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Weekend Market Analysis 27 May 2018

May 26th, 2018 No comments

Executive summary

World equity markets moved sideways to down this week as we remain in this kind of breather space period, with the chart structures still in the early stages of the bear market we are entering. Treasuries moved up in what looks like the start of a countertrend correction with the US 10 year yield dropping sharply from a high down to 2.93%, assisted somewhat by the political ‘deck chair’ re-arranging of North Korea summit agendas.

The strong US$ rally took the currency to a close of $94.13 which some argue will still rise to $95.15 after a correction. But there are strong resistances here with a whole range of competing currencies on strong buy signals against the dollar. These include, amongst others, Euro, UK Pound, Aussie $, Swiss Franc, etc., which suggest this is the end of the dollar rally. Gold, on the other hand, hit a low at $1281 which could now be the 6 month cycle low which, once confirmed, is likely to take the price up through resistance beyond $1400. The whole precious metals complex is once again looking positive with US miners and silver outperforming gold (which is bullish) in a leadership role switch. The jury is still out, but US$ movement in the next weeks is critical. Gold closed at 1301.54 and silver at $16.50.

 

US$

The US$ is ready for a correction after a strong run, but still needs to confirm a top. The strong US$ rally took the currency to a close of $94.13 which some argue will still rise to $95.15 after a correction. But there are strong resistances here with a whole range of competing currencies on strong buy signals against the dollar. These include, amongst others, Euro, UK Pound, Aussie $, Swiss Franc, etc., which suggest this is the end of the dollar rally.

The dollar has enjoyed 27 consecutive closes above 10-Dema and the suggestion of a top can only occur after consecutive closes below 10-Dema. The oscillators are at the top suggesting further rises and the question is whether such rises will take the price all the way to 95.15 or whether resistance is strong enough to prevent this.

 

 

 

The longer term 14 year chart illustrates the dollar increase up through the moving averages back towards the earlier penetration of the 1st stage decline target (dotted red) with little resistance all the way up towards 100 and beyond. It is probably only wave counts that can determine the next stage in US$ movement, with all the profound impact such movement will wreak on the financial market, commodities, etc.

 

 

 

US Treasuries

The benchmark US Treasury 10 year yield is patently underway in rising towards the next increase tranche (probably 5.0%), but is due a countertrend correction soon. This has probably started and can be seen in the drop towards the red diagonal, and which may still extend further down to 2.7% and beyond. The oscillators are turning down in support of this.

 

 

 

US Treasuries and Gold

The relationship between gold and the US Treasury 10 year price is reflected in the chart below with rising bias in strong gold / weak bond price, and reducing bias in weak gold / strong bond price. The chart is bullish but stalling in the tail with current weak gold and strengthening bond value (lower yield). This will create a larger right shoulder in the H&S

The chart will strengthen as gold increases in price and as the 10 year bond value decreases once yields start to increase again.

 

 

 

Gold

Gold is looking positive with a potential 6 month cycle low at $1281, which will be confirmed if price can close above $1308 and breach the diagonal trendline (blue). Much depends on price movement in the dollar next week and whether gold can breach 200-Dema and stay above it.

The whole precious metals complex is once again looking positive with US miners and silver outperforming gold (which is bullish) in a leadership role switch. Confirmation of the 6 month cycle low is positive and will energise the sector to push price through the long term resistance neckline to a new gold breakout, also assisting miners and silver to break their range-bound patterns.

The oscillators are turning up in support.

 

 

 

The longer term 3 year chart remains strong and illustrates the diagonal supports and previous lows are holding, in a chart structure of higher highs and higher lows. Once, and if, the 6 month cycle low is confirmed this will lead to more aggressive price increases.

The oscillators are dropping however but the Slow Stochastic may be close to a bottom.

 

 

 

The yet longer term massive pentagon base pattern continues to hold as it prepares for penetration of the neckline at $1375.00 which, once penetrated, will propel gold up by the depth of the head to higher prices.

 

 

 

HUI / Gold Ratio

The HUI / Gold ratio is positive illustrating the US miners are outperforming gold. The next requirement is to breach 0.1406 which will add traction to the increase. A 2nd H&S is created as that level is breached and this will all add substantial impetus to US miners and the whole complex.

The Slow Stochastic is rising and the MACD is holding up.

 

 

 

GDX US miners ETF

GDX has suffered a setback in stalling at the diagonal trendline (black) and in the process creating lower highs. To start advancing energetically it needs to breach the diagonal and to start penetrating each previous high.

The oscillators are rising in support, and this can be achieved now.

 

 

The longer term GDX chart illustrates how miners are still range bound. Much depends on confirmation of the gold 6 month cycle low, and continued reduction in the gold / silver ratio.

The oscillators are positive.

 

 

 

Silver

The silver price is increasing again, but has again stalled at 200-Dema. But higher prices are coming and it appears silver’s 6 month cycle low occurred 3 weeks earlier than gold’s, as it continues to outperform gold. Price must not fall below $16.33 which will reverse the rally.

The oscillators are rising and supportive.

 

 

 

In the longer term 3 year chart the bullish reducing wedges remain intact, and if price can penetrate the target breakout box (blue) it is liable to generate strong price gains. Price is still stalling at 50-Wema.

Both oscillators are positive in support, and the MACD continues its 18 month long process of honing to a point which all has an upward bias suggesting a strong breakout when it happens.

 

 

 

Gold : Silver Ratio

The ratio continues to drop further below 80 and closed at 78.79, very close to breaching the bottom line of the upward-sloping reducing wedge. The breakout from the year long pattern is likely to happen soon and will alter the nature of the whole precious metals complex in driving prices higher.

Both oscillators are pointing down in support.

 

 

 

General Equities

The Dow Jones countertrend rally is still in progress, having peaked at 25086 earlier in May and closing the week softer at 24753. It has been rising repeatedly to around the primary bull market resistance line, although dropping down to varying levels immediately after each visit. This holding pattern can of course continue but begs the question of whether this leads to a major advance or major decline.

 

 

 

Volatility, as measured by the VIX, is also in a drifting or holding pattern just below 200-Dema. This also suggests the holding pattern in the Dow is likely to continue a while longer.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 13 May 2018

May 13th, 2018 No comments

Executive summary

World equity markets all moved up this week, some to around the April highs and some, like UK and France, to near the all time highs. But the chart structures are all still intact for the bear market we are entering. Treasuries continued to move down with the US 10 year yield increasing slightly to 2.97%, all in a continued kind of breather space period. The next US Fed meeting is still likely to hike rates further but despite that it appears treasuries are set for a countertrend correction, which will bring yield down.

The strong US$ rally turned down (from $93.35) at strong resistance to close at $92.41, exactly where it closed last week. There are many indications that the rally may have run its course despite some strong contrary arguments. Gold hit a low at $1302.30 on Tues 1st May and closed the following day on a bullish Doji candle followed by increased prices to close this week at $1320.70. It is trying to confirm (or otherwise) whether that low was in fact a 6 month cycle low, but remains unconfirmed. To do this it needs to close above Friday’s high at $1326.30 and the US miners need to continue outperforming gold. Silver is also positioned to rally higher, and the gold / silver ratio continues to drop closing  at 79.13.

 

US$

The US$ rally is in correction mode, but still needs to confirm a top. After dropping down to close at $92.41 (same as last week) it reversed up after a brief penetration of 10-Dema. To confirm a top the dollar needs 2 consecutive closes below 10-Dema, and if it does the same below 200-Dema (close at hand) it will confirm a significant top. Very short term support is at 92.39 – 92.22.

The oscillators are turning down in support of further dollar downside.

 

 

 

Looking more closely at some of the powerful forces impacting on any further dollar strength, we find a whole range of factors in that region of strong resistance, including:

  • Nov 2017 low (black line);
  • Fibonacci retracement of 61.8% from the low point (blue);
  • Both 200-Wema and 50-Wema;
  • Dead cross where these 2 MAs diverge;
  • Bearish ‘Shooting Star’ closing candle;

These are all illustrated in the chart below, encouraging the dollar rally to end here.

 

 

 

The long term 40 year chart illustrates the cycles in the dollar pattern of peaking in ever lower 16 year cycles (red) and bottoming in ever lower 16 year cycles (blue). This indicates a dollar value in the lower 60s in the year 2024, with of course correspondingly higher gold values.

 

 

 

US Treasuries

The weekly 5 year chart of the benchmark US treasury 10 year yield has 2 breakouts from the H&S pattern and seems underway to rise further towards 5%. However, there may well be a countertrend correction soon because of high level oscillators that are moving sideways to down, and look somewhat threatening.

 

 

 

Gold

Gold is looking positive with a potential 6 month cycle low, although still unconfirmed. Price moved down from 50-Dema on Friday and this may cause a further price drop before confirming the low. If price drops below $1310 then it will indicate a lower price later in May. However, if it increases above Friday’s high of $1326.30 then this will confirm $1302.30 as the 6 month cycle low.

This may be the trigger to finally propel gold through the long term neckline at $1375, and higher.  The oscillators are turning up in support.

 

 

 

The longer term 3 year chart remains strong and illustrates the diagonal supports and previous lows are holding, in a chart structure of higher highs and higher lows. Once, and if, the 6 month cycle low is confirmed this will lead to more aggressive price increases.

The oscillators are dropping however but the Slow Stochastic may be close to a bottom.

 

 

 

The yet longer term massive pentagon base pattern continues to hold as it prepares for penetration of the neckline at $1375.00 which, once penetrated, will propel gold up by the depth of the head to $1800.00

 

 

 

HUI / Gold Ratio

The HUI / Gold ratio is positive illustrating the US miners are outperforming gold. The breakout from H&S has resumed and the positive bias in the chart needs to continue through 0.1406 to gain real traction in the miners. The ratio needs to penetrate 0.1388 to remain positive and must not fall below support at 0.135 otherwise the diagonal support will fail, suggesting further downside.

The Slow Stochastic is turning up and the MACD is holding up.

 

 

 

GDX US miners ETF

GDX has a positive bias and has moved back into resistance (green). To advance energetically from here GDX needs to clear 1st and 2nd targets at $23.15 and $23.32 beyond which price is likely to move up quickly.

The oscillators are rising in support.

 

 

The longer term GDX chart illustrates how miners are still range bound. Much depends on confirmation of the gold 6 month cycle low, and continued reduction in the gold / silver ratio.

The oscillators are positive.

 

 

 

DUST US Gold Miners Bear Index

DUST is maintaining a negative bias with 7 consecutive closes below 10-Dema. Even 200-Dema is finally moving into the chart space. All this presupposes continued strength in US gold miners. The oscillators are dropping and supportive.

 

 

 

Silver

The silver price is increasing again although it stalled at 200-Dema which might delay a while. Higher prices look to be coming and the rise from the low at $16.07 has introduced the potential of a 6 month cycle low, still to be confirmed. Price must not fall below $16.33 which will reverse the rally.

The oscillators are rising and supportive.

 

 

 

In the longer term 3 year chart the bullish reducing wedges remain intact, and if price can penetrate the target breakout box (blue) it is liable to generate strong price gains.

The slow Stochastic is turning down, although reasonably low, while the MACD continues its 18 month long process of honing to a point which  suggests a strong breakout when it happens.

 

 

 

Gold : Silver Ratio

The ratio is below 80 and continues to drop down from the confirmed double top in closing the week at 78.84. It needs to breach the bottom line of the upward-sloping reducing wedge which is likely to complete at a level of 77.0 – 78.0 soon. The breakout from the year long pattern is likely to alter the nature of the whole precious metals complex in driving prices higher.

Both oscillators are pointing down in support.

 

 

 

General Equities

The Dow Jones continues to correct up in a holding pattern that has now increased to the April high, forming a potential double top in the process. The pattern is still bearish and may still not have completed the upward correction. The oscillators have not yet peaked suggesting more upside to come.

 

 

 

Volatility, as measured by the VIX, is drifting lower slowly and has now penetrated the previous low at 13.4. This suggests further upside in the Dow in the short term.

 

 

 

 

 

 

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 6 May 2018

May 6th, 2018 No comments

Executive summary

World equity markets moved sideways to slightly up this week and treasuries did likewise with the US 10 year yield dropping to 2.95%, all in a kind of breather space period. During the week the US Fed held rates steady and the US jobs report indicated 164 000 new jobs (lower than forecast) as world economies continue to limp on.

The US$ has rallied strongly and has now encountered strong resistance to close at $92.41. Gold was weaker but recovered slightly to close at $1314.83. Dollar resistance is strong from a number of different forces and this has provided a relief period for metals and miners in the short term. The struggle now is between a yet stronger dollar or yet stronger gold, and this may play out differently in the next month, next 6 months, and next year.

 

US$

The US$ rallied strongly into major resistance (green) stalling at the 2nd resistance target of $92.41. The rally has been vigorous and is due a correction which is supported by a number of forces detailed in the next number of charts.

 

 

 

The long term picture in the 14 year chart illustrates the dollar rise to a strong resistance line at $92.4 which is at 200-Dema and the bearish ‘dead cross’. This region is a confluence of powerful resistances which may well end the rally, described in more detail in the next chart.

 

 

At this point the dollar has reached:

  • Nov 2017 low (black line);
  • Fibonacci retracement of 61.8% from the low point (blue);
  • Both 200-Wema and 50-Wema;
  • Dead cross where these 2 MAs diverge;

These are all powerful forces encouraging the dollar rally to end here or at least correct down strongly.

 

 

US Treasuries

The benchmark US treasury 10 year yield has penetrated the psychologically important level of 3.0% and is now correcting down slightly. The move towards the next target of 5.0% is therefore underway, and the oscillators have turned up in support.

However, this has been a strong rally and a corrective drop could be expected in the interim.

 

 

 

US Treasuries and Gold

The relationship between gold and the US Treasury 10 year price is reflected in the chart below as strong gold price and weak bond price. The chart is bullish but stalling in the tail with current weak gold.

It also illustrates the positive relationship between the gold price and interest rates, in that as gold increases so does interest rates (being the inverse of bond price).

 

 

 

Gold

Gold is bouncing up off 200-Dema and technical support levels in the chart (red). It needs to increase above $1317.40 to confirm the bottom with consecutive closes above 10-Dema thereafter. This could be an important turning point as a 6 month cycle low (as the dollar corrects down), as described in the following chart.

The oscillators are turning up in support.

 

 

 

The longer term 3 year chart remains strong with support lines all holding, and volume declines coinciding with price declines (bullish). This could well be a new 6 month cycle low in terms of timing (and the catastrophic state of the world monetary system), but the oscillators are dropping and not sufficiently oversold. On balance therefore, it is more probable that the true cycle low occurs later this month.

 

 

 

The yet longer term massive pentagon base pattern continues to hold as it prepares for penetration of 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 may of course threaten the pattern.

 

 

 

HUI / Gold Ratio

The HUI / Gold ratio illustrates the relationship between US gold miners and the price of gold. The deterioration (to a low in Mar 2018) has improved recently to an actual H&S breakout, which unfortunately proved false. The positive bias with moving averages crossing over needs to exceed 0.1406 to gain traction, and penetration of the diagonal support line (blue) will be negative.

The oscillators are not positive though.

 

 

 

GDX US miners ETF

GDX itself is more positive than the HUI / Gold ratio with oscillators turning up. The short term target is $22.80 and the previous high is at $23.32. The US gold miners are ready to accelerate up after the gold 6 month cycle low is confirmed.

 

 

The longer term GDX chart illustrates how miners are still range bound. Much depends on timing of the gold 6 month cycle low point, and the gold / silver ratio.

The oscillators are positive.

 

 

 

DUST US Gold Miners Bear Index

DUST is maintaining a negative bias despite some recent strength, which suggests a lower US$ and higher metal prices. The oscillators are dropping and supportive.

 

 

 

Silver

Silver has re-established the price mould midway between support and resistance over the last 3 months. Volume collapsed again during price declines (bullish) and COTs remain bullish, pointing to a price increase in the short term.

The oscillators are supportive in turning up.

 

 

 

The bullish reducing wedges over the last 2 years remain intact, and the bullish Dragonfly candle at the close promises some upside.

The slow Stochastic is rising and the MACD is continuing an 18 month process of honing to a point which adds credence to the notion that the substantial support base has price highly ‘coiled’ to generate powerful increases from here.

 

 

 

Gold : Silver Ratio

The ratio has dropped below 80 again and is poised to drop further. Breaking 77.0 will provide the necessary breakout below the year long upward sloping rising wedge. This is likely to alter the nature of the whole precious metals complex in driving prices higher.

Both oscillators are pointing down in support.

 

 

 

General Equities

World equity markets moved sideways to slightly up this week in a kind of breather space period. The Dow keeps bouncing up off 200-Dema which is proving to be strong support, but once it is penetrated it will promote a serious sell-off. The Dow continues to trace out a series of down waves which should eventually lead to the strongest decline since the January 26 top, in what should be a long-term decline.

The oscillators are dropping down in support of price declines.

 

 

 

 

Categories: Currency, Equity, Gold Tags: