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Midweek Market 30 Aug 2018

Aug 30th, 2018 No comments

Executive summary

World equity markets continue to rise, lead by the US. Even emerging markets are up, and mostly by larger increments than developed markets. Resources, except for oil, remain sluggish while precious metals continue to dither at the start of a multi-month rally.

US interest rates bottomed in mid-2016 as the world prepares for an interest rate cycle that is turning up. This is reflected in the US bond market as yield on the Treasury Notes increase, but it is not reflected in the equity market which should be declining also. Instead US equities which lead the world, continue to edge up in what is now the longest bull market in history. At the same time it is doing so in a fractured way with very few shares (Faangs) driving up the market against the majority which are not. Also, the blue chip Dow Jones and the all-encompassing NYSE index are not reaching new highs as are most of the other indices, adding to the divergence and narrow characteristic of the market described by some as a ‘flight to risk’. The markets are therefore at a ‘tipping Point’ stage as this scenario plays out in a kind of ‘The Brave and the Stupid’ soap opera that is going to leave many devastated in due course.

The US$ index peaked and is declining into a multi-month weakening cycle that is propelling gold into a multi-month rally. However, the devastation caused in the severe precious metals decline has left investors extremely pessimistic, and it will take a while to generate some energy in lifting prices into the rally proper. The current COTs report is extremely bullish for precious metals with positive indications similar to those last seen in 2001 at the start of the massive bull market leading up to the peak in 2011.

 

US$

The US$ index declined from the peak well into the consolidation support zone (red) dropping from the peak at $96.984 by some 2.5% in also penetrating 50-Dema. This is developing into a multi-month decline which is possibly due an interim reversal soon.

The oscillators are still dropping although the Slow Stochastic could be bottoming.

 

 

 

The longer term 12 month chart illustrates the decline with various levels of support indicated in addition to the 61.8% Fibonacci retracement level at $91.57.

The oscillators indicate more room for dropping further, signalling further dollar weakness.

 

 

 

The even longer term 3 year chart illustrates the diagonal support line (black) close at hand which might prompt an interim reversal. The various support lines (red) are indicated leading down to the target decline zone towards the 61.8% Fibonacci retracement target at about $91.00 in line with the Sep 2017 low.

The oscillators have much further space to drop indicating much further weakness. The decline will form the beginning of the left side of the right shoulder of what could develop into a bullish inverted H&S formation which could propel the dollar much higher to $105.00 and beyond later on.

 

 

 

US Treasuries

The benchmark US Treasury 10 year note weakened this week with yield increasing to 2.89% although the countertrend rally is technically still in progress. The yield curve penetrated the red diagonal although both the red and blue horizontals are still intact. The direction is therefore somewhat still undecided.

The red horizontal line represents support and the blue line resistance. The main trend will resume once the horizontal blue resistance line is penetrated, after which the US bond market will resume its collapse.

The MACD has formed a reducing wedge and the technical implication is a breakout upwards eventually.

 

 

 

Gold

The gold price bottom has been confirmed with 2 consecutive closes above 10-Dema. But, as can be seen, it is tenuous. The indications are positive though with a weakening dollar, very positive COTs data, and oscillators rising. But the market needs to develop stronger buying interest after the recent price devastation, and hopefully this will manifest in breaking through $1221 and trying later for $1240.

Price needs to penetrate the resistance zone and break through at least the $1240 level before this will be clarified.

The oscillators are turning up and beginning to look more positive in support of this proposition, and the MACD has a breakout through the reducing wedge.

 

 

The gold COT chart indicates a continuing even tighter convergence that precedes a price bottom, and it presents a very positive picture of a strong rally next. Such a situation was last witnessed in 2001 which was at the start of the massive gold bull market that lead to the peak in 2011.

 

 

The longer term 3 year weekly chart illustrates the very positive oscillator position with both turning up and plenty of upside space. The ending red candle could be the start of an Evening Star which is bearish.

 

 

 

The massive Pentagon base pattern is very bullish in line with many other commentaries on the internet. Gold is positioned to now test the 5 year neckline at $1375 during the multi-month rally, with positive oscillator support.

 

 

 

HUI / Gold Ratio

US miners continue to underperform gold, and the chart illustrates the severe underperformance in the last 4 weeks. A bottom is developing but still unconfirmed.

The oscillators are more positive now, indicating more positive price moves next.

 

 

 

GDX US miners ETF

The GDX chart is of course similar to the Hui:Gold ratio chart and the same commentary applies. Once the gold trigger kicks in so too will these charts ignite.

 

 

 

DUST US Gold Miners Bear Index

The Dust chart displays a geared version of the inverse of the preceding charts and the same commentary applies, in reverse. Once the gold trigger kicks in so too will this chart ignite downwards. It provides an early warning system of what is likely to happen to gold and gold miners, the oscillators have topped out and are beginning to decline which is positive for gold.

 

 

 

Silver

The silver price is underperforming gold and this is one of the major reasons why the complex is not moving up. By definition though, it almost implies that the gold : silver ratio is next to move down, and not up further. But to take little steps one at a time we need to first develop a bottom in the silver chart. Once that is achieved we need to penetrate the initial price level of $15.12 to enter the resistance zone.

Like gold, silver also has bullish COTs data, but the market still needs to develop stronger buying interest after the recent price devastation. The question remains as to whether this is just a short price ‘blip’ or the beginning of a stronger rally to higher prices.

The oscillators are turning up and beginning to look more positive in support of this proposition.

 

 

 

The silver COT chart indicates a continuing even tighter convergence that precedes a price bottom, and it presents a very positive picture of a strong rally next.

 

 

 

USLV US Silver Miners Bull Index

The US silver miners USLV (bull index) exhibits a similar strong negative bias to Dust’s positive bias, with also an attempt at developing a bottom which is as yet unconfirmed. A rise into the resistance zone is the next priority.

 

 

 

Gold : Silver Ratio

The ratio pushed up further above 80 and is now at 82,43. It has not penetrated the triple top, and needs to prevent that as a first priority. The chart structure is bearish for precious metals and could turn bullish if the triple top is not penetrated. The oscillators are mixed and the data is somewhat trendless over the time span of the triple top.

 

 

 

General Equities

US equities continue to edge up in what is now the longest bull market in history. At the same time it is doing so in a fractured way with very few shares (Faangs) driving up the market against the majority which are not. Also, the blue chip Dow Jones and the all-encompassing NYSE index are not reaching new highs as are most of the other indices, adding to the divergence and narrow characteristic of the market described by some as a ‘flight to risk’. The markets are therefore at a ‘tipping Point’ stage as this scenario plays out in a kind of ‘The Brave and the Stupid’ soap opera that is going to leave many devastated in due course.

The Dow Jones continues to endure low energy characteristics climbing to new low-level highs as it exhibits continued signs of exhaustion. The latest chart pattern is a rising wedge with price close to the apex. The first major support level is at 24950 and if breached decisively will confirm the end of the 5 month countertrend rally which, until then, is technically still in progress.

 

 

 

One of the indicators pointing to exhaustion on the NYSE is the chart of New Highs against New Lows. It continues to illustrate the difference in the energy of the bull market leading up to the Jan 2018 peak and the lethargy and lower energy levels of the countertrend rally in the bear market. The chart below highlights the 6 months leading up to the Jan 2018 peak and the 5 since the start of the bear market countertrend rally.

During the bull market phase New Highs outstripped New Lows by an average of about 200 (blue dotted), whereas during the countertrend rally from Apr to now they were outstripped by an average of about 25 (red dotted). In other words, the bull market was powerful with high energy levels whilst the bear market rally is lethargic and low in energy. The difference in levels between blue and red is distinct and clear.

The index closed at 111 yesterday.

 

 

 

The rising wedge at the end of the countertrend rally is now pulling away from the ‘Primary Bull Market Resistance Line’. This, in spite of the lower energy levels in the market. This seems to present the potential for a new powerful thrust up, or down soon.

 

 

Categories: Currency, Equity, Gold Tags:

Midweek Market 23 Aug 2018

Aug 23rd, 2018 No comments

Executive summary

This week, unlike usual, a very overall overview.

US interest rates bottomed in mid-2016 and after a lengthy delay the EU and Japan are preparing for rate hikes next year. World markets are therefore at a ‘tipping Point’ stage and the next 6 months will witness dramatic changes in world asset values.

US equities are balanced at the terminal end of a countertrend rally as they continue, ever so slowly, into a bear market. The US bond market started to decline in mid-2016 with yield on the 10 Year Treasury Note rising from 1.4% to 2.82% now, as it also enjoys a countertrend rally which is very near its end. Beyond this point the US bond market will continue to collapse as it destroys all asset values in its path.

The US$ index is once again resurgent and, having peaked at $96.984, is currently in a weakening cycle probably down to a level of $91.00. Thereafter it is likely to climb to much higher levels up to $105 and beyond. During all this, gold has been under severe pressure in a bear market that started in 2011, dropping in value from $1925 to its current level of just below $1200 probably en route to $1000-$900. But, with the dollar in a weakening cycle down to $91, gold is likely to enjoy a rally which is still in its reluctant infancy.

But, at the same time global debt is increasing exponentially as national deficits explode seemingly uncontrollably. During the periods of quantitative easing governments were seemingly incapable of generating economic growth and the prospect of ‘stagflation’ grows nearer. So, as the interest rate cycle has turned up and debt will be ever more difficult to service, so the spectre of a collapsing international monetary system draws nearer. Many claim that the next global financial crisis will be exponentially worse than the last and that the international monetary system will collapse and have to be re-tooled anew. At that time we had all better be in gold.

 

US$

The US$ index weakened from the peak at $96.984 moving down to $95.05 with 2 consecutive closes below 10-Dema, confirming the top. It has stalled just into the support zone with a Doji candle, indicating an upward adjustment before further downside.

The oscillators are dropping which indicates further dollar weakness in due course.

 

 

 

The longer term 12 month chart illustrates the decline into the previous consolidation zone and the likely further weakness towards the 61.8% Fibonacci retracement level close to $91.00.

The oscillators are dropping, signalling further dollar weakness.

 

 

The even longer term 3 year chart illustrates the dollar turning down at resistance with a bearish Shooting Star candle, and the likely further weakness towards the 61.8% Fibonacci retracement target zone in line with the Sep 2017 low at about $91.00.

The decline will form the beginning of the left side of the right shoulder of what could develop into a bullish inverted H&S formation which could propel the dollar much higher to $105.00 and beyond later on.

The oscillators are topping and beginning turn down in support of the decline phase.

 

 

 

Japanese Yen

The US$/Yen currency pair weakened through 2 consecutive diagonal supports (red) as the Yen enjoyed recent strength. Although the Yen inexplicably strengthened during the dollar’s strong advance to its peak, it also weakened during the dollar’s recent weakness. Despite this irregularity the Yen is now poised to strengthen further.

Further Yen strength will likely support a higher gold price.

 

 

 

US Treasuries

The benchmark US Treasury 10 year note strengthened this week with yield dropping to 2.82% as the US bond countertrend rally continues, for now. The chart structure indicates a further drop in yield towards perhaps 2.77% as the countertrend rally endures a while longer.

In the final analysis the horizontal blue and red lines need to be penetrated to determine direction. The red horizontal line represents support and the blue line resistance. The main trend will resume once the horizontal blue resistance line is penetrated, after which the US bond market will resume its collapse.

 

 

Gold

The gold price is trying to build a bottom which still needs to be confirmed with 2 consecutive closes above 10-Dema. Very bullish COTs data is supporting this but the market needs to develop stronger buying interest after the recent price devastation. The question remains as to whether this is just a short price ‘blip’ or the beginning of a stronger rally to higher prices.

Price needs to penetrate the resistance zone and break through at least the $1240 level before this will be clarified.

The oscillators are turning up and beginning to look more positive in support of this proposition, and the COTs data continues to look more bullish for a spectacular gold rally.

 

 

The gold COT chart indicates a continuing tightening convergence that precedes a price bottom, and it presents a very positive picture of a strong rally next.

 

 

 

The longer term 3 year weekly chart ended on a bullish Harami candle which suggests a reversal. The oscillators too are bottoming and turning up which supports this. But gold needs a trigger to counteract the bearish pessimism and earlier price decline to invigorate a revival. This is of course all still dependent on the US$, and it seems almost impossible that that role will probably invert at some time in the not too distant future.

Today sees the US FOMC minutes from the last meeting and next Friday will witness the US Federal Reserve testimony at Jackson Hole in Wyoming. It is no secret that Donald Trump wants a weaker dollar and these events may well include the necessary gold trigger.

 

 

 

HUI / Gold Ratio

US miners continue to underperform gold, and the HUI / Gold ratio continues to decline further with no confirmed bottom yet, reflecting the extreme investor pessimism. But, the chart is starting to build a bottom which still needs 2 consecutive closes above 10-Dema to confirm.

The oscillators are more positive now, indicating more positive price moves next.

 

 

GDX US miners ETF

The GDX chart is of course similar to the Hui:Gold ratio chart and the same commentary applies. Once the gold trigger kicks in so too will these charts ignite.

 

 

DUST US Gold Miners Bear Index

The Dust chart displays a geared version of the inverse of the preceding charts and the same commentary applies, in reverse. Once the gold trigger kicks in so too will this chart ignite. It provides an early warning system of what is likely to happen to gold and gold miners, the oscillators have topped out and are beginning to decline which is positive for gold.

 

 

 

Silver

The silver price is trying to build a bottom which still needs to be confirmed with 2 consecutive closes above 10-Dema. Very bullish COTs data is supporting this but the market needs to develop stronger buying interest after the recent price devastation. The question remains as to whether this is just a short price ‘blip’ or the beginning of a stronger rally to higher prices.

Price needs to penetrate the $15.12 level and break up into the resistance zone, before breaking higher. In so doing hopefully silver starts to out perform gold, which it is not doing at the moment.

The oscillators are turning up and beginning to look more positive in support of this proposition.

 

 

 

The silver COT chart indicates a continuing tightening convergence that precedes a price bottom, and it presents a very positive picture of a strong rally next.

 

 

Gold : Silver Ratio

The ratio pushed up above 80 and is now at 81.58, having created a triple top. The chart structure is bearish for precious metals and could turn bullish if the triple top is not penetrated. The oscillators are mixed and the data is somewhat trendless.

 

 

 

General Equities

The US stock market remains ‘fractured’ with the main indices not agreeing with each other. The Dow continues to endure low energy characteristics climbing to new low-level highs as it exhibits continued signs of exhaustion. If support at 24950 is breached decisively it will confirm the end of the 4½ month countertrend rally which, until then, is technically still in progress.

That will herald the start of a significant leg down which will be a prolonged  and severe drop. The oscillators are dropping in support of this proposition.

 

 

One of the indicators pointing to exhaustion on the NYSE is the chart of New Highs against New Lows. It continues to illustrate the difference in the energy of the bull market leading up to the Jan 2018 peak and the lethargy and lower energy levels of the countertrend rally in the bear market. The chart below highlights the 6 months leading up to the Jan 2018 peak and the 5 since the start of the bear market countertrend rally.

During the bull market phase New Highs outstripped New Lows by an average of about 200 (blue dotted), whereas during the countertrend rally from Apr to now they were outstripped by an average of about 25 (red dotted). In other words, the bull market was powerful with high energy levels whilst the bear market rally is lethargic and low in energy. The difference in levels between blue and red is distinct and clear.

The index closed at 77 yesterday.

 

 

 

The Dow Jones chart structure illustrates how the index continues to hug the ‘Primary Bull Market Resistance Line’ in the countertrend rally over the past 4½ months. This, in spite of the lower energy levels which are closing in on the end of the rally soon. The next penetration point is 24950 which will lead onto additional penetration points (red circles) down eventually into the support zone (red) between 23650 – 23000. Below this the next wave down starts in earnest which will be prolonged and severe.

 

 

 

 

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 12 Aug 2018

Aug 11th, 2018 No comments

Executive summary

World equity markets were flat to slightly down this week with a very weak Friday. US markets continue to exhibit a loss of energy or momentum, and the S+P500, for instance, is propelled really by only the ‘FANGS’ shares, with the structure of its chart virtually identical to that of the 2000 collapse.

A number of countries (especially in Europe) reported inflation figures which were all higher than estimates, so inflation is certainly beginning to ratchet up as virtually all central banks re-position themselves for higher interest rates. The crisis in Turkey put pressure on emerging currencies as the ‘flight to safety’ lifted the US$, while equity markets turned down on Friday. Meanwhile Trump continues to fight the rest of the world in what has to come back to damage him and America eventually. So, the markets remain in their ‘tipping point’ mode.

The US$ increased to close well up at $96.22 which now exceeds the previous high at $95.652, and probably signals the end of the rally having completed its 5 wave advance. Next week will probably confirm this and give rise to other currency strengths (principally the Euro and Yen) as well as the start of the gold rally. Gold closed at $1211.58 (surprisingly high, given the dollar strength) with investor sentiment at extreme pessimism levels. Precious metals are poised for a strong rally which could see gold rise to major resistance at $1375 and, as some would have it, even beyond. Precious metals COT data continues to look more and more bullish to power spectacular price increases.

 

US$

The US$ index short term chart structure indicates the breakout to close strongly at $96.22 having penetrated the previous high at $95.652, with investor sentiment peaking. This probably signals the end of the rally having completed its 5 wave advance as predicted, which will probably be confirmed next week as other currencies strengthen (principally the Euro and Yen). It will also signal the start of the gold rally.

But before this the top needs to be confirmed which requires 2 consecutive closes below 10-Dema. Once this occurs we are likely to see a weaker dollar during the next phase.

The oscillators are still rising though and therefore the decline will not be immediate.

 

 

 

The longer term 12 month chart illustrates the powerful breakout with a broad support zone below. Once the top is confirmed the dollar could decline by a likely Fibonacci retracement of 61.8% which will take price below support to the region of $91.00.

The oscillators are not signalling any of this yet.

 

 

 

The longer term 3 year chart illustrates the breakout from the rising wedge towards a zone of some resistance. Once the top is confirmed the decline phase could breach the support zone and test the Sep 2017 low at about $91.00.

The decline will form the beginning of the left shoulder of what could develop into a bullish inverted H&S formation which could propel the dollar much higher to $105.00 and beyond.

The oscillators are holding up in preparation for the decline.

 

 

 

Japanese Yen

The US$/Yen currency pair weakened further as the Yen enjoys recent strength. In fact the Yen strengthened during the dollar’s strong advance on Friday, depicted by the closing red candle (down). This is likely to continue much further once the US$ peaks, which will test the support zone and even penetrate it during a period of strength in precious metals as well.

The oscillators are dropping and are likely to drop further after the dollar peaks.

 

 

 

US Treasuries

The benchmark US Treasury 10 year note strengthened this week in response to the crisis in Turkey and the decline in the Dow on Friday, with yield declining markedly to close at 2.87%. The yield curve has broken down ever so slightly through the blue diagonal and seems likely now to follow the red parallels and not the blue. The countertrend rally therefore is likely to endure a while longer.

In the final analysis the horizontal blue and red lines need to be penetrated to determine direction. But in the short term the oscillators are dropping in support of the red arrow.

 

 

 

Gold

The gold price continues to churn in consolidation mode just above the 6 month cycle low, and needs to find the necessary energy to start a rally. Given the status of the US$ the rally is likely to start soon, although the bottom still needs to be confirmed with 2 consecutive closes above 10-Dema. Also a key level at $1238 needs to be penetrated for this to be a genuine rally.

The oscillators are turning up and beginning to look positive in support of this proposition, and the COTs data continues to look more bullish for a spectacular gold rally.

 

 

The gold COT chart indicates a continuing tightening convergence that precedes a price bottom, and it presents a very positive picture of a strong rally next.

 

 

 

HUI / Gold Ratio

US miners continue to underperform gold, and the HUI / Gold ratio continues to decline further with no confirmed bottom yet, reflecting the extreme investor pessimism. But, there are now many indications of a reversal and once this is achieved the rally is likely to be energetic. We still need 2 consecutive closes above 10-Dema though and until this happens the rally for HUI investors cannot materialise.

The Slow Stochastic has bottomed and there appears to be a slight bending in the MACD which could be a bottom soon.

 

 

 

GDX US miners ETF

The GDX has dropped to a new low amid extreme investor pessimism and conveys the same picture as the HUI / Gold ratio.

 

 

 

DUST US Gold Miners Bear Index

The DUST chart continues to thrust up, reflecting the gold miner’s dismal status, and the previous close below 10-Dema was 24 trading days ago. The situation, seemingly, cannot be worse with a top still to be confirmed. We still need 2 consecutive closes below 10_Dema to confirm the top and any potential reversal.

The oscillators are topping out however and a Dust price turn down is probably imminent and much overdue.

 

 

 

Silver

As with gold, silver continues to churn in consolidation mode just above the 6 month cycle low, and needs to find the necessary energy to start a rally. Given the status of the US$ the rally is likely to start soon, although the bottom still needs to be confirmed with 2 consecutive closes above 10-Dema. Also a key level at $15.70 needs to be penetrated for this to be a genuine rally.

The silver COTs data continues to look more bullish for a spectacular silver rally.

 

 

 

The silver COT chart indicates a continuing tightening convergence that precedes a price bottom, and it presents a very positive picture of a strong rally next.

 

 

USLV US Silver Miners Bull Index

The US silver miners USLV (bull index) exhibits a similar strong negative bias to Dust’s positive bias, and there is much churning just above the bottom. A rise above 8.25 should herald the start of a strong rally, and the rising oscillators suggest this is likely soon.

 

 

 

Gold : Silver Ratio

The ratio is still below 80 and is also still holding below both the red and black trendlines (blue circle). So, the chart is still positive rather than negative. However, the oscillators are turning up which is negative.

 

 

 

General Equities

The short term Dow chart illustrates the decisive bear flag breakout and the nearby support line at 25120 which once breached will confirm the end of the 4 month countertrend rally which, until then, is technically still in progress.

If 25120 is penetrated decisively it will herald the start of a significant leg down which will be a prolonged  and severe drop. The oscillators are dropping in support of this proposition.

 

 

 

The Dow Jones chart structure continues to maintain its bear market mode despite the 4 month countertrend rally, which may now be close to an end. The bear flag has been penetrated on the downside decisively as has been the Primary Bull Market resistance line. The next penetration point is 25120 and if this is breached it will confirm the end of the countertrend rally.

Once the next wave down starts on the Dow it will quickly test previous lows indicated on the chart in red. The oscillators are dropping in support of lower prices and the next wave down.

 

Categories: Currency, Equity, Gold Tags:

Weekend Market Analysis 5 Aug 2018

Aug 4th, 2018 No comments

Executive summary

World equity markets continued sideways to down this week. The Dow Jones moved sideways as the US digested the weaker jobs report and the continued trade war threat with China. But, the markets remain in their ‘tipping point’ mode as they move, ever so slowly, towards the edge. There is increasing euphoria in equities and bonds and increasing pessimism in precious metals (and to some degree resources in general). There is massive divergence in the US market with investor complacency towards risk evident in the blue chip Dow Jones peaking in January and the high-flying smaller share indices such as the Nasdaq and the Russell 2000 only peaking 6 months later. This ‘flight to risk’ is not only in equities but now also in the bond market with investors piling into higher yield bonds, which by definition is at the junk end of the spectrum. Everything changed on 26 July with Facebook dropping 20%.

The US$ index increased to close at $94.96 and is in process of peaking somewhere just above the previous peak at $95.562, which is forcing gold down and gold pessimism up. The market did not like the US jobs report much and gold spiked a bit, but it is still the dollar that provides gold movement. The period ahead is likely to see dollar weakness after its peak and there is much consensus that gold is about to rally. Elliott Wave structure continues to indicate market reversal patterns are now developing as we slowly begin to move through the powerful ‘tipping point’ moment:

  • The US$ is likely to still move higher before a major drop in value. This will be a precursor to eventual strength again;
  • Gold is likely to bottom soon after again closing at $1223 on Friday and, with sentiment at extreme pessimistic levels, is likely to rally strongly (with silver) in the next period with the added impetus of increasingly favourable COTs data;
  • The period beyond is likely to see strong dollar gains and gold weakness, before the final chapter of complete long term market meltdown;

 

 

US$

The US$ short term chart structure indicates the consolidation below the peak is still likely to rally through resistance to a level marginally above the peak. The support region between $93.87 and $93.45 is not likely to be tested until after the rally which could exceed the previous peak at $95.652.

The oscillators are rising in support of a stronger short term dollar.

 

 

 

The longer term 12 month chart illustrates the period of dollar weakness after the short term rally, as it tests, and perhaps even penetrates, the broad support zone.

The oscillators are turning up in support of the short term dollar rally.

 

 

 

The yet longer term 3 year chart illustrates the developing rising wedge which, once breached, will test the support zone towards a target zone in line with the Sep 2017 low at about $91.00. The decline will form the beginning of the right shoulder of what could develop into a bullish inverted H&S formation before the next leg up.

The oscillators are holding up in preparation for the decline.

 

 

 

Japanese Yen

The US$/Yen currency pair weakened further from resistance towards the diagonal support (red) as the Yen strengthened marginally. This is likely to continue much further once the US$ peaks, which will test the support zone and even penetrate it during a period of strength in precious metals as well.

The oscillators are dropping and are likely to drop further after the dollar peaks.

 

 

 

US Treasuries

The benchmark US Treasury 10 year yield is at the ‘crossroads’ of either continuing the bond countertrend rally (red arrow) or continuing the main yield increase trend (blue arrow). It closed the week at a yield of 2.95% and the next week or two will decide which of the two trends will continue. The blue arrow seems to be the more likely as the bond market rally has been losing momentum, and is more likely to start collapsing again, especially if the equity market has also ended its countertrend rally.

The horizontal blue and red lines need to be penetrated to finally determine direction.

 

 

 

Gold

The gold price has been churning close to the 6 month cycle low in trying to find rally energy. The bottom still needs to be confirmed with 2 consecutive closes above 10-Dema, and a rally is not likely unless $1238 is penetrated on the upside. Price has been devastated by the extreme investor pessimism although there is much consensus now that a strong gold rally is imminent, especially with the increasingly positive COTs data.

The oscillators are not looking positive and the rally may be held back a short while longer until the US$ peaks.

 

 

The gold COT chart indicates a tightening convergence that precedes a price bottom, and it presents a very positive picture of a strong rally next.

 

 

HUI / Gold Ratio

US miners continue to underperform gold, and although there appears to be a bounce off diagonal support (red) a confirmed bottom still requires 2 consecutive closes above 10-Dema. Once this is achieved the rally is likely to be energetic.

The Slow Stochastic has bottomed and there appears to be a slight bending in the MACD which could be a bottom soon.

 

 

 

GDX US miners ETF

The GDX has dropped to a new low amid extreme investor pessimism, and it is still not a confirmed bottom until 2 consecutive closes above 10-Dema is achieved. This could be soon however and the oscillators are bottoming in support.

 

 

 

DUST US Gold Miners Bear Index

The DUST chart has been thrusting up, reflecting gold’s plummeting price, and the previous close below 10-Dema was 19 trading days ago. There is strong resistance above the current price and although price has reversed down marginally it still requires 2 consecutive closes below 10_Dema to confirm a top.

The oscillators are topping out however and a Dust price turn down is probably imminent.

 

 

Silver

As with gold, the silver price has been churning close to the 6 month cycle low in trying to find rally energy. The bottom still needs to be confirmed with 2 consecutive closes above 10-Dema, and a rally is not likely unless $15.70 is penetrated on the upside. Price has been devastated by the extreme investor pessimism although there is much consensus now that a strong gold rally is imminent, especially with the increasingly positive COTs data.

The oscillators are mixed and the rally may be held back a short while longer until the US$ peaks.

 

 

 

The silver COT chart, similar to gold, indicates a tightening convergence that precedes a price bottom, and it presents a very positive picture of a strong rally next.

 

 

USLV US Silver Miners Bull Index

The US silver miners USLV (bull index) exhibits a similar strong negative bias to Dust’s positive bias, and there is much churning just above the bottom. A rise above 8.25 should herald the start of a strong rally, although mixed oscillators suggest this is only likely a short while later.

 

 

Gold : Silver Ratio

The ratio is still below 80 and is also still holding below both the red and black trendlines (blue circle). So, the chart is still positive rather than negative. However, the oscillators are turning up which is negative.

 

 

General Equities

The Dow countertrend rally is still in progress but after peaking at 25 587 on 26 July it has retreated and in fact broken below the bear flag which developed during July. This may be the trigger for further declines to finally end the rally as the US market appears exhausted. But this is not yet conclusive.

The next significant leg down should be a prolonged  and severe drop.

 

 

 

One of the indicators pointing to exhaustion on the NYSE is the chart of New Highs against New Lows. It continues to illustrate the difference in the energy of the bull market leading up to the Jan 2018 peak and the lethargy and lower energy levels of the countertrend rally in the bear market. The chart below highlights the 6 months leading up to the Jan 2018 peak and the 6 months thereafter.

During the bull market phase New Highs outstripped New Lows by an average of about 200 (blue dotted), whereas during the countertrend rally from Apr to now they were outstripped by an average of about 25 (red dotted). In other words, the bull market was powerful with high energy levels whilst the bear market rally is lethargic low in energy. The difference in levels between blue and red is distinct and clear.

The index closed at 82 on Friday.

 

 

The Dow Jones chart structure continues to maintain its bear market mode despite the 4 month countertrend rally. A clear and powerful double top is visible and the bear flag has now been penetrated on the downside.

Once the next wave down starts on the Dow it will quickly test previous lows indicated on the chart in red. The oscillators are dropping in support of lower prices and the next wave down.

 

 

 

 

 

 

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