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Midweek Market 15 Aug 2019

Aug 15th, 2019 No comments

Executive summary

Fear of market contraction is resulting in the decrease in interest rates and the push to ready central banks for additional QE applications, because the global economy has not only partially recovered from 2008 but is now moving steadily towards a much bigger systemic crisis. This process is setting up global markets for a massive rotation event over the next year or two.

Also, other factors continue to plague markets such as US/China trade issues, global debt, and various other economic output issues. The US Fed and other global central banks set up an easy money process over the past 10 years that continued to depreciate the value of money that is now moving toward a shift in confidence from fiat currencies to hard assets, such as gold.

However, much is still to develop as the current gold rally runs its course to eventual price decline before reaching true bottom in what is still only a bear market rally. US dollar strength is likely to be a given in the chaos that lies ahead as the rotation event materialises in many different areas of collapse. US Treasuries have peaked in a countertrend rally with extreme investor optimism which has driven yields to lows last seen at the end of the bond bull market in mid-2016.

Meanwhile, the general equity decline phase has started which will see the Dow Jones decrease by up to 20%-22% between now and the start of 2020.

US Dollar

It is good to remember the US$ is in long term decline (black lines), although still in a rally since 2008 (blue lines). The dollar index may well reach 100 in due course as the financial market chaos escalates, but is likely to decline towards the low 60s in the next 5 years (as also forecast by other long term models).

The dollar index increased slightly this week as rises in the rising wedge in drifting towards the triangle apex in the chart. It could move either up or down from here in the short term in accordance with two opposing arguments, but is continually attracted down by the still active MACD divergence and the eventual break from the rising pattern in the chart.

The daily 12 month chart illustrates dollar retracement up within the rising expanding triangle formation, which could still extend gains. Both oscillators are turning up in support of this.

The short term 3 month chart illustrates the dollar advance which now includes 2 consecutive closes above 10-Dema (blue), having bounced off support at 50-Dema (red). Both oscillators look set to turn higher.

Japanese Yen

The dollar / Yen currency pair maintains a negative bias (weak dollar / strong Yen), declining into a 6-month run of stronger Yen. Price is once again dropping towards the bottom edge of the declining channel with no further support below the support line (red). However, both oscillators are turning up from the bottom of their range and the MACD divergence should start price retracement up soon (strong dollar / weak Yen).

US Treasuries

The US Treasury countertrend rally is now potentially complete and is about to enter a new phase of increasing yields. At the potential end to the countertrend rally, yield on the US Treasury 10 year note closed at 1.59% which is virtually as low as the 1.37% reached at the end of the US bond bull market in mid-2016. Gearing is now at its greatest with small yield increases reflecting large bond losses which is likely to energise the US bond market collapse in the next phase.

While the world watches attentively to the global economic slowdown and encroaching recession, the US yield curve (10 year / 2 year) inverted intraday this week. This is said to herald on-coming recession in the US and the yield curve obligingly moved in the correct direction after a 6 month hiatus.

Gold
Gold commentary is not much different from last week, except to say that precious metal miners are beginning to react down. This could have the effect of pulling the metals down into a correction as well.

Gold has a strong chart from Dec 2016 to now. But it is spiking towards its rally completion, with oscillators at the top of their range. It is enjoying a 30% gain in one year from Aug 2018 to Aug 2019, with the spectre of a sharp correction very soon. US miners have moved down which is likely to pull gold with it.

The daily 12 month chart illustrates the consolidation above the mini-break at the top edge of the expanding triangle, as price spikes up toward rally completion with both oscillators at the top of their range and starting to turn down.
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Gold has strong support in the consolidation below the spike with the key break level at $1490, below which the support zone will be tested. Support extends down to $1383, below which support will have failed.

Cots data has the Commercials building extremely large short positions and Large Speculators building extremely large long positions. This combination, reflected in extended dilation (red circle), is extremely bearish gold with strong indication of price reversal soon. Dilation in the red / green graph heralds lower gold prices while narrowing heralds higher prices. And, remember the Cots data is available only on Friday, which means the chart you see is also nearly a week old.

South African Rand

The South African Rand has a breakout to yet weaker levels against the dollar, which now extend to 3 weeks of lower prices, well ahead of the MAs. Value is trending up towards the upper limit of the expanding triangle, with still more room to move which indicates further weakening. Price closed yesterday on a large Engulfing candle which indicates yet higher dollar value / lower Rand. But both oscillators are oversold with the Slow Stochastic starting to turn down, indicating a potential correction likely soon.

HUI / Gold Ratio

The ratio ratcheted down this week penetrating earlier support indicating lower US miners against the strong gold price. Miners tend to move ahead of metals and this move could provide the energy for a downward gold correction. Both oscillators are moving down in support of lower prices and the MACD has a distinctly rounded and bearish shape.

GDX US miners ETF

Long term GDX has a breakout of the expanding triangle pattern but closes back into the pattern. It reflects as a strong rally with price well ahead of the MAs. But the chart shape and oscillator behaviour indicate a correction soon.

The daily 12 month chart illustrates GDX correcting down from the peak, against the continued strong precious metal prices. This is a negative divergence, with price still within bearish rising chart patterns. Both oscillators are poised to weaken and MACD has formed a distinctly bearish and bowed top pattern.

Dust US Miners Bear Index

The US Miners Bear index, as the inverse of GDX, has a small correction up from the bottom of the expanding triangle formation which includes a close above 10-Dema for the first time in 10 trading days. This could be the start of a correction with both oscillators looking to turn up. A turn up is negative for US miners.

Silver

Silver has a breakout through long term diagonal resistance, but the chart still has negative bias. The rally from Oct is positive in an expanding triangle with price at a new high at the upper limit of the pattern. Silver now needs to penetrate resistance or face testing of support lower down. Both oscillators are rising but close to the end of their range. Silver has started once again to underperform gold, as reflected in the gold/silver ratio which increased slightly again this week.

The daily 12 month chart illustrates the silver spike to a new high at the top edge of the expanding triangle pattern, but also the strong advance from late May in what is now a bear flag. This reinforces the need for a breakout which will otherwise have to test support with the threatening penetration down through the flag pattern. Both oscillators are reasonably overbought supporting lower prices ahead.

The 3 month chart illustrates the advance to a new high with both oscillators at the top of their range. There is also divergence with silver miners turning down which may well provide the energy for a downward silver correction soon.

Silver Miners

Silver miners turned down from the new high and are close to testing support. Miners usually lead the metals and with both oscillators trending down this may well develop further into a more severe correction which will in turn lead to lower silver prices.

Gold : Silver Ratio

The gold / silver ratio increased slightly again this week as gold continues to outperform silver. This is negative for the whole precious metals complex, and the drift toward higher ratios may continue. Both oscillators are negative, but with MACD divergence providing some downward energy the ratio may yet turn lower.

General Equities
Major US equity indices have started the decline phase which will see the Dow Jones decrease by up to 20%-22% between now and the start of 2020. This is all in accordance with the continued development of a major global topping pattern that is likely to eke out a recovery peak towards the end of 2020 to coincide with US presidential elections at that time.
Our view of US equities, using the Dow Jones as a proxy, illustrates the continued enormous topping pattern end play towards a final market top in the next year or two. We will use this template as a guide against which to measure ongoing performance which at the moment is exactly correct.

The market, using the Dow Jones Ind Ave as a proxy, has now started to decline towards E. It is forecast to traverse the complete ABCDE pattern to complete a decline phase at E(4) by the new year 2020 at an index value of approximately 20 000. Optionally, either the Dow continues to collapse from there or will enjoy an increase through 2020 to yet another new high at approximately 28 000 at (5) which is likely to be the final market top before a serious decline starts in early 2021.


A more detailed view of this is illustrated below.

  1. The Dow is declining from D to E, and has already penetrated 50-Wema (equivalent of 250 day moving average);
  2. Declines to E (4) by Dec 2019 at approximately 20 000;
  3. Advances to (5) by Dec 2020 at approximately 28 000;
  4. This is the final market top;
  5. Start of major collapse in early 2021;
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Midweek Market 8 Aug 2019

Aug 8th, 2019 No comments

Executive summary

The gold ‘train’ has been jerked into rapid and exciting movement, seemingly by an exhausted dollar and the stress of the newly-opened currency front of the US – China trade war.

The gold breakout through the multi-year basing pattern at $1370 in June signalled a new bull market for many observers. The initial surge took gold to $1438 before prices consolidated in an upward bias with enthusiasm swamping the need for a correction. The recent breakout at $1453 in early August provided the energy to penetrate $1500, but the frenetic climb is now due an extended multi-week correction. There is powerful resistance ahead from the 2013 price declines near $1525, as well as strong Commercial short positions building in the Cots data which should retard any further price advances, and trigger the correction.

Keep in mind also that Elliott Wave analysis has it that the gold rally is nothing more than further price declines in what has only been a bear market rally. At this stage the correction may prove to be temporary with higher prices still to come, or it may be the end of the rally.

Meanwhile, the general equity decline phase has started which will see the Dow Jones decrease by up to 20%-22% between now and the start of 2020. This next phase will also see an end to the countertrend rally in longer term US Treasuries as yields finally begin to bottom in a resumption of the bear market which started in mid-2016.

The US dollar has weakened slightly in its current rally and is likely to continue in zig-zag movement before resuming the rally. Dollar strength is likely to be a given in the chaos that lies ahead in declining general equities worldwide, lower oil prices, increased political friction, and deteriorating trade relations.

US Dollar

The US$ long term decline (black lines) is still intact, although so also is the rally since 2008 (blue lines). The dollar index may well reach 100 in due course as the financial market chaos escalates, but is likely to decline towards the low 60s in the next 5 years (as also forecast by other long term models).

Dollar strength waned slightly in turning down from resistance, as it slowly bends to the force of negative divergence in the MACD. The dollar is likely to weaken further in the short term, but could still move either up or down within the rising wedge pattern. Both oscillators are also stalling in sympathy with this, and more time is required to determine more accuracy in direction.

The daily 12 month chart illustrates strong dollar retracement down within the rising expanding triangle formation. Both oscillators indicate further dollar weakness in the short term. The whole chart presents as a strong upward sloping pattern that is due further correction down.

However, the short term 3 month chart illustrates support at 50-Dema as well as some indecision with the closing Doji candle.

Japanese Yen

The dollar / Yen currency pair maintains a negative bias (weak dollar / strong Yen), declining into earlier support. Price is at the bottom edge of the declining channel which has now run into 5 months of weaker dollar / stronger Yen. Although there is little support at current values (red line) there is MACD divergence which indicates a stronger dollar correction soon.

US Treasuries

The US Treasury countertrend rally is now potentially complete after a 15% drop in yield this week created MACD divergence. This could potentially start correcting into a reversal which may very soon start increasing US bond yields. Once a bottom is confirmed it will herald resumption of the US bond bear market which started in mid-2016.

Gold

Gold has a strong chart from Dec 2016 to now. But it is spiking towards its rally completion, with oscillators at the top of their range. It is enjoying a 30% gain in one year from Aug 2018 to Aug 2019, with the spectre of a sharp correction very soon.

The daily 12 month chart illustrates the flag breakout to the top edge of the expanding triangle, as price spikes up toward rally completion with both oscillators at the top of their range.

Gold has strong support in the consolidation below the spike with the key break level at $1455, below which the support zone extends down to $1383.

In the Cots data the Commercials have large (and increasing) short positions which indicate a decline in the gold price. Similarly, the Large Speculators have large (and increasing) long positions which also indicate a decline in the gold price, because they are notoriously always wrong. Hence, dilation in the red / green graph heralds lower gold prices while narrowing heralds a higher price. And, remember the Cots data is available only on Friday, which means the chart you see is also nearly a week old.

South African Rand

The South African Rand has a breakout to yet weaker levels against the dollar, which now extend to 2 weeks of lower prices, well ahead of the MAs. Value is trending up towards the upper limit of the expanding triangle, with still more room to move which indicates further weakening. But both oscillators are oversold which indicates a potential correction is now likley.

HUI / Gold Ratio

US miners reacted negatively to the US Fed announcement last week but have ratcheted up against gold this week. But despite that there is no new high and the oscillators are mixed and dithering. Perhaps this is the precursor to the start of a correction.

GDX US miners ETF

Long term GDX has a breakout of the expanding triangle pattern but closes back into the pattern. It reflects as a strong rally and is due a correction with overbought oscillators.

The daily 12 month chart illustrates GDX peaking strongly in a bearish rising wedge pattern which could correct down soon with overbought oscillators.

Dust US Miners Bear Index

The US Miners Bear index, as the inverse of GDX, has a breakout to a new low at the bottom edge of the expanding triangle pattern. It too is liable to correct up soon with oscillators at the bottom of their range, which is negative for US miners.

Silver

Long term silver spikes to a new high at the top limit of the expanding triangle pattern, although still in a chart with negative bias. It needs to break up to test resistance otherwise will drop back and start to test support. Silver has started once again to underperform gold, as reflected in the gold/silver ratio which increased slightly this week.

The daily 12 month chart illustrates the silver spike to a new high at the top edge of the expanding triangle pattern, but also the strong advance from late May in what is now a bear flag. This reinforces the need for a breakout which will otherwise have to test support with the threatening penetration down through the flag pattern. Both oscillators are reasonably overbought supporting lower prices ahead.

Silver Miners

Silver miners are lagging the silver price itself in eking out a new high within two bearish patterns in a rising wedge and bear flag.

As with gold although not as pronounced, silver Cots data has Commercials with large (and increasing) short positions which indicate a decline in the silver price. Similarly, the Large Speculators have large (and increasing) long positions which also indicate a decline in the silver price, because they are notoriously always wrong. Hence, dilation in the red / green graph heralds lower silver prices while narrowing heralds a higher price. And, remember the Cots data is available only on Friday, which means the chart you see is also nearly a week old.

Gold : Silver Ratio

The gold / silver ratio increased again this week as gold continues to outperform silver. The ratio closed slightly up at 88.37 which means the drift towards a higher ratio seems to have started again which is negative for the whole precious metals complex.

General Equities
Major US equity indices have started the decline phase which will see the Dow Jones decrease by up to 20%-22% between now and the start of 2020. This is all in accordance with the continued development of a major global topping pattern that is likely to eke out a recovery peak towards the end of 2020 to coincide with US presidential elections at that time.

Our view of US equities, using the Dow Jones as a proxy, illustrates the continued enormous topping pattern end play towards a final market top in the next year or two. We will use this template as a guide against which to measure ongoing performance which at the moment is exactly correct.

The market, using the Dow Jones Ind Ave as a proxy, has now started to decline towards E. It is forecast to traverse the complete ABCDE pattern to complete a decline phase at E(4) by the new year 2020 at an index value of approximately 20 000. Optionally, either the Dow continues to collapse from there or will enjoy an increase through 2020 to yet another new high at approximately 28 000 at (5) which is likely to be the final market top before a serious decline starts in early 2021.

A more detailed view of this is illustrated below.

  1. The Dow is declining from D to E, and has already penetrated 50-Wema (equivalent of 250 day moving average);
  2. Declines to E (4) by Dec 2019 at approximately 20 000;
  3. Advances to (5) by Dec 2020 at approximately 28 000;
  4. This is the final market top;
  5. Start of major collapse in early 2021;
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Midweek Market 1 Aug 2019

Aug 1st, 2019 No comments

Executive summary

The US Fed cut the rate by 25 basis points yesterday, in what is described by many as the first rate cut in the new cycle which by definition means more cuts to come. But they are backed into a corner like never before. The tightening cycle of the last three years, to try and stabilise and prepare for the chaos that lies ahead, has been a dismal failure in a world of slowing economies that face recession, or worse. So presumably they must now resort to further easing, which is described by many as hyper monetary inflation leading to further QE.

If the QE option is chosen then the US Fed must start acting as before by adding bond purchases in order to drop bond yields so they can cut rates further. But this is exactly what caused the bond market crisis in the first place, globally. Some have described that as the new subprime problem: The new Global Subprime Bond which will kill the international monetary system eventually.

The alternative, which is to stall further cuts (or actually raise rates to finally start correcting the ills of the past) will decimate equity and bond markets worldwide.


The rate cut pronouncement yesterday satisfied few (least of all Donald Trump) and prompted lower equities, stronger dollar, and lower gold. This could signal the start of an equity decline phase which will decrease values by up to 20%-22% by the start of 2020. This next phase will also see an end to the countertrend rally in longer term US Treasuries as yields finally begin to bottom in a resumption of the bear market which started in mid-2016.

The US dollar continued to strengthen as precious metals weakened after the US Fed announcement, but could easily correct after market digestion, as volatility levels increase. However, multiple signals in breakdowns of US gold miners as well as bearish silver behaviour indicate that the rally in precious metals has probably run its course.

US Dollar

The US$ long term decline (black lines) is still intact, although so also is the rally since 2008 (blue lines). The dollar index may well reach 100 in due course as the financial market chaos escalates, but is likely to decline towards the low 60s in the next 5 years (as forecast by other long term models).

Dollar strength has invalidated the earlier rising wedge breakout and is starting to test resistance. Both oscillators are rising in support of further strength, although negative divergence with MACD is still active, and this will induce lower prices later on.

The daily 12 month chart illustrates the strong extension of the recent breakout up to a double top which could prompt a correction down as rally exhaustion seems imminent. The whole chart presents as a strong upward sloping pattern that is due a correction down. This is supported by both oscillators at the top of their range.

Japanese Yen

The dollar / Yen currency pair maintains a negative bias (weak dollar / strong Yen) with little dollar support below the support zone. But price has broken up through the reducing wedge (strong dollar / weak Yen) to start testing resistance. Both oscillators are in support of further dollar strength / Yen weakness, together with negative divergence in the MACD.

US Treasuries

The US Treasury countertrend rally is close to completion but is still not complete, as indicated in the benchmark US Treasury 10 year yield. Yield continues to weaken and looks set to drop below the previous low at the beginning of July. This is now very close to a bottom as increased signs of divergence become apparent. Once a bottom is confirmed it will herald completion of the countertrend rally which will then resume into the US bond bear market (started in mid-2016).

Gold
The Gold price weakened after the US Fed announcement yesterday but is still not reflected in the Stockcharts data as this document was written. Gold in the charts closed at $1437.80 but is actually $30 weaker in reality.

The long term weekly gold chart illustrates price holding at higher levels within the small bear flag but has actually penetrated down towards support. This reflects on both oscillators hovering at higher levels in their range.

Gold is actually breaching the bottom of the bear flag as it hovers above support.

The short term 3 month chart illustrates the very constructive chart structure which has now been breached on the downside with the gold price at $1407 as this is written.

South African Rand

The South African Rand has a breakout to weaker levels. The falling wedge has been breached up towards resistance after a 2 month strengthening phase, which could now be tested.

HUI / Gold Ratio

US miners reacted negatively to the US Fed announcement with the chart reflecting a sharp drop against gold. Both gold and HUI latest prices are reflected in the StockCharts data as this is written.

GDX US miners ETF

Long term GDX turns down at resistance after its strong rally. The question is whether the rally continues after this correction, and the chart structure and oscillators indicate that lower prices lie ahead.

The daily 12 month chart illustrates GDX dropping through key levels below the recent peak. Both oscillators support further declines in the price.

Dust US Miners Bear Index

The US Miners Bear index corrected up from the recent low with minor breaks through a key level. This is the start of a correction and positioning of both oscillators indicates further increases. Higher Dust prices are negative for US miners.

Silver
The Silver price weakened after the US Fed announcement yesterday but is still not reflected in the Stockcharts data as this document was written. Silver in the charts closed at $16.41 but is actually $0.50 (or 3%) as this is written.

Long term silver breakout is testing diagonal resistance in the chart but has actually penetrated down with the latest price at $15.97. Silver behaviour is bearish and has enabled gold to start outperforming, as long periods before. Price is starting to invalidate the bullish W bottom formation.

The daily 12 month chart is suggesting the silver breakout could be false, which it actually is with the current price below $16. Both oscillators are at the top of their range supporting lower prices ahead.

The short term 3 month daily chart illustrates the break to the downside with actual price below $16, and with support for lower prices from both oscillators.

Silver Miners

Silver miners break down strongly into earlier support as they begin to drop faster than silver itself.

Gold : Silver Ratio

The gold / silver ratio increased this week as gold begins to outperform silver again. The ratio closed at 87.64 which invalidates the earlier breakout from the bear flag formation. Both oscillators indicate further increases in the ratio which is negative for the whole precious metals complex.

General Equities
Major US equity indices have completed forecast rallies to new highs and are now indicating the start of a 6 month decline phase towards new year which could decrease values by up to 20%-22%.

This is all in accordance with the continued development of a major global topping pattern that is likely to eke out a recovery peak towards the end of 2020 to coincide with US presidential elections at that time.

Our view of US equities, using the Dow Jones as a proxy, illustrates the continued enormous topping pattern end play towards a final market top in the next year or two. We will use this template as a guide against which to measure ongoing performance which at the moment is exactly correct.

The market, using the Dow Jones Ind Ave as a proxy, has now started to indicate completion of the new high at D, and has started to decline towards E. This looks the likely course now but is still to be confirmed. It is forecast to traverse the complete ABCDE pattern to complete a decline phase at E(4) by the new year 2020 at an index value of approximately 20 000. Thereafter, the Dow will enjoy an increase through 2020 to yet another new high at approximately 28 000 at (5) which is likely to be the final market top before a serious decline starts in early 2021.

A more detailed view of this is illustrated below.

  1. Dow has completed its rise to D (July) at a new high of approximately 27 400;
  2. Declines to E (4) by Dec 2019 at approximately 20 000;
  3. Advances to (5) by Dec 2020 at approximately 28 000;
  4. This is the final market top;
  5. Start of major collapse in early 2021;
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Midweek Market 25 Jul 2019

Jul 25th, 2019 No comments

Executive summary

Major US equity indices have completed forecast rallies to new highs and are now expected to start a 6 month decline phase towards new year which could decrease values by up to 20%-22%. This may be delayed until after the US Fed meets next week (31st Jul 2019) to decide on the rate cut which is now a near certainty, as short term US Treasury yields are dropping further below the Fed Funds rate which will force the rate cut decision. In the short term this will also extend the countertrend rally in longer term US Treasuries as yields continue to remain depressed in a world of slowing economic growth and the fight to stall the approach of global recession.

Much depends on pronouncements from the ECB today and the US Fed meeting next week, as the values and directional movement in the US dollar and other major currencies (especially the Euro) remain relatively undecided. Market digestion will presumably delay directional movement as we await some key central bank decisions.

The whole precious metals and miners sector has come alive with many very positive-looking charts, suggesting a runaway advance of some magnitude is now in process. However, there are also many negative aspects which need to be considered. US equity declines will strengthen the dollar as investors switch into cash, and all the precious metals charts include some disturbing elements. All volumes are down markedly and most charts indicate overbought positions including expanding triangle formations with price at the upper limits. So, caution is perhaps necessary especially with Elliott Wave analysis, as well as some conventional technical analysis, indicating gold is only in a bear market rally with much lower prices still to come.

US Dollar

The US$ is in long term decline (black lines) although in a rally since 2008 (blue lines). The dollar index may well reach 100 in due course as the financial market chaos escalates, but is likely to decline towards the low 60s in the next 5 years (as forecast by other long term models).

The dollar is still testing the rising wedge breakout in the 3 year weekly chart, and may well now break up higher with both oscillators turning up. Negative divergence with MACD is prominent though and this will induce lower prices later on.

The short term 3 month daily chart illustrates recent strength and a breakout through the expanding triangle pattern. Price is moving up within a bear flag with MACD still with space to rise, but the pattern indicates a breakdown later on.

Japanese Yen

The dollar / Yen currency pair has a negative bias (weak dollar / strong Yen) with little dollar support below the support zone. But there is a consolidation within the reducing wedge (circle) which is likely to break up into resistance, as is the nature of reducing wedges. Both oscillators are in support of further dollar strength, together with negative divergence in the MACD.

US Treasuries

The US Treasury countertrend rally is close to completion but is still not complete, as indicated in the benchmark US Treasury 10 year yield. This is supported by short term US Treasury yields dropping further below the Fed Funds rate as yields continue to remain depressed in a world of slowing economic growth and the fight to stall the approach of global recession.

Gold

The long term weekly gold chart illustrates price holding at higher levels within the expanding triangle. Gold is overbought at the upper limit with both oscillators overbought and volumes turning down. This picture is repeated throughout the precious metals and miners complex.

The Pennant breakout is pulling back to test, within the overall expanding triangle formation with price at the upper levels. A breakout at the upper levels is very bullish, but both oscillators are declining, and volumes are beginning to drop.

The short term 3 month chart illustrates the very constructive chart structure promoting a breakout to higher levels. The key breakout level is $1453 and a downside break below $1385 will test lower support levels. Both oscillators are drifting lower.

South African Rand

The South African Rand continues to hold at stronger levels against the dollar within the falling wedge pattern, and now very close to the apex. Price closed at $13.88 below all the MAs after 25 consecutive closes below 10-Dema, which illustrates the strong run against the dollar. This is likely to reverse soon, given the structure of the falling wedge and the oscillators beginning to turn up.

HUI / Gold Ratio

US miners continue to outperform an increased gold price as the ratio consolidates after the breakout at the upper perimeter of the expanding triangle. A reversal is likely from here with both oscillators overbought and turning down from the top of their range.

A longer term view of the ratio illustrates the breakout through diagonal resistance with price positioned midway between support and resistance. Recovery in this 5 year view is only partial, which indicates the ground lost during the past years.

GDX US miners ETF

The GDX breakout from the 2½ year range-bound region continues as the next leg up unfolds. It is subject to a degree of pullback before the next leg up can continue, and it remains to be seen whether this does in fact still move higher.

The daily 12 month chart illustrates GDX holding to the new high, but price needs to break up or else will drop down to test support. This is another expanded triangle pattern with price at the upper limit which indicates weakness ahead supported by the overbought oscillators.

Dust US Miners Bear Index

The US Miners Bear index breakout has lead to the next leg down, promoting continued strength for US miners. The chart structure is the near opposite of the GDX in an expanding triangle format with the need to now break down or else move up to test resistance. Both oscillators are at the bottom of their range in support of price moving up: Negative for GDX.

Silver

Long term silver has broken up through diagonal resistance, although still in a negative bias chart. The silver spike is unconfirmed by gold which is bearish and could end the rally. The breakout completed and activated the bullish W bottom pattern and both oscillators have more room to move further up.

The daily 12 month chart is a very powerful chart to a new high that is holding above the breakout level. Both oscillators are overbought indicating some kind of pullback next.

The short term 3 month daily chart is also a very powerful chart holding the breakout level and new high. It also is in an expanding triangle pattern with price at the upper extreme with oscillators that are overbought.

Silver Miners

Silver miners are at a new high in a very strong chart, after the breakout from the pennant. It has also completed and activated the bullish W bottom pattern, and has indeed ignited the silver price itself. The only negative is that the oscillators are overbought and that price is therefore likely to correct down before anything else.

USLV US Silver Miners Bull Index

The short term US Silver miners bull index (Uslv) 3 month chart is at a new high in a very strong chart. It is also in an expanding triangle pattern with price at the upper extreme with overbought oscillators. The index is very constructive and could easily move higher.

Gold : Silver Ratio

The gold / silver ratio declined another 4% this week to the level of 3 months ago. It has a breakout through the bottom of the 1 year long bear flag and has arrested the relentless rise in the ratio. This is bullish for the whole precious metals complex, but the question is whether it can be sustained. The oscillators have plummeted to the lower region of their range, indicating that the next move might well be a correction up, or worse.

General Equities
Major US equity indices have completed forecast rallies to new highs and are now expected to start a 6 month decline phase towards new year which could decrease values by up to 20%-22%. This may be delayed until after the US Fed meets next week (31st Jul 2019) to decide on the rate cut which is now a near certainty, as short term US Treasury yields are dropping further below the Fed Funds rate which will force the rate cut decision.

Much depends on pronouncements from the ECB today and the US Fed meeting next week, as the values and directional movement in the US dollar and other major currencies (especially the Euro) remain relatively undecided. Market digestion will presumably delay directional movement as we await some key central bank decisions.

This is all in accordance with the continued development of a major global topping pattern that is likely to eke out a recovery peak towards the end of 2020 to coincide with US presidential elections at that time.

Our view of US equities, using the Dow Jones as a proxy, illustrates the continued enormous topping pattern end play towards a final market top in the next year or two. We will use this template as a guide against which to measure ongoing performance which at the moment is exactly correct.

The market, using the Dow Jones Ind Ave as a proxy, has now probably completed a new high at D. It is forecast to traverse the complete ABCDE pattern to complete a decline phase at E(4) by the new year 2020 at an index value of approximately 20 000. Thereafter, the Dow will enjoy an increase through 2020 to yet another new high at approximately 28 000 at (5) which is likely to be the final market top before a serious decline starts in early 2021.

A more detailed view of this is illustrated below.

  1. Dow has completed its rise to D (July) at a new high of approximately 27 300;
  2. Declines to E (4) by Dec 2019 at approximately 20000;
  3. Advances to (5) by Dec 2020 at approximately 28000;
  4. This is the final market top;
  5. Start of major collapse in early 2021;
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Midweek Market 18 Jul 2019

Jul 18th, 2019 No comments

Executive summary

Much depends on what the US Fed decides on 31 July when they are expected to cut the rate for the first time in this new rate cut cycle. This is awaited eagerly by all, as it is gold friendly and should also be equity friendly. But will it be?

In the meantime US general equities are behaving as forecast, having peaked Monday this week with all the bearish symptoms of exhaustion in contracting volumes, divergences between major and minor indices, and investor sentiments at historic highs. This is all in accordance with the continued development of a major global topping pattern that is likely to decline (20%) this year and to eke out a recovery peak towards the end of 2020 to coincide with US presidential elections at that time. Bond markets continue in a countertrend rally, characterised by the continued increase in negative yield Treasuries that now total US$13trillion, as global central banks fend off inevitable recession.

The US Dollar has regained some lost ground but is forecast to decline further in response to the rate cut, while gold technicals and fundamentals are finally in place to sustain a broad advance. Silver is finally in a rally and has started to outperform gold, while miners have ignited and are now outperforming the metals.

US Dollar

The US$ is in long term decline (black lines) although in a rally since 2008 (blue lines). The dollar index may well reach 100 in due course as the financial market chaos escalates, but is likely to decline towards the low 60s in the next 5 years (as forecast by other long term models).

The dollar is still testing the rising wedge breakout in the 3 year weekly chart. But is still forecast to decline further in line with the negative divergence displayed in the MACD.

The short term 3 month daily chart illustrates recent strength while the expanding triangle pattern indicates further weakness towards the support region.

Japanese Yen

The dollar / Yen currency pair has a breakout from the small bear flag and is hovering above support which leads down to a stronger Yen. This is supported by the oscillators with the chart maintaining its negative bias, with little support below the support zone. Any dollar weakness now will convert to Yen strength.

US Treasuries

US Treasuries continue to rally as the yield on the US10 year continues to decline. This is supported by the increased global number and value of bonds yielding negatively. This trend is driven by global central banks (mainly in the EU) desperately trying to ignite a borrowing/spending frenzy to offset an incipient recession, creating a lot of borrowing and spending which solves the immediate slow-growth problem.

Only after the chaos is recognised as ‘crazy’ will confidence return to fear, and only then will the countertrend bond rally start to normalise into a collapse, in line with interest rates bottoming in mid-2016.

Gold

The long term gold chart illustrates the consolidation above penetration of long term resistance which now looks set to break upwards. All looks constructive with oscillators holding up.

Pennants elsewhere in the precious metals complex of charts have broken up successfully, and the 12 month daily chart looks likely to break up likewise. An upside break will promote the next leg up as the gold price builds on the successful breakout through the 6 year resistance line.

The short term 3 month chart highlights more detail of the constructive consolidation which is likely to break to the upside. The oscillators are in positive support with key resistance at $1443. A break below key support at $1385 will induce a pullback to test lower support levels.

South African Rand

The South African Rand continues to strengthen against the dollar as it drops further down the falling wedge pattern, below all the MAs to close at $13.99. This will have the effect of an eventual breakout to Rand weakness which is supported by both oscillators turning up after declining to the bottom of their range.

HUI / Gold Ratio

US miners continue to outperform an increased gold price with a breakout in the HUI / Gold ratio, to a new high. Miners are forecast to continue outperforming metals with both oscillators holding at the top of their range.

GDX US miners ETF

The GDX breakout from the small consolidation above the 2½ year range-bound region has produced a new high, as the next leg up starts to unfold. It is also supported by both oscillators.

The daily 12 month chart illustrates the consolidation in more detail, as well as penetration of the key level at 26.25, to a new high. The chart structure is in an expanding triangle formation which could now still thrust higher.
Pic GDX 8y

The long term 8 year weekly chart illustrates the breakout potential in the near term resistance band between 27.50 and 32.00, and the target band between 37 and 46. All depends on the strength of the metals breakouts.

Dust US Miners Bear Index

The US Miners Bear index breakout has lead to the next leg down, promoting continued strength for US miners. The chart structure is the near opposite of the GDX in an expanding triangle format with still more room to move.

Silver

Long term silver continues constructing a bullish W bottom as the silver price increases dramatically. Despite the bull flag breakout the chart remains in negative bias. But, silver is gaining energy and could still provide a meaningful rally that activates the W bottom formation. Both oscillators are in support of this.

The daily 12 month chart illustrates more detail of the multiple breakouts which provide traction for the next leg up.

The short term 3 month daily chart illustrates even more detail of the breakout as evidence to support the next leg up.

Silver Miners

Silver miners have a breakout from the pennant through a breakout of the previous peak. This could potentially push up through resistance which would ignite silver itself. The bullish W bottom formation is now activated to add energy to the advance which traditionally ignites silver itself, and both oscillators are in support of this.

USLV US Silver Miners Bull Index

US Silver miners bull index (Uslv) advance through multiple breakouts provides a powerful trigger for silver. The index is looking very constructive with support from both oscillators.

Gold : Silver Ratio

The gold / silver ratio declined 4% this week and the relentless rise in the ratio has been arrested. We now have what could be a real top pattern taking shape, with potentially further declines ahead. This now reflects silver’s outperformance of gold – and long may it last. It is positive for the whole precious metals complex.

General Equities

US general equities are behaving as forecast, having peaked Monday this week with all the bearish symptoms of exhaustion in contracting volumes, divergences between major and minor indices, and investor sentiments at historic highs. This is all in accordance with the continued development of a major global topping pattern that is likely to decline (20%) this year and to eke out a recovery peak towards the end of 2020 to coincide with US presidential elections at that time.

Our view of US equities, using the Dow Jones as a proxy, illustrates the continued enormous topping pattern end play towards a final market top in the next year or two. We will use this template as a guide against which to measure ongoing performance which at the moment is exactly correct.

The market (Dow Jones Ind Ave) has now probably completed a new high at D. It is forecast to traverse the complete ABCDE pattern to complete a decline phase at E(4) by the end of 2019 at an index value of approximately 20 000. Thereafter, the Dow will enjoy an increase through 2020 to yet another new high at approximately 28 000 at (5) which is likely to be the final market top before a serious decline starts in early 2021.
A more detailed view of this is illustrated below.

  1. Dow has completed its rise to D (July) at a new high of approximately 27 300;
  2. Declines to E (4) by Dec 2019 at approximately 20000;
  3. Advances to (5) by Dec 2020 at approximately 28000;
  4. This is the final market top;
  5. Start of major collapse in early 2021;
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Midweek Market 11 Jul 2019

Jul 11th, 2019 No comments

Executive summary

US June payroll announcement last Friday impacted positively on the dollar and US equities and negatively on gold. This has now worked through the system and US Fed minutes from the June meeting issued yesterday indicated increased certainty for a rate cut in July. This was more gold friendly with the dollar retracing since then and gold moving higher towards $1420 today.


General equities are behaving as forecast, moving towards a peak before a serious decline (20% – 22%) through the remainder of 2019. This is all in accordance with the continued development of a major global topping pattern that is likely to peak towards the end of 2020 to coincide with US presidential elections at that time. Bond markets continue in a countertrend rally, characterised by the continued increase in negative yield Treasuries that now total US$13trillion, as global central banks fend off inevitable recession.


Gold technicals and fundamentals are finally in place to sustain a broad advance with the US Federal Reserve close to beginning a new cycle of rate cuts. The US Dollar has regained some lost ground, and with today’s weaker trend could still move either way. Much depends on bond market behaviour leading on to US Fed behaviour and US equities once the decline into yearend begins in earnest.

US Dollar

The dollar is still testing the rising wedge breakout in the longer term weekly chart. It has closed on a small bearish candle and the negative divergence is still active which both support weakness to follow. It does need to secure higher ground otherwise will be subject to further declines.

The short term 3 month daily chart illustrates recent strength with a sharp drop after the release of the US Fed minutes yesterday, all within expanding wedge pattern which suggests further weakness. It could move either way and probably will retrace some of the drop, but both oscillators are steadying for a trend change to support weakness.

Japanese Yen

The dollar / Yen has a breakout from the falling wedge up into a small bear flag, from recent dollar strength. The chart maintains its negative bias though, also with little support below the support zone. Any dollar weakness now will convert to Yen strength. The Slow Stochastic is turning at the top of its range and the MACD exhibits a generally weaker trend, both seemingly in support of further dollar weakness.

US Treasuries

US Treasuries continue to rally as the yield on the US10 year continues to decline, although slightly up on the week to close at 2.07% (1.96% last). The small ending reversal has yield breaking up through 10-Dema for the first time in 2 months (blue MA). The low US Treasury yields are the driving force behind any US Fed intention to cut the rate, the first of which is forecast for this month. Low yields provide the evidence of worsening economic conditions and are global, with cumulative global treasuries worth US$13trillion now having negative yield.


Despite this chaos and the likely end to the countertrend US treasury rally, yields will presumably still decline further before any meaningful recovery.

Gold

The decisive breakout through the massive 6 year basing pattern in the gold market continues to hold above the neckline. Much depends of US Fed behaviour, resultant dollar value, and US equities, but as long as the neckline holds the gold price may well move up to any of the indicated targets (blue) in the range of $1500 – $1700.

The 12 month daily chart illustrates breakout through long term resistance and that penetration through recent peaks at $1443 will promote another leg up. A prerequisite is to hold the breakout level, failing which lower support levels will be tested. Both oscillators indicate some downside first.

The short term 3 month chart highlights more detail of the consolidation in the peak price cluster indicating key support at $1385 and key resistance at $1443, with a slight lift in the tail after the US Fed minutes release. A break below $1385 will induce a pullback to test lower support levels.

South African Rand

The South African Rand continues to strengthen against the dollar as it drops further down the falling wedge pattern, below all the MAs to close at $13.97. This will have the effect of an eventual breakout to Rand weakness which is supported by both oscillators turning up after declining to the bottom of their range.

HUI / Gold Ratio

US miners continue to outperform an increased gold price as the HUI / Gold ratio breaks out to a new high. This occurred after the pennant formation broke up and increased above the previous high. Both oscillators are coming off the top of their range though which presupposes some downward correction next.

GDX US miners ETF

The GDX breakout in the long term weekly chart has consolidated above the 2½ year range-bound region. It needs to now thrust higher than its close at 26.20 in order to capitalise with some increase still available in the MACD but not the Slow Stochastic.

The daily 12 month chart illustrates the consolidation in more detail, and the need to penetrate to new highs. The chart structure is in an expanding triangle formation which could still thrust higher after correcting.

Dust US Miners Bear Index

The US Miners Bear index has a breakout which should lead to the next leg down, promoting continued strength for US miners. The chart structure is the near opposite of the GDX in an expanding triangle format with still more room to move.

Silver

Long term silver continues forming a bullish W bottom as it prepares to breakout of the bull flag. This will provide the energy for a meaningful silver rally, and the oscillators still have available upside.

The daily 12 month chart is constructing a bull flag within a bull flag, with a breakout at $15.50 prompting the next leg up, and a break down at $15.06 which will then test supports. This is about as constructive for silver as we have seen, and although the oscillators are declining they are looking to turn up.

The short term 3 month daily chart illustrates continued advance into another consolidation, within a bull flag. A breakout here is very bullish, with oscillators turning up in support. But, any decline below $15.06 will threaten the structure and any potential.

Silver Miners

Silver miners are enjoying a strong advance and creating a bullish pennant in the process. Any breakout and advance could potentially push up through resistance which would ignite silver itself. The bullish W bottom formation is also in place to add energy to an advance. But both oscillators are in decline and a breakdown below 25.75 must be avoided as this will then test lower support levels

USLV US Silver Miners Bull Index

US Silver miners bull index (Uslv) could provide another trigger for silver. The index is looking constructive for silver with an advance back above 50-Dema which includes 2 bullish candles plus oscillators turning up.

Gold : Silver Ratio

The gold / silver ratio continues its relentless rise, closing slightly higher again at 92.77. This continues to reflect the silver underperformance of gold which is negative for the whole precious metals complex, seemingly endlessly. But silver is finally indicating some measure of positive potential and may surprise on the upside soon. The chart also indicates the beginnings of a potential ‘top’ in development. As stated before, either silver generates a meaningful rally soon or gold and gold miners drop prices.

General Equities

General equities are behaving as forecast, moving towards a peak before a serious decline (20% – 22%) through the remainder of 2019. This is all in accordance with the continued development of a major global topping pattern that is likely to peak towards the end of 2020 to coincide with US presidential elections at that time.

Divergence in US indices continues with attendant loss of momentum, as they approach final new highs before the forecast major trend change which will witness a probable 20% decline during the rest of 2019.


Our view of US equities, using the Dow Jones as a proxy, illustrates the continued enormous topping pattern end play towards a final market top in the next year or two. We will use this template as a guide against which to measure ongoing performance which at the moment is exactly correct.

The market (Dow Jones Ind Ave) is at the moment moving up to complete a new high at D very soon. It is forecast to traverse the complete ABCDE pattern to complete a decline phase at E(4) by the end of 2019 at an index value of approximately 20 000. Thereafter, the Dow will enjoy an increase through 2020 to yet another new high at approximately 28 000 at (5) which is likely to be the final market top before a serious decline starts in early 2021.


A more detailed view of this is illustrated below.

  1. Dow rises to D very soon (July) at a new high of approximately 27 000;
  2. Declines to E (4) by Dec 2019 at approximately 20000;
  3. Advances to (5) by Dec 2020 at approximately 28000;
  4. This is the final market top;
  5. Start of major collapse in early 2021;
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Midweek Market 4 Jul 2019

Jul 4th, 2019 No comments

Executive summary

Donald Trump and Chinese President Xi met at G20 this week and agreed not to increase tariffs as they attempt to restore trade relations: Equities, bonds, and the dollar strengthened while gold corrected down. But gold reversed up again within days and has closed the month and quarter above $1385 and is holding the majority of its recent gains. That does not guarantee continued strength but it is a good sign.


Gold’s technicals and fundamentals are finally in place. It is outperforming all major currencies and the US Federal Reserve is weeks away from beginning a new cycle of rate cuts. The US Dollar has lost its uptrend. The near-term outlook is very strong and if the US Fed cuts rates three or four times and Gold strongly outperforms equities then this move can go much higher, with very little resistance from $1420/oz to the low $1500s and strong measured upside targets of $1600/oz to $1700/oz.


To add momentum, equities are likely to peak very soon with forecast strong declines in the next 6 months.


If Gold is going to trend higher towards $1600-$1700/oz, then the gold equities will run even stronger. GDX is trading below $26. A break past $31-$32, would trigger a measured upside target of almost $50, with even stronger gains for GDXJ (Junior miners).
If the Fed does cut rates three or four times and either the dollar declines more or gold outperforms equities, then gold should be able to reach the $1700/oz target. If only one of those things happen then it still has a good chance of reaching $1550.


It is generally, if grudgingly, accepted that the “paper gold” market (trading in futures contracts and options such as Comex) dictates the gold price, and that this enables price manipulation in delaying gold’s inevitable real valuation. It is also generally believed that demand for physical gold will eventually overwhelm this false situation, sending the metal to its intrinsic value somewhere north of $10,000/oz.


The timing of this shift in market dynamics is impossible to predict, but when it comes its early stage will look a lot like what’s happening right now.


However, keep in mind the major dichotomy in the market with some calling a new gold bull market, whilst Elliott Wave theory calls this still only a bear market rally.

US Dollar

The dollar is rising to test the breakout and has broken up through 50-Wema (equivalent to 250 day moving average) in the process. It needs to secure higher ground otherwise will be subject to further declines. Both oscillators are declining, confirming the generally bearish attitude of price direction, with the negative divergence still active.

The 12 month daily chart illustrates recent dollar strength could void the H&S pattern which seems likely with both oscillators rising.


There are rival propellants acting on price with strong resistance just above plus negative divergence and breakdowns through the rising wedge and H&S pattern on the one hand, with penetration through 200-Dema plus rising oscillators on the other.

The short term 3 month chart illustrates recent strength from the G20 trade announcement, as the dollar increases to test resistance. But, price needs to penetrate $96.42 otherwise declines will continue.

Japanese Yen

The dollar / Yen negative chart bias continues as dollar weakness / Yen strength is evident with price dropping down from the top of the reducing wedge: This is spite of recent dollar strength. Both oscillators are also rising reluctantly.

US Treasuries

US Treasuries continue to rally as the yield on the US10 year continues to decline, closing at 1.96%. Yield was this low last in Nov 2016, being a strong indicator of the forthcoming rate cut/s in the US. This is now very close to completion of the countertrend reversal in US Treasury yields.

Gold

The decisive breakout through the massive 6 year basing pattern in the gold market is holding above the neckline. The strength of the breakout is supported by increasing volume, surpassing volumes over the 6 year period, and especially those of the last gold peak in Aug 2011.


Taking the price cluster during 2011 and 2012 as a guide as well as the depth of the basing pattern, it can be seen that potential price increases could well reach the ‘potential target region’ (blue), at rally peaks of $1600 or $1700.

The decisive breakout in the gold market is well evident, but one of the impacting negative factors remains the non-conforming silver price. There is still a persistently high gold/silver ratio which traditionally has a damaging effect on the whole precious metals complex.


It is a double-edged sword however in that a silver price breakout is long overdue, given the positive impacts affecting gold at the moment. But, either silver enjoys a breakout rally or gold and gold miners reverse to lower prices.

The daily 12 month chart illustrates not only the breakout but also gold’s chart structure which promotes another upward penetration for the next leg up.

The short term 3 month chart illustrates gold correcting down to $1385 before a bullish Engulfing candle which could provide the energy for additional upward penetration. However, it closed yesterday on a bearish Evening Star candle which has the opposite effect.

South African Rand

The South African Rand continues to strengthen against the dollar as it drops further down the falling wedge pattern. This will have the effect of an eventual breakout to Rand weakness which is supported by both oscillators declining to the bottom of their range.


Price has penetrated through 200-Dema after 18 consecutive closes below 10-Dema which presupposes further dollar declines and Rand strength.

HUI / Gold Ratio

US miners continue to outperform an increased gold price during this rally as the ratio consolidates after the recent increases. The consolidation is taking the shape of a pennant which is a continuation pattern, for more of the same. Both oscillators are coming off the top of their range though which presupposes some downward correction first.

GDX US miners ETF

The GDX breakout above the 2½ year range-bound region is holding, and could still thrust higher after correcting. There appears to be much upside in the MACD still.

The daily 12 month chart is in an expanding wedge formation which could still thrust higher after correcting. But both oscillators are overbought and indicate a correction first.

The long term 8 year GDX chart illustrates the breakout potential to the next strong resistance at about 31.50 if gold continues higher towards $1600-$1700/oz. This will propel gold equities to run even stronger, and GDX would trigger a measured upside target of almost $50, with even stronger gains for GDXJ (Junior miners).

Silver

Long term silver is constructing a bullish W bottom as it prepares to breakout of the bull flag. This will provide the energy for a meaningful silver rally, and needs to be watched carefully.

The daily 12 month chart is consolidating at the top range of the bull flag and a breakout will result in a rally for the next potential leg up. So, silver is finally indicating some positive energy.

The short term 3 month daily chart illustrates continued advance into another consolidation. A bullish breakout will provide the next leg up, but any decline below $15.06 will threaten the structure and any potential.

Silver Miners

Silver miners are enjoying a strong advance and any potential push up through resistance could ignite silver itself. Price is now above all the MAs, but must avoid dropping below 25.75 if it is to maintain its potential. Both oscillators are at the top of their range and this could affect negatively.

USLV US Silver Miners Bull Index

Another silver trigger could be provided by the silver miners bull index (USLV). The index is looking constructive for silver with a pullback to 50-Dema followed by a bullish Engulfing candle. Both oscillators are drifting and not obviously negative.

Gold : Silver Ratio

The gold / silver ratio continues its relentless rise, closing slightly higher again at 92.65. This continues to reflect the silver underperformance of gold which is negative for the whole precious metals complex, seemingly endlessly.


But silver is finally indicating some measure of positive potential and may surprise on the upside soon. Either silver generates a meaningful rally soon or gold and gold miners drop prices.

General Equities
Divergence in US indices continues with attendant loss of momentum, as they approach final new highs before the forecast major trend change which will witness a probable 20% decline during the rest of 2019.

Our view of US equities, using the Dow Jones as a proxy, illustrates the continued enormous topping pattern end play towards a final market top in the next year or two. We will use this template as a guide against which to measure ongoing performance which at the moment is exactly correct.

The market (Dow Jones Ind Ave) is at the moment moving up to complete a new high at D very soon. It is forecast to traverse the complete ABCDE pattern to complete a decline phase at E(4) by the end of 2019 at an index value of approximately 20 000. Thereafter, the Dow will enjoy an increase through 2020 to yet another new high at approximately 28 000 at (5) which is likely to be the final market top before a serious decline starts in early 2021.


A more detailed view of this is illustrated below.

  1. Dow rises to D very soon (early Jul) at a new high of approximately 27 000;
  2. Declines to E (4) by Dec 2019 at approximately 20000;
  3. Advances to (5) by Dec 2020 at approximately 28000;
  4. This is the final market top;
  5. Start of major collapse in early 2021;
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Midweek Market 27 Jun 2019

Jun 27th, 2019 No comments

Executive summary

Divergence in US indices continues with the dominant non-conformance being indices in small caps, banks, and transports against the major blue chip indices. This bearish evidence indicates that general equities are preparing for a very strong major trend change, as forecast for the Jul-Dec period this year. The warning signs have been growing in potentially dangerous global economic and political issues, in slowing global economies, global central bank activity, debt issues in China and the EU, Euro-fragility, Brexit, populism, increasing Middle East tensions, etc. The vast majority of investors remain confident that all these problems can and will be solved painlessly, as generally investor optimism remains excessively high.


Increasing global treasuries on negative yield now exceeds US$12trillion as the world fends off recession, with confidence in the first US Fed rate cut in the next cycle increasing to 2 (two) cuts this year. This is as yet still restricting US treasury yields from rising, as they must eventually, in the long term bear market which started in mid-2016.


The 16 month rally in the US dollar has ended, as the process of eroding dollar value resumes into its long term decline. History has shown that the first US Fed rate cut in a new cycle ushers in a new gold bull market, and this is now in process causing the gold price to penetrate long term resistance as it increased $170 in a month.


However, there is major dichotomy in the market with many commentaries now increasingly calling a new gold bull market, whilst Elliott Wave theory calls this still only a bear market rally. And, a gold bear market rally means lower prices to come and also higher US$ values to come. Watch this space!!!

US Dollar

The US dollar has ended its recent advance and could now have resumed its long term decline. This 30 year chart is a reminder of the dollar’s long term decline, illustrating the RSI divergences in 2002 and 2016 which in the first instance resulted in a 5 year duration 40% drop in value after penetrating down through the 200 week moving average. On a fractal comparison basis, the divergence occurred again in 2016 and, after also penetrating down through the 200 week moving average, should also produce a 5 year long 40% drop in dollar value. In fact, even more so in the second instance if one considers the dire situation now compared to earlier in 2002.


This illustration indicates a dollar value at $62 in the year 2024.

The dollar has broken down through the bottom of the rising wedge pattern which indicates a potential decline at least to the Sep 2017 low at $91. The negative divergence in the MACD is a major propellant with short term support between $93.50 and $95.


Both oscillators are still dropping in support of further declines.

The breakout through the rising wedge pattern has also activated the H&S pattern plus penetration of 200-Dema. This should supply additional propellant to eventually reduce dollar value through the short term support band between $95.38 – $94.62.

The short term 3 month chart illustrates the breakdown through the H&S activation and 200-Dema. There is some price retracement from the top of the support band at $95.38 which both oscillators are supporting with turn-ups.

Japanese Yen

The dollar / Yen chart negative bias (dollar weakness / Yen strength) is evident, but with some retracement up to the lower H&S neckline which should provide some resistance. There is little support below this line but the developing reducing wedge should break up o dollar strength eventually.

US Treasuries

The US Treasury market rally continues as yields continue to hold at lower levels. The circle illustrates some loss of momentum and as investor optimism is at extreme levels it suggests the rally is probably close to completion.


US Treasuries are being supported at these low yield levels because of concerns regarding the encroaching recession which is the US Fed prompt to prepare for the first rate cut in the next cycle. This will be further prompted by the anticipated equity sell-off in the Jul-Dec period this year.

Gold

This gold chart extends the full history of price behaviour since Richard Nixon delinked the dollar from gold convertibility in Aug 1971. It includes a fractal analysis comparison between the 1980 peak and the 2011 peak illustrating failure to penetrate the previous high (red circle) and success in penetrating the recent high (blue circle).


The failure (red) ended in gold continuing to decline to lower levels until the final bottom in 1999 (12 years later), whereas the success now (blue) will increase the gold price. This is a bullish divergence which is said to confirm the start of the next gold bull market. Note also the consecutive higher lows (green) to support the process.


The fractals include points 1-5 (red in the early 1980s) and 1-5 (blue since 2011), each ending in the bullish divergence in the circles. An added difference includes the interest rate peak in 1981 and the interest rate bottom in 2016. These together provided the platform in 1981 for general equities to start the greatest bull market in history (negative for gold) and in 2016 to start the greatest bear market in history (positive for gold).
Consider also that, in Elliott Wave theory the massive general equity top pattern we have today is the end of wave 3 up in the Grand Supercycle starting in year 1700. This impulse wave will include 5 waves, and that wave 4 down will decline 90% and last 100 years before it resumes up to wave 5 to complete the cycle.

We have a decisive breakout through the massive pentagon basing pattern in the gold market stretching back 6 years. This is the breakout referred to in blue in the previous chart, supposedly confirming a new gold bull market.

This is all mainly powered by the increasing likelihood of a US Fed rate cut which has caused an appropriate dollar decline. History shows that the start of the next gold bull market will be triggered by the first US rate cut in the next cycle, and it is now virtually a given that this is likely soon.

There is a breakout through long term resistance in the gold market.
Silver is still non-conforming with a persistently high gold/silver ratio which is a double-edged sword. Either silver enjoys a breakout rally or gold and gold miners reverse to lower prices.

The short term 3 month chart illustrates gold catapulting higher through long term resistance with momentum illustrated by the 21 consecutive closes above 10-Dema. But the small retracement includes a bearish Evening Star candle at the peak, and the overbought oscillators also suggest a correction next.

South African Rand

The South African Rand strengthened further to close at $14.23 against the weaker dollar. Technically, it has a bullish breakout through the bottom of the rising wedge although it is now confronted by unsupportive oscillators together with 200-Dema and the support zone just below.

HUI / Gold Ratio

US miners are outperforming an increased gold price during this rally as the ratio achieves 21 consecutive closes above 10-Dema. The ratio has also broken above the previous high with no visible resistance in sight. Both oscillators are at the top of their range and the rally is subject to some retracement.

GDX US miners ETF

GDX has a breakout above the 2½ year range-bound region with price in an expanding wedge which implies potential additional gains. ut, conventional wisdom suggests a correction next.

GDX has a strong rally breakout to new highs within an expanding wedge formation. But both oscillators are overbought and there are a number of gaps which usually are closed eventually.


Momentum is strong though with 21 consecutive closes above 10-Dema and well ahead of all MAs.

DUST US Gold Miners Bear Index

The Dust index is the inverse of GDX nearly exactly, with penetration of the triple bottom adding further declines equal to the height of resistance. This is very positive for gold miners.


But the oscillators are at the bottom of their range which should invite a price advance which have the opposite and negative on US gold miners.

Silver

Long term silver advances up to the top of the bull flag, but continues in a chart with a distinctively negative bias. Both oscillators have potential to still advance but silver needs to rally strongly if it is to impact positively on the whole precious metals complex. Otherwise its affect will in fact be strongly negative.

The short term 3 month daily chart illustrates an advance up a bear flag, which is an opposite and negative indication to the 3 year chart. The advance includes 11 consecutive closes above 10-Dema which indicates increasing momentum, both oscillators are now overbought and vulnerable to declines which indicate negatively for silver.

Silver Miners

Silver miners are enjoying a strong advance with 21 consecutive closes above 10-Dema, indicating more energy than silver itself. Maybe silver miners energise silver into a meaningful rally. But the oscillators are at the top of their range and this could affect negatively.

Gold : Silver Ratio

The gold / silver ratio continues its relentless rise, closing slightly higher again at 92.55. This continues to reflect the silver underperformance of gold which is negative for the whole precious metals complex, seemingly endlessly.


Either silver generates a meaningful rally soon or gold and gold miners drop prices.

General Equities
Divergence in US indices continues with the dominant non-conformance being indices in small caps, banks, and transports against the major blue chip indices. This bearish evidence indicates that general equities are preparing for a very strong major trend change, as forecast for the Jul-Dec period this year.


Our view of US equities, using the Dow Jones as a proxy, illustrates the continued enormous topping pattern end play towards a final market top in the next year or two. We will use this template as a guide against which to measure ongoing performance which at the moment is exactly correct.

The market (Dow Jones) is at the moment moving up towards D during this month (Jun 2019) and is likely to traverse the complete ABCDE pattern before then strengthening from (4) to finally reach market top at (5) probably at the end of the year 2020.


A more detailed view of this is illustrated below.

  1. Dow rises to D this month (June) at a new high ±27000;
  2. Declines to E (4) by Dec 2019 ±20000;
  3. Advances to (5) by Dec 2020 ±28000;
  4. This is the final market top;
  5. Start of major collapse in early 2021;
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Midweek Market 20 Jun 2019

Jun 20th, 2019 No comments

Executive summary

Market confidence in a US Fed rate cut has grown to an anticipated 2 cuts this year, as the short term US Treasury yields continue to decline below the Fed Funds rate which is the trigger for Fed action. This will be the first cut in the new cycle, probably as the anticipated equity selloff in the 2nd half of 2019 gathers momentum.


This has prompted the US equity market, into a rally this month which is likely to take the Dow to yet another new high (±27 000). The market is likely to be much weaker during Jul-Dec 2019 with a severe downturn into the end of the year, followed by a strong recovery through 2020 to the potential final market top close to Dec 2020.


The 16 month rally in the US dollar is now probably complete as the impact of US Fed rate cuts later in 2019 start the process of eroding dollar value. The US$ is in a long term decline and this process is now likely to start gathering momentum.


History has shown that the first US Fed rate cut in the new cycle ushers in a new gold bull market, and market confidence that this is now in process caused a major shift in the gold price this week. The gold price is finally testing long term resistance at the neckline in the massive basing pattern in the gold market stretching back 6 years.

US Dollar

The US dollar has seemingly ended its recent advance and could now have resumed its long term decline. The 40 year chart is a reminder of the dollar’s long term decline, illustrating the 8 year cycles coinciding with US presidential elections in peaks and troughs every 16 years. This is likely to include a trough next in late 2024 with the dollar index declining into the low $60s, as is clearly evident in the chart structure.

The 16 month rally in the dollar is all but complete as it now begins to penetrate the bottom of the rising wedge pattern. The negative divergence in the MACD is finally beginning to draw dollar value down as both oscillators continue declining.


Market confidence in a US Fed rate cut has grown to an anticipated 2 cuts this year, as the short term US Treasury yields continue to decline below the Fed Funds rate which is the trigger for Fed action. This will be the first cut in the new cycle, probably as the anticipated equity selloff in the 2nd half of 2019 gathers momentum. It is this anticipation which is providing energy to a lower dollar, which is now long overdue.

Technically, the dollar is starting to decline because of the bearish rising wedge patterns and the impact of negative divergence with the MACD. A threatening H&S pattern is developing which further declines will activate.

The short term 3 month chart illustrates the threatening H&S pattern in more detail, which a break below $96.33 will activate. 200-Dema (green) is just below that level and penetration will add energy and momentum to further declines.

Japanese Yen

The dollar / Yen chart is developing negative bias (dollar weakness / Yen strength), with an incline H&S (already penetrated) and another level H&S which is about to be activated.

US Treasuries

The US Treasury market is still in a rally with continued extreme investor optimism, as yield continues to break down to lower levels. Reduced bond yields, especially the short term 3 and 6 month T-bills, are providing trigger mechanisms for the US Fed to prepare for the first rate cut in the next cycle.

The market is now anticipating at least 2 such cuts this year which are probably likely as the anticipated equity sell-off in the Jul-Dec 2019 period gathers momentum.

Gold

The massive pentagon basing pattern in the gold market stretches back 6 years, with the inviting neckline at $1365 – $1375 already tested numerously. This gold rally, although closing at $1348.80, has actually penetrated the neckline because gold advanced during the night and is at $1381 as these words are written.

This is all powered by the increasing likelihood of a US Fed rate cut which has caused an appropriate dollar decline. History shows that the start of the next gold bull market will be triggered by the first US rate cut in the next cycle, and it is now virtually a given that this is likely soon.

This is a weekly chart, and what is required now is confirmation of the penetration.

Gold is now testing long term resistance after a breakout from the long term bull flag. As mentioned, gold is now at $1381 but needs to confirm penetration on a weekly basis.

Silver is still non-conforming with a persistently high gold/silver ratio which is a double-edged sword. Either silver enjoys a breakout rally or gold and gold miners reverse to lower prices.

The short term 3 month chart illustrates gold beginning to catapult higher after 3 breakouts. In fact, as of writing, gold is another $33 higher at $1381. The last 10 trading days have provided 10 consecutive closes above 10-Dema which is an indication of increased momentum.

The one negative is still both oscillators at the top of their range, suggesting lower prices next.

South African Rand

The South African Rand strengthened nearly 5% in the last 9 trading days against the weaker dollar. Technically, it has a bullish breakout through the bottom of the rising wedge and it has invalidated the earlier bearish H&S activation. Declining oscillators indicate further strength to come, as the divergence with the MACD plays out correctly.

The short term R186 government bond yield has been steadily declining since Oct 2018 which suggests the Reserve Bank is likely to cut the Repo rate soon. This will have a weakening effect on Rand value.

HUI / Gold Ratio

US miners are outperforming an increased gold price during this rally as the ratio achieves 15 consecutive closes above 10-Dema. The ratio still needs to breakout above the previous high and penetrate resistance decisively. Both oscillators are at the top of their range and the rally is subject to some retracement.

GDX US miners ETF

GDX, likewise, has had a strong rally with breakouts above previous highs as well as 15 consecutive closes above 10-Dema. The oscillators are both at the top of their range and GDX is subject to a retracement of sorts. The advance includes 2 gaps which are still un-filled, and as always, may well be closed later on.

DUST US Gold Miners Bear Index

The Dust index is the inverse of GDX nearly exactly, with penetration of the triple bottom which promises further decline. The triple bottom breakout is very positive for gold miners.
But the oscillators are at the bottom of their range which should invite a price advance which is negative for US gold miners.

Silver

Long term silver breaks out of the reducing wedge but continues to languish below resistance in a chart which continues to look very negative. Either silver breaks up and starts to rally or the whole precious metals complex is likely to continue towards weakness.
Both oscillators are beginning to turn up, promising perhaps some excitement in silver.

The 3 month daily chart illustrates a lacklustre consolidation after the breakout. But silver achieves 7 consecutive closes above 10-Dema which is an indication of building energy for increased momentum. Both oscillators still have some space to rise further.

Silver Miners

Silver miners are enjoying a strong advance with 15 consecutive closes above 10-Dema, indicating more energy than silver itself. Maybe silver miners energise silver into a meaningful rally. But the oscillators are at the top of their range and this could affect negatively.

Gold : Silver Ratio

The gold / silver ratio continues its relentless rise, closing slightly lower this time at 90.17. This continues to reflect the silver underperformance of gold which is negative for the whole precious metals complex, seemingly endlessly.

Either silver generates a meaningful rally soon or gold and gold miners drop prices.

General Equities
Our view of US equities, using the Dow Jones as a proxy, illustrated last week the continued enormous topping pattern end play towards a final market top in the next year or two. We will use this template as a guide against which to measure ongoing performance which at the moment is exactly correct.

US equities of course are a proxy for world markets and as they perform so too will world markets (on average) follow.

The market (Dow Jones) is at the moment moving up towards D during this month (Jun 2019) and is likely to traverse the complete ABCDE pattern before then strengthening from (4) to finally reach market top at (5) probably at the end of the year 2020.

A more detailed view of this is illustrated below.

  1. Dow rises to D this month (June) at a new high ±27000;
  2. Declines to E (4) by Dec 2019 ±20000;
  3. Advances to (5) by Dec 2020 ±28000;
  4. This is the final market top;
  5. Start of major collapse in early 2021;
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Midweek Market 13 Jun 2019

Jun 13th, 2019 No comments

Executive summary

US equities, using the Dow Jones as a proxy, continue the enormous topping pattern end play towards a final market top in the next year or two. US equities of course are a proxy for world markets and as they perform so too will world markets (on average) follow.

The market is likely to be stronger this month with a severe downturn into year end followed by a final recovery through 2020 to the final market top.
The 16 month rally in the US dollar is all but complete as it continues to advance into the rising wedge formation with increasing signs of exhaustion and a potential change of trend soon.

Market confidence in a US Fed rate cut by Sep 2019 is growing and this will be the first cut in the new cycle, probably in the midst of the anticipated equity selloff in the 2nd half of 2019. Obviously, a rate cut will add credence to a lower dollar which is now long overdue.

The massive basing pattern in the gold market stretches back 6 years, with the inviting neckline at $1365 – $1375 already tested numerously. This gold rally is also rising to test the neckline which may or may not succeed. But there is a difference this time in that the start of the next gold bull market will be triggered by the first US rate cut in the next cycle, and it is now virtually a given that this is likely soon, probably in Sep 2019: Especially if equity markets are in a selloff which is forecast for the 2nd half of 2019.

US Dollar

The 16 month rally in the dollar is all but complete as it continues to advance into the rising wedge formation with increasing signs of exhaustion. There is noticeable negative divergence with the MACD which will draw the dollar down at some point. Both oscillators are declining in support of a change of trend soon.

Market confidence in a US Fed rate cut by Sep 2019 is growing and this will be the first cut in the new cycle, probably in the midst of the anticipated equity selloff in the 2nd half of 2019. Obviously, a rate cut will add credence to a lower dollar which is now long overdue.

The dollar has weakened significantly since the May high which disrupted the barrier triangle rally in creating a new lower low. This has cast serious doubt in the outcome of the pattern, with the likelihood now that the rally has completed the (A)(B)(C) at $98.33 and that lower dollar values lie ahead.

The red support line at 4 has been breached, with a bounce off the red support line at 2. Final dollar direction will be confirmed with penetration of the blue diagonal support (weakness) or the blue horizontal resistance (strength).

The short term 3 month chart illustrates another week of dollar weakness which should invite some corrective strength in the short term. Both oscillators are turning up at the bottom of their range in support of this.

Japanese Yen

The dollar / Yen chart is developing a negative bias (dollar weakness / Yen strength) and the same can be said of the Euro/dollar (not shown). The dollar/Yen has triggered a H&S which should realise more dollar weakness, but at the same time is declining into a reducing wedge which should eventually break up to dollar strength.

Both oscillators are moving to the lower regions of their range which suggest an upward reversal and dollar strength at some stage’

US Treasuries

The US Treasury market is still in a rally with continued extreme investor optimism, although the 10 year yield is bouncing off bottom and may now be close to bottom. Both oscillators are at the bottom of their range suggesting rising yields next, but yield bottom still needs to be confirmed.

Gold

The massive pentagon basing pattern in the gold market stretches back 6 years, with the inviting neckline at $1365 – $1375 already tested numerously. This gold rally is also rising to test the neckline which may or may not succeed. But there is a difference this time in that the start of the next gold bull market will be triggered by the first US rate cut in the next cycle, and it is now virtually a given that this is likely soon, probably in Sep 2019: Especially if equity markets are in a selloff which is forecast for the 2nd half of 2019.

Gold has a breakout from the long term bull flag which has powered price up to start testing long term resistance. The oscillators are still rising, promising more to come.

Silver is still non-conforming with a persistently high gold/silver ratio which is a double-edged sword. A high ratio traditionally indicates lower prices, or will silver finally advance strongly and take the whole complex higher.

The short term 3 month chart illustrates the consolidation above the recent breakouts, in a setup inviting further price increases. The one negative is the oscillators at the top of their range, suggesting lower prices next.

The Gold COTS data is available only every Friday and therefore this chart is nearly a week old. But the data indicates Large Speculators trending up (green) and Commercials trending down (red) which are both gold bearish. Therefore, based on this, gold should decline from here.

South African Rand

The South African Rand chart indicates further weakness against the dollar. Dollar / Rand is trending up into a broad reducing wedge plus a H&S has activated, both of which indicate dollar strength and Rand weakness next.
However, both oscillators are turning down and there is negative divergence with the MACD, both of which suggest dollar weakness and Rand strength.

HUI / Gold Ratio

The ratio is consolidating after recent advances as US miners continue to outperform the strong gold price. Both oscillators are topping which suggests some kind of retracement next.

GDX US miners ETF

GDX, likewise, has a strong breakout into earlier resistance and is consolidating after the increases. However, the advance includes 2 gaps which, as always, will be closed later on, and the oscillators also are topping out which suggest some kind of retracement next.

DUST US Gold Miners Bear Index

The Dust index is the inverse of GDX nearly exactly, and there is also a consolidation at the triple bottom after the strong decline. A breakout through the triple bottom will be very positive for gold miners.

But, the oscillators are turning up and the 2 gaps remain un-filled, both of which suggest a price rise which is negative for US gold miners.

Silver

Long term silver breaks out of the reducing wedge but continues to languish between support and resistance in a chart which continues to look very negative. Either silver breaks up and starts to rally or the whole precious metals complex is likely to continue towards weakness.

Both oscillators are beginning to turn up, promising perhaps some excitement in silver.

The 3 month daily chart illustrates the breakout of the reducing wedge but with continued weakness back down to top diagonal trend line. Lacklustre silver is likely to get no support from the oscillators turning down.

Silver Miners

Silver miners are consolidating between support and resistance after the breakout. There is no drive to higher prices with oscillators at the top of their range and an un-filled gap still to be filled lower down.

The Silver Cots data, like gold, is available only every Friday and therefore this chart is nearly a week old. But the data, unlike gold, indicates potential price increases. Large Speculators trending down (green) and Commercials trending up (red) which are both silver bullish, even if only mildly so.

Gold : Silver Ratio

The gold / silver ratio continues its relentless rise, closing slightly higher at 90.61. This continues to reflect the silver underperformance of gold which is negative for the whole precious metals complex, seemingly endlessly.
But, it is a double-edged sword, and the ratio will correct down at some point although not any time soon. The oscillators are elevated and could therefore start declining soon.

General Equities
The Elliott Wave view of US equities, using the Dow Jones as a proxy, illustrated last week the continued enormous topping pattern end play towards a final market top in the next year or two. We will use this template as a guide against which to measure ongoing performance which at the moment is exactly correct.

US equities of course are a proxy for world markets and as they perform so too will world markets (on average) follow.

The market is at the moment moving up towards D during this month (Jun 2019) and is likely to traverse the complete ABCDE pattern before then strengthening from (4) to finally reach market top at (5) probably at the end of the year 2020.

A more detailed view of this is illustrated below.

  1. Dow rises to D this month Jun/Jul at a new high 27000;
  2. Declines to E (4) by Dec 2019 approx. 20000;
  3. Advances to (5) by Dec 2020 approx. 28000;
  4. This is the final market top;
  5. Start of major collapse in early 2021;
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