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Midweek Market 19 Sep 2019

Sep 19th, 2019 No comments

Executive summary

The US Fed cut the rate by 25 basis points yesterday to keep in touch with yield movement of short term US Treasuries, as they try to fend off recession in America. The US yield curve has weakened correspondingly but, contrary to logic, the US dollar has not, probably because the ‘balance of power’ still resides in the dollar with recent rate cuts elsewhere (notably the EU). Despite a slight weakening in long term US Treasury yields, the end of the countertrend rally seems to have arrived. This means the resumption of the long term collapse in US Treasuries with corresponding increases in yield. It will be interesting to witness how this will affect attempts to continue to cut rates.

US equities continue to remain elevated as they continue to development of a major topping pattern that is leading to the next global systemic crisis and market collapse. Using the Dow Jones Industrial Average as a proxy for US equities it can be seen that there are extremely interesting elements in the wave structure as it develops. These are discussed in more detail in the body copy, but can be grouped basically into 2 (two) outcomes:
• Strong decline now leading into strong recovery into 2020 to new highs to coincide with US presidential elections in Nov 2020, before the final market collapse begins;
• Continued advance now to new highs, invalidating the Elliott Wave expanding triangle pattern, before the final market collapse begins in 2019;

These two options are being watched carefully to verify outcomes as soon as possible.

The big decline in precious metals is underway as prices are forecast to drop below the Dec 2015 low before true bottom is reached and the eventual start of the next gold bull market. There are a number of support levels (especially $1383) to the gold price and these will of course provide temporary price improvements as they are triggered.

The US$ has sustained a strengthening phase since the start of 2018 which is soon likely to correct into weakness, especially with the likely round of more US Fed rate cuts to fend off recession. During this phase gold and the dollar will therefore weaken together, and not opposite to one another which is more usual. Many commentators are forecasting dollar strength in the period ahead, especially once chaos increases in markets and the dollar is perceived as a ‘safe haven’. Once gold starts to decline seriously it may be that the dollar at that stage will strengthen, and move opposite to each other in the more usual format. Much depends on equity and bond market behaviour.

US Dollar

The continued format in the US$ index is overall long term decline with a rally since 2008. Despite any likely short term decline the dollar index may well strengthen as gold continues to decline, before eventually declining towards the low 60s in the next 5 years as the next gold bull market gathers momentum.

The dollar index increased this week as it continues towards the wedge apex. This is a bearish pattern with the promise of weakness ahead together with the force of the powerful negative MACD divergence.

The daily 12 month chart illustrates the dollar edging up from the bottom of the expanding triangle pattern, still within the rising channel. Both oscillators are declining and with negative MACD divergence we are likely to see dollar weakness ahead.

However, the 3 month daily chart illustrates dollar consolidation at the bottom edge of the expanding triangle plus oscillators that appear to be bottoming, which suggests still further short term dollar strength before weakness.

Japanese Yen

The dollar has strengthened against the Yen for 4 weeks now with a breakout through the top of the small declining channel. This is still only at the centreline of the large declining channel though, reflecting strong Yen performance earlier. Dollar strength is much the result of negative MACD divergence but the oscillators are reflecting overbought conditions which will assist dollar weakness ahead.

US Treasuries

The US Treasury countertrend rally looks complete with determined breakouts up from support. The breakout through 50-Dema is being tested and there could still be further slippage, but an eventual increase to 1.9% yield through the resistance zone will confirm that a bottom has been reached. The global sovereign treasury market continues to hold more risk than at any time in history, and the period of central bank ‘silly season’ continues with still more issuing of global bonds yielding negatively. This means ultra-low interest rates and a ‘bubble’ in the so-called risk free Sovereign bond market as well as a few more US Fed rate cuts in trying to fend off recession. With this fundamental background it is difficult to understand how the US Treasury 10 year yield could possibly have bottomed.

The US Treasury yield curve has turned down again towards inversion below 1.00. There is obviously much consternation in America concerning the approach of recession, and this is reflecting in the yield curve which, at inversion below 1.00, reflects Treasury yield on long term 10 year below short term 2 year.

Gold

The gold price as this is written is about $1500 and has been as low as $1480 in spending most of today below $1500. But the gold price reflected in the charts is $1515.80 because of the ‘Stockcharts’ data the charts are based on. This causes a somewhat irritating dysfunction in not only the metals charts but also the miner charts.@#$%

Long term gold has turned down from major resistance, and indicates the start of the next leg down in the gold bear market which is likely to witness prices below the Dec 2015 low before true bottom is reached and the eventual start of the next gold bull market. There are a number of support levels (especially $1383) to the gold price and these will of course provide temporary price improvements as they are triggered.

The start of the gold downturn meets some support, but the next wave down should breach $1490 to test the major support zone. Both oscillators are turning down from the top of their range in support of lower prices.

The daily 12 month chart illustrates the price drop from the peak as well as declining to the support level from where a small rally activated. There is a whole range of intermediate support levels to the bottom of the support zone at which $1383 is likely to provide strong support for a meaningful rally.

The 3-month daily chart illustrates the downturn towards support with $1490 at the entry level and $1383 at the bottom. 50-Dema is at $1483 just below the support entry level and this may provide additional support, just as 200-Dema is just below 1383 which will no doubt provide additional support to a meaningful rally.

South African Rand

The dollar /ZAR currency pair is consolidating between support and resistance, after recent Rand strength in closing below both 10- and 50-Dema. The price consolidation is on the centreline of the rising channel, indicating a slow drift towards Rand weakness, but some dollar weakness is forecast instead.

HUI / Gold Ratio

The ratio has successive breakouts from the rising wedge and H&S pattern as miners increasingly underperform gold. This is in line with the negative MACD divergence but both oscillators are oversold indicating a ratio increase ahead.

GDX US miners ETF

Similar commentary to the HUI/Gold ratio with GDX indicating a bearish negative bias as the trend change develops. The breakout form the rising wedge is followed by developing H&S pattern which could activate soon. But both oscillators are oversold indicating a price increase ahead first.

GDX Junior Gold ETF

GDX Juniors have an identical commentary to the GDX indicating a bearish negative bias as the trend change develops. The breakout form the rising wedge is followed by developing H&S pattern which could activate soon. But both oscillators are oversold indicating a price increase ahead first.

Dust US Miners Bear Index

The US Miners Bear index, as the inverse of GDX, is similar but in reverse direction. A bottom is in development with the bias changing to up as the trend change develops. There is now potential for a thrust up into resistance to confirm the bottom, which is in support of lower US miner prices.

Silver

Long term silver turned down within the confines of the rising wedge in meeting some support. But the next wave down should penetrate $17.50 with both oscillators overbought and turning down.

The daily 12-month chart illustrates penetration of the bear flag which should propel price downwards. The next decline could be strong in penetrating $17.50 and possibly $16.80. Both oscillators seem to have space to decline further in support.

Gold : Silver Ratio

The gold / silver ratio continues to bounce around with increased volatility, typical of a trend change. There is a net increase in the ratio which means gold is again assuming a leadership role again. Both oscillators have more space to increase further in support of an increasing ratio which is negative for the whole precious metals complex.

General Equities
US equities continue to remain elevated as they continue to development of a major topping pattern that is leading to the next global systemic crisis and market collapse. Using the Dow Jones Industrial Average as a proxy for US equities it can be seen that there are extremely interesting elements in the wave structure as it develops. These are discussed in more detail in the body copy, but can be grouped basically into 2 (two) outcomes:
• Strong decline now leading into strong recovery into 2020 to new highs to coincide with US presidential elections in Nov 2020, before the final market collapse begins;
• Continued advance now to new highs, invalidating the Elliott Wave expanding triangle pattern, before the final market collapse begins in 2019;

These two options are being watched carefully to verify outcomes as soon as possible.

Consider the chart below which includes the two options.

Option 1 (Red) Could complete the pattern (3)(4)(5) into the start of major collapse in 2021.
Option 2 (Blue) Could rise to a new high in 2019 into the start of major collapse in 2019.

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Midweek Market 12 Sep 2019

Sep 12th, 2019 No comments

Executive summary

The big decline in precious metals appears to be finally underway and what we see now is the beginning of the final stage of the prolonged decline that started in Aug 2011. The trigger seems to have been the US Labour Day (1st Monday in September) which annually has the seasonal effect of starting a decline phase in precious metals. The decline is likely to witness prices below the Dec 2015 low before true bottom is reached and the eventual start of the next gold bull market. There are a number of support levels (especially $1383) to the gold price and these will of course provide temporary price improvements as they are triggered.


The US$ has sustained a strengthening phase since the start of 2018 which is soon likely to correct into weakness, especially with the equally likely US Fed round of more rate cuts to fend off recession. During this phase gold and the dollar will therefore weaken together, and not opposite to one another which is more usual. Many commentators are forecasting dollar strength in the period ahead, especially once chaos increases in markets and the dollar is perceived as a ‘safe haven’. Once gold starts to decline seriously it may be that the dollar at that stage will strengthen, and move opposite to each other in the more usual format.


US equities are strengthening, probably due to the forthcoming Trade War summit between China and the US early next month, with the hope that this may lead to compromise of some sort. Using the Dow Jones Industrial Average as a proxy for US equities (as well as global equities) it can be seen that the wave structure of the Dow chart is now developing into 2 (two) basic options as it continues development of a major global topping pattern that is leading to the next systemic crisis and market collapse. These two options are being watched carefully to verify outcomes as soon as possible.

US Dollar

The continued format in the US$ index is overall long term decline with a rally since 2008. Despite any likely short term decline the dollar index may well strengthen as gold continues to decline, before eventually declining towards the low 60s in the next 5 years as the next gold bull market gathers momentum.

The dollar index increased this week as it continues towards the wedge apex. This is a bearish pattern with the promise of weakness ahead together with the force of the powerful negative MACD divergence.

The daily 12 month chart illustrates the dollar edging up within both the expanding triangle and the rising channel. Both oscillators are moving sideways in anticipation of a stronger breakout in either direction, although negative MACD divergence remains active.

The 3 month daily chart illustrates dollar strength edging back up to test resistance. Both oscillators are neutral and with all MAs moving higher for 9 weeks now the impression is one of slower strengthening before eventual weakening.

Japanese Yen

Finally the dollar is strengthening against the Yen with 3 weeks of gains up to test resistance, from a low point below which no dollar support exists. Both oscillators are rising and the negative MACD divergence could now possibly be activating. However, the chart maintains its negative dollar bias with price still within both declining channels.

US Treasuries

The US Treasury countertrend rally could now be ending with a pronounced increase in the benchmark US Treasury 10 year yield from 1.37% to 1.75% in a week. This means a correspondingly geared decrease in the value of the bond as value in the US Treasury market begins to decline. The yield bottom still has to be confirmed and, judging by the chart, it would seem at least decisive and sustained penetration of 50-Dema would help. The global sovereign treasury market continues to hold more risk than at any time in history, and the period of central bank ‘silly season’ continues with still more issuing of global bonds yielding negatively. This means ultra-low interest rates and a ‘bubble’ in the so-called risk free Sovereign bond market as well as a few more US Fed rate cuts in trying to fend off recession. With this background it is difficult to understand how the US Treasury 10 year yield could possibly have bottomed.

Gold

Long term gold has turned down from major resistance, and the big decline in gold appears to be finally underway. This is the beginning of the final stage of the prolonged decline that started in Aug 2011, which is likely to witness prices below the Dec 2015 low before true bottom is reached and the eventual start of the next gold bull market. There are a number of support levels (especially $1383) to the gold price and these will of course provide temporary price improvements as they are triggered.

Gold turns down from the top of the expanding triangle with 2 bearish Shooting Star candles adding propulsion. There may well be corrections up, but the next wave down should reach $1450 into testing main support. Both oscillators are turning down from the top of their range in support of lower prices.

The daily 12 month chart illustrates the price drop from the peak as well as declining to the support level from where a rally is likely. There are many support levels within the support zone, and the chart indicates 2 of them at $1462 and $1413. Both oscillators are dropping in support of lower prices.

The 3-month daily chart illustrates confirmation of the top in consecutive closes below 10-Dema and successive lower lows. There will no doubt be a rally from here but eventually breaking below $1490 will test support, with support bottom at $1383 providing strong support and likely strong correction up. Both oscillators are dropping in support of lower prices with MACD some way to go still.

South African Rand

The dollar /ZAR currency pair declined into earlier support as the Rand strengthens more than 6% against the dollar in this cycle. Price has consolidated in the middle of the expanding triangle after closing below 50-Dema and 8 consecutive closes below 10-Dema.

HUI / Gold Ratio

The ratio has a trend change to down as the top is confirmed with a breakout. Price has moved down sharply as both oscillators do likewise with MACD still further to go. The negative MACD divergence assisted the breakdown.

GDX US miners ETF

Similar commentary to the HUI/Gold ratio with GDX in a trend change with breakout through the bottom trendline of the rising wedge. The MACD continues to stair step down and the negative divergence assisted in the breakout.

GDX Junior Gold ETF

GDX Juniors have an identical commentary to the GDX in a trend change to down with a breakout. Therefore the breakout is right across the full spectrum of US miners.

Dust US Miners Bear Index

The US Miners Bear index, as the inverse of GDX, has an identical commentary, but in reverse direction. Therefore this counter is in full support of lower US miner prices.

Silver

Long term silver spiked up in a failed breakout to end in a bearish Shooting Star candle that represents a reversal and potential top at the apex of the rising wedge. Both oscillators are turning down in support of a confirmed top and start of a weakening phase.

The short term daily 3-month chart illustrates the silver reversal in a potential top after the failed breakout. Penetration through $17.50 will test support with support bottom at $15.92 providing strong corrective rally potential.

Gold : Silver Ratio

The gold / silver ratio bounced up and down to close higher at 82.73, as volatility increases with the trend change in precious metals. This indicates gold beginning again to slightly outperform silver. Both oscillators have turned up indicating further upward movement in the ratio.

General Equities
US equities are strengthening, probably due to the forthcoming Trade War summit between China and the US early next month, with the hope that this may lead to compromise of some sort. Using the Dow Jones Industrial Average as a proxy for US equities (as well as global equities) it can be seen that the wave structure of the Dow chart is now developing into 2 (two) basic options as it continues development of a major global topping pattern that is leading to the next systemic crisis and market collapse. These two options are being watched carefully to verify outcomes as soon as possible.
Consider the chart below which includes the two options.

Option 1 (Red) Could complete the pattern (3)(4)(5) into the start of major collapse in 2021.
Option 2 (Blue) Could rise to a new high in 2019 into the start of major collapse in 2019.

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Midweek Market 5 Sep 2019

Sep 5th, 2019 No comments

Executive summary

General equities continue to hover in a potential correction in the continued development of a major global topping pattern that is leading to the next systemic crisis and market collapse. Once the correction completes it will see the Dow Jones decline substantially in either a rapid ‘corrective’ drop or perhaps a slower ‘impulsive’ drop. A rapid ‘corrective’ decline into October will likely be followed by a rise into 2020 to a new high to coincide with US presidential elections in Nov next year, to be followed by the start of the major collapse. Alternatively, a slower ‘impulsive’ decline into yearend 2019 will indicate the main trend has changed to down and assume collapse characteristics indicating this to already be the start of the major collapse. Global equities take their lead from the US and will follow the same patterns.

The US yield curve inversion has signaled the coming recession in America which may be 6 – 12 months away, while global economies, partly already in recession, continue to deteriorate. The global rampant trend towards negative yield, especially in the first world, continues a-pace with now more than $17 trillion worth of negative yield Treasuries. This means ultra-low interest rates and a ‘bubble’ in the so-called risk free Sovereign bond market which is partly the cause of current gold strength. It also means a few more US Fed rate cuts in trying to fend off recession, as well as the increased risk of US Treasuries actually going negative.

The gold rally is running into long term resistance as silver continues to spike, resulting in a non-confirmation which is typically the signal for a potential trend change. In fact there are many non-confirmations in the total market suggesting a break with most of the current trends. The US dollar has peaked and is weakening, which should usually mean still higher gold prices as they often move in opposite direction. But this is not always the case, and with extreme investor sentiment in both these asset classes at the moment, it seems that soon both will trend down together.

US Dollar

The continued format in the US$ index is overall long term decline with a rally since 2008. Despite any likely short term decline the dollar index may well strengthen as gold continues to decline, before eventually declining towards the low 60s in the next 5 years as the next gold bull market gathers momentum.

The dollar index weakened slightly this week as it continues to rise in the rising wedge in drifting towards the triangle apex. This is a bearish pattern, and together with usually powerful negative divergence, the next phase should be weakness.

The daily 12 month chart illustrates dollar decline after the bearish Evening Star candle. The dollar is close to the top of the rising channel and with both oscillators at the top of their range, should see further weakness. Also, the negative divergence in the MACD remains active.

Japanese Yen

The dollar / Yen currency pair is still consolidating at the bottom of both a small declining channel within a large declining channel, at the end of a 6 month long period of stronger Yen / weaker dollar. There is no dollar support below this consolidation, but both oscillators are rising in support of dollar strength / Yen weakness, plus the usually powerful effect of negative MACD divergence.

US Treasuries

The US Treasury countertrend rally is still in progress and still not complete. Therefore there should still be lower yields before any confirmed bottom in the chart. The global bond market continues to hold more risk than at any time in history, and the period of central bank ‘silly season’ continues with still more issuing of global bonds yielding negatively. This means ultra-low interest rates and a ‘bubble’ in the so-called risk free Sovereign bond market which is partly the cause of current gold strength. It also means a few more US Fed rate cuts in trying to fend off recession, as well as the increased risk of US Treasuries actually going negative.

Gold

The University of Michigan ‘Consumer Sentiment Index’ is a reflection of the ‘mood’ in America. It moves in swathes of about 10 years each way, and now has a breakout indicating another 10 years of ‘gloom’ ahead. The gold price tends to move in the opposite direction, and it too has a breakout in 2019 indicating higher prices.

Gold also had a breakout in 2002, as ‘gloom’ set in after the 2000 tech bubble collapse. The gold breakout led to the market high in Aug 2011 during which the gold price increased by about 600%. The breakout now is equally likely to increase the gold price by more than 600% in the next 10 years.

A closer look at the 2019 gold breakout illustrates the major resistance that the gold price is now encountering. This is likely to trigger a correction back towards the breakout level of $1380, once peak exhaustion caps any further advance. Elliott Wave analysis, in opposition to normal technical analysis, has it that gold is in a corrective ABC wave count from the high in Aug 2011 that will take the price down below $1045 (Dec 2015 low) to probably in the region of $1000-$900.

The gold spike is probably not complete yet, but is close to completion. Once a top is confirmed with a break below $1500 a correction down to test the original breakout level of $1380 is likely. Both oscillators are at the top of their range indicating correction soon. Gold is likely to move much higher in the coming years, as confidence in currencies erodes, but not before declining substantially first.

The daily 12 month chart illustrates the consolidation at the peak and signs of a potential top developing. Silver’s spike to a new peak creates a non-confirmation with gold which is a usual bearish sign of a pending trend reversal. Both oscillators are in the upper regions of range in support of a correction soon and price activity is at the upper edge of the expanding triangle.

Gold is developing into a potential top with strong support below. A break below $1490 will test the support zone and support will have failed with a break below $1383. Both oscillators are drifting down in support of yet lower prices.

South African Rand

The dollar /ZAR currency pair has a breakout through the bottom of the consolidation as the Rand strengthens through earlier support towards stronger support levels. There are 2 consecutive closes below 10-Dema confirming a top as price drops down from the upper edge of the expanding triangle. Both oscillators are dropping and the MACD still has some way to go.

HUI / Gold Ratio

The ratio is developing into a top and has a Doji candle at the peak of the latest consolidation which indicates indecision. Price is at the upper region of the expanding triangle, and a top will be confirmed with further downside this week because of the negative MACD divergence.

GDX US miners ETF

Similar commentary to the HUI/Gold ratio with GDX in a breakout to a new high, at the upper limit of the expanding triangle and rising wedge. The MACD is stair stepping down and negative divergence exerts some force of a price correction soon.

GDX Junior Gold ETF

GDX Juniors have no new high and create a bearish non-confirmation with GDX itself indicating the increased potential for a trend change soon. This chart too has a bearish dome top MACD with negative divergence developing.

Dust US Miners Bear Index

The US Miners Bear index, as the inverse of GDX, has a breakout down to a new low. As with GDX, price has reached the bottom of the patterns and negative divergence is now in place to suggest a potential trend change soon. But the bottom is still not confirmed, and could go lower.

Silver

Long term silver spiked up further in multiple breakouts through earlier levels and patterns, as it continues to outperform gold. However the new peak creates a bearish non-confirmation with gold which usually happens prior to trend change.

The short term daily 3-month chart illustrates the continued spike as silver outperforms gold. Both oscillators are at the top of their range which promises a correction soon. The thrust up will be equalled or exceeded by the thrust down once a reversal starts, which will test support. This starts at $17.50, and if $15.92 is breached support will have failed.

Gold : Silver Ratio

The gold / silver ratio has dropped another 5% this week to close below 80 for the first time in 12 months. This is positive for the whole precious metals complex, provided the trend holds without reversing up again. Unfortunately both oscillators have plummeted to the bottom of their range, and the correction up could be as powerful as the plummet down

General Equities
General equities continue to hover in a potential correction in the continued development of a major global topping pattern that is leading to the next systemic crisis and market collapse. Once the correction completes it will see the Dow Jones decline substantially in either a rapid ‘corrective’ drop or perhaps a slower ‘impulsive’ drop. A rapid ‘corrective’ decline into October will likely be followed by a rise into 2020 to a new high to coincide with US presidential elections in Nov next year, to be followed by the start of the major collapse. Alternatively, a slower ‘impulsive’ decline into yearend 2019 will indicate the main trend has changed to down and assume collapse characteristics indicating this to already be the start of the major collapse. Global equities take their lead from the US and will follow the same patterns.

Consider the chart below which includes both periods and an hypothesis of what clues it may hold.

The 2 options of ‘corrective’ (red) or ‘impulsive (blue) are indicated on the chart:
Red If the decline is a corrective ABC, it will be quicker in terminating in Oct 2019, to be followed by an impulsive wave count to a new high into 2020, before the final market collapse;
Blue If the decline is impulsive (5 waves) from D down to E (blue) it may be slower in terminating in Dec 2019, to be followed by a corrective ABC up into 2020 and then down into the final market collapse;

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