Home > Uncategorized > Midweek Market 9 May 2019

Midweek Market 9 May 2019

May 9th, 2019

Executive summary

Much has been said and written about the impending collapse of markets and in fact even the international monetary system itself. The legacy of debt, deficits, and doom lurks in the background as investor psychology remains vexing because prices keep rising, volatility keeps declining, and extreme sentiment and euphoria remains.

Probably the world’s leading researcher in Elliott Wave theory recently projected equity behaviour based on the Dow Jones Industrial Average, and this commentary explores some of those views in simple terms.


The Dow is estimated to peak in early 2021 in the region of 28250 after various short term gyrations that unfold the wave structures up to that point (indicated in the attached charts). The Grand Supercycle wave structure (started at the beginning of the United States in 1776) will end wave III up at that moment and start the century long wave IV down before eventually completing wave V. So, US equities have approximately another 21 months to grow another 5% before the final market top, beyond which the next financial collapse will envelop the world in something far greater than anything else gone before.

The US dollar index continues to increase in the short term towards the region of $100.00 or above but, once this pattern has completed, the dollar will resume its long term weakening trend.

Precious Metals and miners continue their weakening trend which is not complete, although currently could be in a troublesome rally. This is likely to eventually extend declines before completing the down cycle to coincide with final dollar strength.

US Dollar

The US dollar index continues to increase into the rising wedge although involved in miner retracement at times. The oscillators are rising and price is well ahead of all the MAs and looks set to move higher.

The dollar is in a 2nd consolidation in its rally in the barrier triangle pattern chart, as it also holds above the red support lines. It is likely to continue rising and technically will have completed the pattern once it rises above the April peak just above $98.00. But the rally could be in a more complex wave 3 of (C) which is still likely to catapult the dollar index up to $100.00 or higher, providing the red support lines continue holding. This will complete the corrective (A)(B)(C) before the next impulsive 5 wave down.

The short term 3 month chart illustrates the dollar building a base consolidation for the next advance up above the previous high.

Japanese Yen

The Yen strengthened during the dollar pause to breakout of the expanding wedge formation, but will resume a weakening phase as the US$ barrier triangle plays out to completion. This Yen strength coincides the recent pause in gold’s weakening phase.

US Treasuries

The benchmark US 10 year Treasury yield bottomed at the start of April before launching into an increasing yield phase, which is enduring increased resistance. This is caused principally by the threat of US recession and the onset of more modern monetary theory applied in potential QE later in 2019.

This can be seen in the next chart illustrating the US yield curve.

US Yield Curve

The official yield curve calculated on the 10 year and 2 year has been drifting up but jolted down these last 2 weeks as US recession and trade wars re-surfaced. There is little doubt that global recession is coming (and already here in parts) and that US recession is potentially due later in 2019 or 2020.

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 into the cycle low but is consolidating just above 50-Wema (equivalent of 200 day moving average). The oscillators are mixed and further declines may be delayed slightly.

Despite the delay in the consolidation below the H&S neckline, the gold price is likely to still drop down into the support zone.

The 3 month chart illustrates gold’s consolidation at 200-Dema as the price continues its relentless decline towards lower levels.

South African Rand

The South African Rand strengthened slightly this week to close at 10-Dema. Despite this, the oscillators are mixed which indicates some further dithering ahead, and with more dollar strength in the next period further Rand weakness seems likely again.

HUI / Gold Ratio

The recent multiple breakdowns are turning into lower consolidations as US miners decline ahead of the gold price. Both oscillators are bottoming which might produce a bounce in the ratio. However, it is well below the MAs and looks set to still continue down.

US Miners Matrix

The matrix chart of the HUI Index, GDX ETF, and the Dust Bear Index, still portrays a negative picture with penetrations through the necklines and emergence of a 2nd new neckline. The top two have penetrated 200-Dema and Dust is about to penetrate also. This is not a positive picture and further declines in US miners are expected, which additionally impact negatively on metal prices.

Silver

Silver continues to move down into the reducing wedge, breaking down towards the support zone in a chart with very negative bias. However, the Slow Stochastic is turning up close to the bottom of its range, the MACD is virtually still at its mid-point with much downside still available. Silver could bounce from here.

The 12 month chart illustrates silver dropping further down into the reducing wedge pattern, as price moves toward the triangle apex. There could be a bounce from here but it will be short-lived.

The 3 month chart illustrates the decline range as well as the consolidation around 10-Dema. This may of course already be the bounce completed.

Silver Miners

Silver miners, like US gold miners, have broken lower into 2 consecutive consolidations. This is a very negative picture with likely further declines.

Gold : Silver Ratio

The gold / silver ratio continues rising overall within the rising wedge pattern, to close slightly lower at 86.22. 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

An in-depth analysis by probably the world’s leading researcher in Elliott Wave theory recently projected equity behaviour based on the Dow Jones Industrial Average on the New York Stock Exchange. In simple terms the Dow is estimated to peak in early 2021 in the region of 28250 after various short term gyrations that unfold the wave structures up to that point.

This will be the top of the market, worldwide, and will usher in the coming collapse. The Grand Supercycle wave structure (started at the beginning of the United States in 1776) will end wave III up at that moment and start the century long wave IV down before eventually completing wave V. So, US equities have approximately another 21 months to grow another 5% before the final market top, beyond which the next financial collapse will envelop the world in something far greater than anything else gone before.

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