Home > Uncategorized > Midweek Market 25 April 2019

Midweek Market 25 April 2019

Apr 25th, 2019

Executive summary

Quote for the week: “The scariest single statistic worldwide is the dramatic decline in the marginal productivity of debt. China, like the US, is getting progressively less return for each newly-created debt. There’s a point at which new borrowing doesn’t just produce less wealth but actually destroys it. The US and China are heading that way fast, while Europe might be there already”.


Equity markets continue to edge up towards the top with the Dow Jones now at a triple top and indicating classic symptoms of exhaustion and trend change, with fractured divergent behaviour, lower volumes and volatility, along with extreme optimism and euphoria. US Treasuries have normalised in resuming their long term bear market which is the precursor to the start of the equity bear market.

The US dollar increased strongly this week with every indication of the index continuing up towards $100.00 or above. This is corrective, however, and once complete the dollar will resume its long term weakening trend.


Precious Metals and miners continue their weakening trend which is not complete. It is likely to retrace some of the declines in the short term before completing the down cycle in due course.

US Dollar

The US dollar index continues to increase into the rising wedge with multiple breakouts in a strong rise this week. The oscillators are rising and price is well ahead of all the MAs and looks set to move higher as the cycle turns up.

The dollar barrier triangle pattern has a breakout through the BD horizontal and is now technically set to catapult the dollar index up to $100.00 or higher, providing E(B) holds and is not penetrated on the downside. From an Elliott Wave point of view the longer and stronger wave 3 has started and will lead on to complete the corrective (A)(B)(C) before the next impulsive 5 wave down.

The short term 3 month chart illustrates the strong thrust up in dollar value this week with breakouts through the 2 previous peaks. Price is well above the MAs and the oscillators are rising in support of a stronger dollar.

Japanese Yen

The Yen continues to weaken against the resurgent dollar and, despite any short term retracement, is likely to continue weakening as the US$ barrier triangle plays out to completion. The Yen will continue to weaken well up into the resistance region, together with the implications for a weaker gold price.

US Treasuries

The benchmark US 10 year Treasury yield has bottomed and is increasing as US bond values weaken. The Elliott Wave 1-2 is now launching into the longer and stronger wave 3, having bottomed at 2 C(circle) (5). Any short term retracement potential needs to play out before wave 3 increases yield to above the Feb 2019 high and potentially even the Oct 2018 high.

This will confirm and resume the earlier collapse in the bond market which has been disrupted by a 5 month countertrend rally.

Gold

The gold price 6 month cycle low is in progress which should complete somewhere between $1250-$1210 (red circle). As the US$ index strengthens towards $100.00 and beyond so too will the gold price drop down into its cycle low. The next up cycle may well take gold to the $1500 region later in 2019.

Gold continued to decline this week into the cycle low. Both oscillators are dropping in support of this with the MACD some way to go yet.

Multiple breakouts occurred below the neckline of the dome top including the inclined H&S. Although a breakback occurred after penetration of 200-Dema it still seems likely that gold will drop further down into the support zone, despite potential short term price retracement back up into resistance.

The gold price decline has consolidated at 200-dema, and with the earlier declines there appears to be potential for partial price retracement in the short term, especially with the oscillators turning up.

South African Rand

The South African Rand weakened against the dollar up into resistance, and further weakening beyond $14.76 will activate the potential H&S pattern. Price has moved away from consolidating at the confluence of the MAs, and with more dollar strength further Rand weakness seems likely.

HUI / Gold Ratio

The ratio turned down sharply with multiple breakdowns as US miners began to underperform gold. It is below the MAs and has also ‘nicked’ the bottom trendline of the 7 month rally in US miners, with every indication now that the rally is close to completion.

US Miners Matrix

The chart includes the HUI Index, GDX ETF, and the Dust Bear Index, each with dome formations and break lines which have now been penetrated. This illustrates the likelihood of further movement equal to the height of the dome, which illustrates the decline and further potential decline of US miners. This will additionally impact negatively on metal prices.

Silver

Silver continues to move down into the reducing wedge, breaking down into the support zone. This continues to display as a very negative bias chart.

The 12 month chart illustrates silver dropping further down into the reducing wedge pattern, as price moves toward the triangle apex. Price is below the MAs and the breakdown does include a breakback, but the chart, in the nature of a reducing wedge pattern, indicates a potential bounce before eventual further declines.

The 3 month chart illustrates the decline range as well as the breakback to 10-Dema. The momentum remains is decidedly down, but a short term bounce is overdue.

Silver Miners

Silver miners, like US gold miners, also displays a bearish dome top and a powerful penetration of the break line down into support. This portrays a sombre picture of US silver miners in relation to a dropping silver price in the short term, although the Slow stochastic is turning up at the bottom of its range.

Gold : Silver Ratio

The gold / silver ratio continues rising overall within the rising wedge pattern, to close at 85.47. This reflects the continued silver underperformance of gold which is negative for the whole precious metals complex. The rising wedge pattern continues and seemingly has a way to go yet which presupposes continued lower precious metal prices.

General Equities

Equity markets continue to edge up towards the top with the Dow Jones now at a triple top and indicating classic symptoms of exhaustion and trend change, with fractured divergent behaviour, lower volumes and volatility, along with extreme optimism and euphoria.

Every intelligent indication points to the US rally being in the very late stages of maturation supported by overwhelming fundamental evidence of impending collapse.
So, it is simply a matter of preparing for the collapse and waiting.

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