intact as are the previous lows.

 

 

 

GDX US miners ETF

US miners closed up on the week again at $22.89, well into the short term resistance zone (green) and approaching the interim high at $23.18. There is a breakout through the triangle of the previous week and has 6 consecutive closes into the close above 10-Dema. The earlier chart structure indicated a breakout might be with gusto, and this appears to now be happening.

The earlier stalemate appears to have been broken as well as the earlier period of significant GDX underperformance against the gold price. But, this will again be voided with a strong Dollar rally.

 

 

 

The longer term GDX chart illustrates the stronger bias in the consolidation that has built up above support during the last 2 months including penetration of 50-Wema, having been range-bound for 15 months. The coiled nature of the GDX price may soon be released if gold starts to rise energetically. Much depends on the US$ and whether gold breaks up through the $1375.00 neckline, and also whether the gold / silver ratio penetrates down through 77.

The oscillators are also turning up.

 

 

 

DUST US Gold Miners Bear Index

Price has broken down powerfully through the triangle of the previous week and has now 11 consecutive closes below 10-Dema into the close at 22.63. It has penetrated down through 50-Dema as well as both the 2 previous lows, although creating a small gap in the process.

 

 

 

Silver

Silver moved up strongly this week from the previous week’s Doji candle to close at $16.66, after a fleeting breakout through diagonal resistance (black). It is still consolidated between short term support and resistance and needs to still breakout of the reducing wedge pattern decisively.

It continues to build a substantial support base and its price is highly ‘coiled’ to spring up powerfully once the gold / silver ratio starts to reverse down. Price needs to break up ($17) or down ($16) to break the current chart structure.

 

 

 

In the longer 3 year chart the Silver price has developed into a bullish reducing wedge pattern which, with the earlier positive COTs data, is likely to break up sooner than down. 50-Wema has proved strong resistance in the last 11 trading days and on Friday it was fleetingly broken.

The Slow Stochastic is bottoming and the MACD is honing to a point which both illustrate a breakout is imminent.

 

 

 

USLV US Silver Miners Bull Index

The US gold miners DUST (bear index) is very positive for GDX but the US silver miners USLV (bull index) is even more positive for silver. It has been in a broad down-sloping bull flag for 10 weeks, but the oscillators have been trending up in a major divergence. On Wednesday the index fleetingly penetrated the top trendline and the chart structure has the appearance of an imminent breakout. This is strong for silver and strong for the gold / silver ratio.

 

 

 

Gold : Silver Ratio

Silver continues to underperform gold for now 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. The ratio closed at 80.92 (improving 3 days running) and needs to drop below 78.7 to confirm the double top signal. There are now some positive factors impacting the silver price and the ratio still needs to drop below 77.0 to achieve the final breakout. This will signal the start of the long overdue reversal which has eluded for so long.

With a silver price breakout soon this may also be upon us soon.

 

 

 

General Equities

World equity markets continued to correct up this week while the bond market started to drop again. The Dow Jones moved up slightly, with the collapse structure still intact whether there is further upside or not. Volatility (measured by the VIX) also dropped slightly in line with the market correction, while the political pressure continues to build on Trump as it assumes more of a personal nature. Minutes from the last US FOMC meeting were released this week and they conveyed unanimous agreement amongst members that the rate hike program is correct and will continue. You do not ever get unanimous agreement, and this apparent ‘coup d Etat’ means further tightening of US market conditions, not easing. Tightening, rate hikes, trade wars, actual wars, and much more, are not what booming markets are made of.

The Dow is still at critical confluence which has extended into a second week and the collapse structure of the chart remains the same. There are critical supports that are close by and if these are breached it will lead to serious further declines.

The oscillators are rising which suggests the declines are some way off still.

 

 

 

The VIX has penetrated the pennant of the previous week on the downside, thereby indicating slightly reduced volatility in line with the slight increase in the Dow.

The milestones from here remain the same, including penetration of the previous high at 26.2 or penetration of the previous low at 13.4. It is a simple matter of which comes first.

 

 

 

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 8 Apr 2018

Apr 8th, 2018 No comments

Executive summary

World equity markets continued to edge up this week, with a few exceptions, and then late on Friday the US Dow Jones crashed 572 points as it continues to prepare for a much bigger drop soon: The Dow downtrend chart structure is very much still intact. Volatility continues to build with continued tweet damage from Trump and nobody particularly liked the US jobs report on Friday with 103 000 (lowest in last 6 months) against the estimate of  193000.

The US$ had a flat week with Thursday well up and Friday well down to close at $89.78, whilst the Yen is poised to strengthen again soon. The question as to a sustained Dollar rally remains and gold continues to hold up, closing the week at $1333.21. The gold / silver ratio is however still above 80 which continues to cast doubt on precious metal price acceleration soon, although the silver position appears to be poised for some meaningful upside soon which by definition will change all that. So, once again, much depends on Dollar movements in the short term, as weary eyes begin to view the equity markets with increased suspicion, worldwide.

There is however an element of ‘wait and see’ in the markets at present with a period of definite pause which has manifested right across the spectrum. Markets are consolidating as treasuries pause after recent rapid yield gains and the metals and miners are basically also all moving sideways.

 

US$

The US$ once again failed to penetrate 50-Dema and after a flat week ended below this moving average to close at $89.78. The question as to a sustained Dollar rally remains and gold reciprocally continues to hold up. The previous cycle top is at $90.92 which it first needs to penetrate if it is to rally higher into the large resistance block above between $91 and $95.

The two opposing theories are that either the Dollar rallies strongly towards 95 or weakly towards the diagonal resistance which in both cases will cause gold to retreat either strongly or weakly.

The oscillators are not in support of a strong rally.

 

 

The long term picture in the 14 year chart illustrates the US$ continuing to consolidate just above the interim support line at $89.35 and below the major resistance block (red). The minor resistance lines at $91.50 and $92.50 are well above and just below the ‘dead cross’ forming at about $93.00, suggesting more long term downside.

Fundamentals supporting a weaker Dollar continue to mount, rendering any rally to last only temporarily.

 

 

Japanese Yen

The Jap Yen weakened again this week to close at 106.91 against the US$, after weakening into resistance only to respond back from 50-Dema into a stronger Friday. It is now moving from the downsloping channel into what looks like a rising wedge or bull flag. This is bullish for the Yen and supported by oscillators that may have peaked, which is negative for the US$ and positive for gold.

 

 

US Treasuries

The US bond market continues to consolidate after recent rapid yield gains. This has been assisted by the collapsing equity markets with increased switching from stocks to bonds. The benchmark 10 year US sovereign bond yield closed at 2.77% which is the same as last week although with some gyration through the week.

The weekly 5 year chart illustrates the expected rise to 5% has stalled and may do so a while longer, judging by the oscillators which are slightly mixed. The climb to 5.0% will resume in due course which will destroy all asset values in its path.

 

 

Gold

Gold increased this week to close at $1336.10 but is now directionless, midway between support and resistance with oscillators moving sideways. It needs to break up or down to resolve the stalemate which at the moment is still not being supported by silver which continues to underperform gold.

It is critical to hold Friday’s low at $1322.60 in order to prevent a test of lower support such as the previous low at $1303.60.

 

 

The massive 5 year long Pentagon Base Pattern in the gold price is still securely intact with increased consolidation just below the breakout line at $1375. The breakout is proving long in coming because of the US$ rally threat, and it begs the question as to whether the breakout occurs first or whether the next 6 month cycle low occurs first (due Jun/Jul).

The long term gold picture does remain bullish though.

 

 

GDX US miners ETF

US miners closed up on the week at $22.07 just within the resistance zone (green), but with a chart pattern that has developed into a triangle that could break up or down. The pattern has a slight upward bias but includes another gap which just illustrates the ‘coiled’ nature of the structure which, when it breaks, will do so with gusto.

It does need to break up or down to resolve the stalemate, and this will be decided by US$ movement or by silver starting to outperform gold. This will terminate the period of significant GDX underperformance against the gold price, but will also be voided with a strong Dollar rally.

 

The longer term GDX chart illustrates the strong consolidation that has built up above support during the last 2 months, having been range-bound for 15 months. GDX is somewhat coiled to respond upwards powerfully in due course once gold starts to rise energetically.

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.

 

 

Silver

Silver moved up this week to close at $16.36, after a very strong Monday and lacklustre remainder of the week. It closed again with a Doji candle (Spinning Top) which augers well for next week, 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. Price needs to break up ($17) or down ($16) to break the current chart structure.

Metals and miners have consolidated for 2 months now and something is brewing with bullish activity represented in the COTs reports of late.

 

 

In the longer 3 year chart the Silver price has developed into a bullish reducing wedge pattern which, with the positive COTs data, is likely to break up sooner than down.

 

 

 

In the latest Silver COT report (Commitment of Traders) Large Speculators increased net short positions for a 3rd consecutive week, which has not happened since 2003. So, something big is brewing in the silver market.

The silver long term chart illustrates the chart pattern in 2003 and now. If a similar breakout occurs now as in 2003 then price is likely to punch up to at least to $22 and more likely to $25 later in 2018. This could be the trigger to power the gold / silver ratio much lower and take precious metals much higher.

 

 

Gold : Silver Ratio

Silver continues to underperform gold for now 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. To confirm the double top signal, price needs to close below the initial breakout at 78.7, and thereafter to drop further to the final breakout at 77.0. This will signal the start of the long overdue reversal which has eluded for so long.

With a silver price breakout soon this may also be upon us soon.

 

 

 General Equities

World equity markets continued to edge up this week, with a few exceptions, and then late on Friday the US Dow Jones crashed 572 points as it continues to prepare for a much bigger drop soon: The Dow downtrend chart structure is very much still intact. Volatility continues to build with continued tweet damage from Trump and nobody particularly liked the US jobs report on Friday with 103 000 (lowest in last 6 months) against the estimate of 193 00.

The Dow moved down slightly this week to close at 23932.76 but, more importantly, it reached a high during the week at a critical confluence of 4 important elements, the:

  • 50-Day exponential moving average;
  • Primary bull market resistance line;
  • Diagonal short term bear market resistance line;
  • Potential ‘Final Goodbye Kiss’;

The Dow is now dropping down towards a support zone (red) which, if it penetrates, will result in serious further declines. The critical confluence of these 4 elements virtually guarantee that this does in fact occur.

The Bollinger Band Width in the bottom oscillator window indicates the increase in volatility which further stock market collapse creates.

 

 

 

 

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 1 Apr 2018

Apr 1st, 2018 No comments

Executive summary

 World markets all moved counter to their primary trends this week in what appears to be a pregnant pause before the main trend continues again. Equity and bond markets moved up this week as gold moved down from major resistance, with the US$ starting to rally against the Euro, Pound and Yen starting to stall. Oil too is down from a double top.

The Dow Jones is about to plummet further as the next leg down in the bear market gathers traction in a world that still as yet sees no danger. This is supported by the US bond market rising in a correction as the 10 year US treasury yield dropped through support at 2.80% to close the week at 2.77%.

The US$ rallied up from support to close at $89.81 and stalled again shy of resistance at 50-Dema as it has done 4 times this month. The previous cycle top is at $90.92 with a large resistance block above that between $91 and $95. Another strong resistance in the block is at $91.50 coinciding with diagonal resistance at that level, and the question remains whether the Dollar strengthens to 91.5 or whether it rallies all the way up to 94 or 95.

Gold moved down to close at $1327.30 and is between short term support and resistance, although all the long term trendlines are intact. Silver continues to underperform gold which continues to retard 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.

One of the more significant events this week has been the launching of China’s oil-for Yuan-for gold scheme which started on 26 Mar 2018 (last Monday) and in the first 3 days signed 151 804 contracts to a value of 65bn Yuan. Trading houses like Glencore and Trafigura are looking at this with every intention of participating. This is the beginning, but the scheme goes directly against the Petrodollar and is designed by China to eventually topple the US$ as the world’s reserve currency, and in the process propel gold to very high prices.

 

US$

The US$ rallied up from support to close at $89.81 and stalled again shy of resistance at 50-Dema as it has done 4 times this month. The previous cycle top is at $90.92 which it first needs to penetrate if it is to rally higher into the large resistance block above between $91 and $95. Another strong resistance in the block is at $91.50 coinciding with diagonal resistance at that level, and the question remains whether the Dollar strengthens to 91.5 or whether it rallies all the way up to 94 or 95.

The oscillators are rising to support further Dollar strength.

 

 

 

The long term picture in the 14 year chart illustrates the US$ consolidating just above the interim support line at $89.35 and closing at $89.81. The major resistance block (red) contains the resistance lines at $91.50 and $92.50 below the ‘dead cross’ forming just above at about $93.00, suggesting more downside.

Fundamentally, the range of negative pressures continue to mount on the Dollar and it is not likely to advance beyond $91.50.

 

 

 

Japanese Yen

The Jap Yen weakened this week but started to strengthen again towards the close, turning down from resistance, in maintaining an overall strengthening bias (downsloping black lines). This continues to presuppose a continued weaker Dollar and stronger gold price. However, the oscillators rising suggest the opposite.

 

 

 

US Treasuries

The US bond market continues to correct with the benchmark 10 year US sovereign bond yield penetrating support at 2.80% to close at 2.77%. The approach to 3.0% has therefore stalled but is nevertheless expected to resume its upward journey to 3.0% and then beyond to 5.0%, which will destroy all asset values in its path.

The ‘pause and wait’ attitude of the correction in the yield may yet be delayed further with the stock market collapsing further, thereby extending the flurry of switching from stocks to bonds as a falsely-believed safe haven.

 

 

 

Gold

The recent weaker gold price and bond yield correction is causing the small right shoulder in the H&S pattern to move down in a consolidation in the chart of the Gold / US 10 year bond yield ratio. This is a bullish pattern for gold which is also developing a ‘pause and wait’ attitude. Higher gold and lower bond yield will penetrate the neckline of the H&S pattern which will then climb by the depth of the head, which will eventually take the ratio up to 16+. Vice versa is of course also true.

 

 

Gold reversed down from resistance to close at $1327.30 inside the cluster of moving averages. It is now midway between short term support and resistance, although all the long term trendlines are intact. But silver continues to underperform gold which continues to retard the whole complex. The oscillators are dropping which supports more downside.

 

 

 

The 3 year weekly gold chart illustrates the price move down from main resistance still above the moving averages, with all the supports still clearly intact. The ‘Gold cross’ at about $1260 continues to promise higher prices.

The oscillators are drifting which also attests to the ‘pause and wait’ attitude of the market.

 

 

 

The massive 5 year long Pentagon Base Pattern in the gold price is still securely intact despite the down move this week. The breakout at $1375 promises higher prices later on and a breakdown below $1250 will corrupt the pattern for new assessments based on the chart structure thereafter.

 

 

 

 GDX US miners ETF

US miners closed down on the week just below the resistance zone at $21.98, in spite of a strong Friday with a bullish engulfing candle. All the gaps created in the past 2 weeks have been closed and the chart structure has developed a slight upward bias (black sloping lines) which seems to promise an attack on the 2 previous highs, which if successful will take the price up through resistance (green). At the same time the  substantial support base suggests we might have reached minimal downside movement from here.

It may be that the period of significant GDX underperformance against the gold price is beginning to end, but this positive situation will be voided with a strong Dollar rally. 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 gold starts to rise energetically.

 

 

 

DUST US Gold Miners bear index

DUST closed up on the week at $25.75 in spite of a weak Friday with a bearish engulfing candle which pushed down through the MAs. All the gaps created in the past 2 weeks have been closed and the chart structure has developed a slight downward bias (black sloping lines) which seems to promise an attack on the 2 previous lows, which if successful will take the price down towards stronger support. At the same time the  substantial resistance base between $23 and $30 suggests we might have reached minimal upside movement from here.

But a strong Dollar rally will void this scenario and take DUST powerfully up, supported by oscillators rising at the moment.

 

 

 

Silver

Silver moved down from short term resistance to short term support this week. It closed at $16.27 with a spinning top (Doji) candle suggesting indecision, 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.

In the latest COT report (Commitment of Traders) silver reached a record low commercial short position of 3 700 contracts which is a level not seen for many years. The normal low position is of the order of 20 000 contracts, and this is an unusually bullish sign which some are predicting is about to propel the silver price and trigger a reversal in the gold / silver ratio.

 

 

 

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. It closed at 81.59 with a double top, having opened worse on Friday and then improving throughout the day. The long overdue reversal continues to elude and we must wait longer for the initial breakout at 78.7 and the final breakout at 77.0.

 

 

 

 General Equities

World equity markets all moved counter to their primary trends this week in what appears to be a pregnant pause before the main trend continues again. The Dow Jones is about to plummet further as the next leg down in the bear market gathers traction in a world that still as yet sees no danger. This is supported by the US bond market rising in a correction.

The Dow has moved down towards a zone of support (red) between 23250 and 23650 where it has consolidated into a pennant pattern (usually continuation). This will encourage further movement down and if this support zone is penetrated there will be serious further declines. The next moves down will define the chart structure more definitively and begin to start the process of popular recognition. The world believes a technical correction needs at least 10% change and a bear market is only recognised at 20% change. The drop from the peak is now only 9.2%.

The oscillators are now dropping fast.

 

 

 

The VIX has moved, much like the inverse of the Dow, up to the previous high before correcting slightly this week to form a pennant by closing slightly down at 19.97. Being a continuation pattern the VIX is expected to continue up towards its all time high with volatility expected to increase significantly as the Dow continues down next week.

Milestones from here include penetration of the previous high at 26.2 with some resistance in a consolidation cluster in the region of 25.0 up to 35.0. The gold cross in Feb this year has certainly triggered upward movement away from the level region of around 10.0 that the VIX has occupied for so long now. All this indicates much higher volatility and lower stock market prices.

 

 

 

 

 

 

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