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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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Midweek Market 6 Jun 2019

Jun 6th, 2019 No comments

Executive summary

Last week, trade wars went into high gear as surprising news followed more surprising news. First, President Trump insisted that Mexico stop illegal immigration into the US as he told the world about his plan to keep increasing tariffs on Mexico. Then with no hint of relief he insisted that China stop intellectual theft and other malpractices according to international rules and laws. Finally, the US Fed discussed potential interest rate cuts with investors aggressively increasing bets on the effect of such monetary easing. This caused severe drops in the US stock market and a big rise in the Gold price with US treasury yields spiking down further.

Expect the unexpected in the next 6 months. We are getting closer to the next major significant monetary event which will take the world to the edge of the abyss, when gold will swamp the monetary base.

US equities continue in the end play towards a final market top in the next year or two as the enormous topping pattern plays out. Using the Dow Jones as a proxy for US equities the markets are 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 US dollar index continues to increase into the barrier pattern which may take value close to $100.00, although with a notable decline currently which has prompted the even more notable gold rally up towards long term resistance. While this balance may persist a while longer, it does appear the rally in gold, silver and mining stocks is temporary and that weakness will return until the dollar barrier pattern plays out.

US Dollar

The US dollar index continues to advance into the rising wedge and well ahead of the MAs. The chart is positive and looks set to advance higher until the dollar finally breaks down through the pattern to ultimate weakness.

The dollar rally in the barrier triangle pattern is set to clear the Apr high and move towards a level $100.00, provided the red support lines are not violated. Dollar strength is primarily the reaction to market tension and volatility as a perceived safe haven to the threats. From an Elliott Wave point of view the advance will complete the corrective (A)(B)(C) which will complete anywhere between the Apr peak and the region of $100.

The short term 3 month chart illustrates dollar weakness this week down through both 10- and 50-Dema, although ending on a bullish Hammer candle. Both oscillators appear to be turning in the bottom regions..

Japanese Yen

The Yen strengthened this week in line with current dollar weakness, in a chart that looks amazingly Yen positive for a currency that is most printed and in an economy that has been virtually stagnant since 1990. This Yen strength coincides with recent gold strength, both of which are likely to weaken as the dollar barrier pattern plays out, followed later by dollar weakness.

US Treasuries

The US Treasury 10 year yield may now be close to a bottom especially after the frenetic declines this week, with both oscillators at the bottom of their range. The rally in the US bond market is countertrend and cannot go on forever with potential for the upward reversal now beginning to develop.

US Yield Curve

This week saw a wild bounce in the US treasury yield curve as shorter term treasury yields plummeted faster than longer term yields. This is all pushing the US Fed toward a potential rate cut later this year which is one of the powerful financial market triggers.

Gold

Gold has a breakout from the long term bull flag which has powered price up toward long term resistance. The bearish closing candle with a long shadow above is similar to all the previous peak candles which indicates this is also a potential peak. But the advance has been strong and is likely to maintain price levels a while longer, especially with the oscillators still rising.


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 advance strongly and take the whole complex higher.

Daily gold 12 month chart illustrates the bullish breakout and the bearish closing candle forming a double top.

South African Rand

The South African Rand finally has a breakout to weakness as it also activates an inverted H&S that has been developing these last 8 months. More weakness is likely, especially if the US dollar continues to play out into its strengthening barrier pattern.

HUI / Gold Ratio

There is a strong breakout back up into earlier resistance, with US miners outperforming gold this week. Both oscillators are topping which suggests some kind of retracement next.

GDX US miners ETF

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

GDX weekly data illustrates the strong breakout back into the earlier range-bound region. This indicates that current price is actually quite normal and with rising oscillators there is potential for higher prices.

DUST US Gold Miners Bear Index

The Dust index is the inverse of GDX nearly exactly. There is also a strong breakout through earlier support to create a triple bottom, and if that is breached it will be very positive for gold miners.

Silver

Long term silver breaks out of the reducing wedge but price still languishes 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.

The 3 month daily chart illustrates the breakout of the reducing wedge but with two negative ending candles. The oscillators are also topping and do not suggest anything exciting.

Silver Miners

The silver miners have broken out of the bull flag to end the carnage. But there needs to be follow through and the advance includes a gap which will need to be closed. Prices need to advance much further to produce any kind of potential for silver itself.

Gold : Silver Ratio

The gold / silver ratio continues rising overall within the rising wedge pattern, to close higher still a 90.16. This reflects the continued silver underperformance of gold which is negative for the whole precious metals complex, seemingly endlessly.

General Equities
US equities continue in the end play towards a final market top in the next year or two as the enormous topping pattern plays out. An Elliott Wave view of the Dow Jones Industrial Average sees the index topping finally at the end of 2020 after some ups and downs up to that point. This is illustrated below.


There may well be a number of variations to this basic view.

The market is likely to traverse the ABCDE pattern to then strengthen from (4) to finally reach market top at (5). This will include arriving at D (approx. Jun/Jul) at a new high, after which the rest of 2019 will endure a severe drop to E (approx. Dec 2019), after which the final rally will take the Dow to yet another new high at (5) which will be the final market top during Dec 2020.

A more detailed view of this is illustrated below.

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Midweek Market 23 May 2019

May 23rd, 2019 No comments

Executive summary

Markets are likely to witness increased volatility in the next period of weeks and months which just might become the norm throughout the rest of 2019. Current EU elections and continued Brexit turmoil, plus the deteriorating stance between China and the US will drive initial price volatility. Also the political fervour in the ramp up to the US 2020 presidential election is building to the most hotly contested election in decades.


Markets are increasingly reacting to all this across the spectrum in currencies, stock and bond markets, debt levels and rates, precious metals et al., in attempting to balance capital, risk, and reward.


The US dollar index continues to increase in the short term towards the region of $100.00 which is the prime driver of weaker precious metals and miners. Potential decline in US equities has the major indices reacting in differing ways with differing short term options, as the grind towards the final market collapse edges closer.

US Dollar

The US dollar index continues to advance into the rising wedge and well ahead of the MAs. The chart is positive and looks set to advance higher.

The dollar rally in the barrier triangle pattern is set to clear the Apr high and move towards a level $100.00, provided the red support lines are not violated. Dollar strength is primarily the reaction to market tension and volatility as a perceived safe haven to the threats. From an Elliott Wave point of view the advance will complete the corrective (A)(B)(C) which will complete anywhere between the Apr peak and the region of $100.

The short term 3 month chart illustrates the dollar rising towards the Apr peak after consolidating around 10-Dema. The chart looks positive with all MAs moving up steadily.

It improves perspective to view much longer term charts from time to time. This 40 year weekly chart illustrates the 16 year cycles in dollar value, based on the US presidential election periods every 4 years.


The dollar is in a long term down trend which, if the cycles hold true, is likely to witness dollar value dropping towards the cycle bottom in the low $0.60 late in 2024. This coincides with reciprocal gold strength which will occur at the same moment.

Japanese Yen

The Yen weakened significantly this week in line with the dollar advance as the US$ barrier triangle continues play out to completion. This Yen weakness coincides with recent gold weakness.

US Treasuries

This is a 40 year weekly chart of the benchmark US Treasury 10 year yield, highlighting the bottom formation signalling the end of the 35 year US bond bull market. It includes a powerful inverted dome bottom including a double bottom which is likely to advance yield into the long term bond bear market once the neckline is breached. This will include an initial phase of increasing yield by the depth of the dome towards yield of 6.0%.


There was a false breakout in late 2018, and the current countertrend bond rally (seen in the dangling dogleg since then) needs to complete with a reversal and subsequent breakout through the neckline to confirm everything.

The 5 year weekly chart illustrates the extent of the yield countertrend decline which is all but complete. Both oscillators are in the lower regions of their range and indicate the potential for the needed reversal.

The yet shorter term 1 year chart details the countertrend yield decline and the potential for the upward reversal which seems likely any time soon.

Gold

This is a 50 year chart of the gold : SPX (proxy for the S+P500 index) ratio which illustrates performance of one against the other. The two are opposite in content, value, and investor confidence, in that gold is a hard asset and the S+P500 is an investment based on a fiat-based currency, the dollar. You cannot therefore have peaks / troughs in both at the same time, and a gauge of gold value is improved when the S+P500 is doing badly, and vice versa.


The peaks Red) are the gold peaks in 1980 and 2011 and troughs (blue) are when Nixon de-linked the dollar from gold convertibility in 1971 and the US tech bubble in 2000. The final black circle is now.


The first blue circle in 1971 was the start of the 1st gold bull market and the 2nd blue circle the start of the 2nd gold bull market. The 2 red circles represent the start of the 2 gold bear markets, which follow the end of bull markets.


The black circle will turn blue if the S+P500 collapses and red if gold collapses. The blue moving average is a very long term 200-Wema (equivalent to 800 day moving average) which triggers the bull / bear markets at the cross over. It can be seen in the tail of the graph that gold potential is beginning to develop even before any equity collapse.

This is a 6 year weekly chart of the gold ; 10 Year US bond price ratio which has been constructing a 6 year bottom formation. It will trigger as the ratio breaks through the neckline. The ratio advances as gold rises and the bond value drops, and vice versa. Therefore, as the bond countertrend rally completes, yield will advance and value will drop. Even a casual glance at the chart indicates this is about to occur any time soon.

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

Weekly gold continues decline into the bullish flag pattern which will break up and advance once the dollar completes its barrier cycle advance. The oscillators are still declining with the Slow Stochastice at the bottom of its range.

Daily gold continues its relentless decline into the reducing wedge as a threatening H&S develops. More downside looks likely.

The 3 month chart illustrates gold’s decline this week ending in another break below 200-Dema.

The gold volatility index is flat to continuing down. Investors are not getting excited by events which presupposes more of the same to come.

South African Rand

The South African Rand is moving sideways and looking relatively stable against the dollar, as it develops 2 channels in the chart, one bullish and the other bearish. Price is above the MAs (bearish) and there does not appear to be many other technical reasons for movement either way. Therefore, with the elections completed, movement is likely to be dollar driven and not Rand driven.

HUI / Gold Ratio

US miners continue to grossly underperform weak gold as the ratio completes 25 consecutive closes below 10-Dema. The ratio is oversold but with more gold downside any correction seems unlikely. Both oscillators are bottoming which suggests some kind of a bounce is possible.

GDX US miners ETF

GDX is consolidating (on reduced volume) just above the neckline of a developing H&S pattern, which if triggered is likely to take price much lower. The ETF is at a critical bearish moment with a tipping point close at hand.

DUST US Gold Miners Bear Index

The Dust index is the inverse of GDX nearly exactly. It is also at a critical bullish moment with a tipping point close at hand. If this is triggered it will be very bearish for gold and miners.

Silver

Silver continues to move down into the reducing wedge, breaking down into previous support in a chart with very negative bias.

The 12 month chart illustrates silver dropping further down into the reducing wedge pattern, as silver becomes acutely oversold.

The 3 month chart illustrates the decline accelerating further down into a prolonged reducing wedge. There may be some sort of bounce from here, but unlikely.

Silver Miners

The silver miners carnage continues in a near vertical decline. Like gold miners, this can only be extremely negative for the metals.

Gold : Silver Ratio

The gold / silver ratio continues rising overall within the rising wedge pattern, to close higher at 88.19. This reflects the continued silver underperformance of gold which is negative for the whole precious metals complex, seemingly endlessly.

General Equities

Potential decline in US equities has the major indices reacting in differing ways with differing short term options, as the grind towards the final market collapse edges closer.

The Dow Jones has 2 short term options:

  1. Drop from here by about 20% to a level of 20000 before the end of 2019;
  2. Advance from here to 27000 soon and to drop from there by about 26% to a level of 20000 before the end of 2019;

From there the Dow Jones has 2 mid-term options:
1 To start a major collapse directly from there in early 2020;
2 To first advance from there to 28000 by the end of 2020 and to start a major collapse from there in early 2021;

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Midweek Market 9 May 2019

May 9th, 2019 No comments

Executive summary

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

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


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

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

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

US Dollar

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

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

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

Japanese Yen

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

US Treasuries

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

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

US Yield Curve

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

Gold

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

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

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

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

South African Rand

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

HUI / Gold Ratio

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

US Miners Matrix

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

Silver

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

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

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

Silver Miners

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

Gold : Silver Ratio

The gold / silver ratio continues rising overall within the rising wedge pattern, to close slightly lower at 86.22. This reflects the continued silver underperformance of gold which is negative for the whole precious metals complex. The rising wedge pattern continues and seemingly has a way to go yet which presupposes continued lower precious metal prices.

General Equities

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

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

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Midweek Market 2 May 2019

May 2nd, 2019 No comments

Executive summary

How overvalued and dangerous is the US market? To answer that question you could look at one or two pertinent ratios.


The age old Warren Buffet measure of total US market cap to GDP ratio is currently at 145% which is a full 30% higher than it was before the start of the Global Financial Crisis in 2007. Another metric is the Household Net Worth to GDP Ratio which is calculated by dividing current total value of US home prices + equities by the underlying economy. This is now at an incredible 535% of GDP, all artificially inflated by interest rates that have been pushed down toward zero. This is also a record and 19% higher than at the Nasdaq bubble of 2000, compared against the historical average of 384%.


But the markets remain elevated, seemingly forever.


Equity markets continue to edge up towards the top with the Dow Jones now at a triple top and indicating classic symptoms of exhaustion and trend change, along with continued extreme optimism and euphoria. Also, US Treasuries have perhaps not normalised yet in resuming their long term bear market in that yields are not increasing with any noticeable momentum.

Meanwhile, the US Federal Reserve has just completed its FOMC meeting and remain in the midst of their ‘pause’ on interest rates, while they continue to rethink the perilous strategy of triggering lower interest rates to raise inflation and economic growth (which is failing everywhere else). This, in the glare of President Donald Trump’s ongoing pressure to cut rates and pile on the QE, while he points to China’s approach to stimulating its economy.


All the above certainly provides food for thought, and is causing some to now believe that this situation is going to continue for longer than originally thought. Markets may well continue longer before finally topping out.

The US dollar continues to increase overall although this week retracing some of the earlier advance. The index still looks set to increase up towards $100.00 or above but, once complete the dollar will resume its long term weakening trend.


Precious Metals and miners continue their weakening trend which is not complete. This is likely to extend declines before completing the down cycle in due course.

US Dollar

The US dollar index continues to increase into the rising wedge although retracing some of the earlier advance. The oscillators are rising and price is well ahead of all the MAs and looks set to move higher.

The dollar barrier triangle pattern has broken back below the BD horizontal to end in a bullish Hammer-type candle, indicating the next moves to be up. This could result in a more complex wave 3 of (C) which is still likely to catapult the dollar index up to $100.00 or higher, providing the red support line at 2 holds. This will complete the corrective (A)(B)(C) before the next impulsive 5 wave down.

The short term 3 month chart illustrates the partial retracement down to the bullish Hammer-type candle which is more likely to increase dollar value in the next period.

Japanese Yen

The Yen continues to weaken against the dollar in the expanding wedge formation, despite strengthening in the last 10 trading days. The Yen will continue to weaken as the US$ barrier triangle plays out to completion.

US Treasuries

The benchmark US 10 year Treasury yield bottomed at the start of April before launching into the usually longer and stronger Elliott Wave 3, which is at present enduring increased retracement pressure down as wave 3 struggles to gain momentum. This is caused principally by the threat of US recession and the onset of more modern monetary theory applied in potential QE later in 2019.


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

US Yield Curve

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

Gold

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

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

The bearish dome top formation and neckline, incorporating a H&S as well, has pushed the gold price below the neckline. Gold has consolidated below the neckline, having increased back to test, where it is likely to still drop down below 200-Dema into the support zone.

The 3 month chart illustrates gold’s increase back to test the neckline before ending on an indecisive red candle. Price needs to drop below 200-Dema if it is to drop down into the support zone. There is potential for partial price retracement in the short term back up to diagonal resistance.

South African Rand

The South African Rand weakened against the dollar up into earlier resistance before strengthening marginally. Despite this, the oscillators are mixed which indicates some dithering ahead. But with more dollar strength in the next period further Rand weakness seems likely.

HUI / Gold Ratio

The ratio dropped 12% in the last 25 trading days, with multiple breakdowns in the last 10 trading days. So US miners have underperformed weak gold significantly. It is well below the MAs and looks set to continue down, except the oscillators are also well down which could precede a bounce in the ratio.

US Miners

The chart includes the HUI Index, GDX ETF, and the Dust Bear Index, each with dome formations and necklines. The support lines are all penetrated with price back to test followed by further penetration. The top two have penetrated 200-Dema and Dust is about to penetrate also. This is not a positive picture and further declines in US miners are expected, which additionally impact negatively on metal prices.

Silver

Silver continues to move down into the reducing wedge, breaking down into the earlier support zone. This continues to display as a very negative bias chart. Although the Slow Stochastic is close to the bottom of its range, the MACD is virtually still at its mid-point with much downside still available.

The 12 month chart illustrates silver dropping further down into the reducing wedge pattern, as price moves toward the triangle apex. Price is below the MAs and multiple breakdowns have occurred as the earlier support zone is penetrated.

The 3 month chart illustrates the decline range as well as the multiple breakdowns in momentum that remains decidedly down.

Silver Miners

Silver miners, like US gold miners, are poised to break lower.

Gold : Silver Ratio

The gold / silver ratio continues rising overall within the rising wedge pattern, to close yet higher at 87.19. This reflects the continued silver underperformance of gold which is negative for the whole precious metals complex. The rising wedge pattern continues and seemingly has a way to go yet which presupposes continued lower precious metal prices.

General Equities

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

Meanwhile, the US Federal Reserve has just completed its FOMC meeting and remain in the midst of their ‘pause’ on interest rates, while they continue to rethink the perilous strategy of triggering lower interest rates to raise inflation and economic growth (which is failing everywhere else). This, in the glare of President Donald Trump’s ongoing pressure to cut rates and pile on the QE, while he points to China’s approach to stimulating its economy.
All the above certainly provides food for thought, and is causing some to now believe that this situation is going to continue for longer than originally thought. Markets may well continue longer before finally topping out.
So, if it is simply a matter of preparing for the collapse and waiting, the wait might take longer and may even extend through towards 2021.

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Midweek Market 25 April 2019

Apr 25th, 2019 No comments

Executive summary

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


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

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


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

US Dollar

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

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

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

Japanese Yen

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

US Treasuries

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

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

Gold

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

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

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

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

South African Rand

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

HUI / Gold Ratio

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

US Miners Matrix

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

Silver

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

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

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

Silver Miners

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

Gold : Silver Ratio

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

General Equities

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

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

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Midweek Market 18 April 2019

Apr 18th, 2019 No comments

Executive summary

Charles Dow once wrote, “To know values is to know the meaning of the market.” That quote may surprise many analysts, because Dow’s work is usually thought of as nothing more than divergence in the Dow Jones Industrial and Transportation averages. But Dow’s actual views, best elaborated by writers like Robert Rhea, were actually about something much more fundamental: Identifying the position of the market in its complete bull or bear cycle. That’s a concept that investors have forgotten, encouraged by the illusion that the Federal Reserve’s buying of Treasury bonds is capable of saving the world. That illusion is likely to prove costly.

Probably the most useful exercise we can do at present is to examine where the US markets are in their respective cycles.


Robert Rhea in 1932 wrote the following in The Dow Theory:
There are three principal phases of a bull market:
• 1st is represented by reviving confidence in the future of business;
• 2nd is the response of stock prices to the known improvement in corporate earnings;
• 3rd is the period when speculation is rampant – a period when stocks are advanced on hopes and expectations.

There are three, and opposite, principal phases of a bear market:
• 1st represents the abandonment of the hopes upon which stocks were purchased at inflated prices;
• 2nd reflects selling due to decreased business and earnings;
• 3rd is caused by distress selling of sound securities, regardless of their value, by those who must find cash.

The recent bull market clocked in as the longest in history, already exceeding those leading to the 1929 and 2000 peaks. There is little doubt that the market is long into what Rhea described as the final phase of the bull market; “the period when speculation is rampant – a period when stocks are advanced on hopes and expectations.”


However, that doesn’t preclude a temporary improvement in the US economy and markets. China is stimulating again, and global equities have recovered with the Dow (and others) on the cusp of a new high. This all means a US Fed rate cut in the next 12 months is less likely, although still not unlikely.

Precious Metals are now beginning to look more bearish on these changing expectations plus higher highs in equities and some increased stabilization in the economy.

US Dollar

The US dollar index continues to drift sideways into the triangle apex, as it continues to strengthen overall within the rising wedge pattern. Price is well ahead of all the MAs and looks set to move higher in the next up cycle.

The dollar has formed a barrier triangle pattern since Sep 2018 which is, technically, set to catapult the dollar index up to $100.00 or higher, providing E(B) holds and is not penetrated on the downside. From an Elliott Wave point of view price has established the (A) (B) at E and is constructing the 1-2 in the 5 wave rise to (C). After completion of 2 the wave turns up to the longer and stronger 3 leading on to complete the corrective Elliott Wave (A)(B)(C) before the next impulsive 5 wave down.

The dollar is beginning to cycle up after the recent down wave which should increase momentum after the bullish Hammer candle. Price is above 200-Dema and both oscillators are beginning to turn up in support of higher prices.

Japanese Yen

The Yen weakened up through penetration of the diagonal resistance in accordance with the stronger dollar, which should continue as the US$ barrier triangle plays out to completion. Therefore the Yen will continue to weaken well up into the resistance region, together with the implications for a weaker gold price.

US Treasuries

The benchmark US 10 year Treasury yield has bottomed and is increasing as US bond values weaken. The Elliott Wave 1-2 is now launching into the longer and stronger wave 3, having bottomed at 2 C(circle) (5). This should increase yield to above the Feb 2019 high and potentially even the Oct 2018 high.


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

Gold

The gold price dropped this week in resuming creation of the next cycle low which should complete within the indicated red circle, in the region of $1250-$1225. As the US$ index strengthens towards $100.00 and beyond so too will the gold price drop down into its cycle low. The next up cycle may well take gold to the $1500 region later in 2019.

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

The 12 month chart illustrates the bearish dome top that has formed, indicating further downside to come. There have now been multiple penetrations with every indication the gold price will descend well into the support region.


Gold has penetrated 200-Dema, the diagonal support, as well as an incline H&S pattern, and these together with the dome top should propel price further down.

The short term 3 month chart illustrates the decline acceleration and the penetrations. Penetration of 200-Dema removes the earlier divergence with silver which penetrated 200-Dema some while ago.

South African Rand

The South African Rand is consolidating in the region of confluence with the MAs, after strengthening over the last 3 weeks. This reflects also as a sideways move over the last 6 months, which might now weaken as the dollar barrier triangle pattern plays out to completion.


The Rand is positioned between support and resistance, but above 200-Dema, and the balance of probabilities with oscillators beginning to bottom and turn up suggests weakness before strength.

HUI / Gold Ratio

The ratio turned down to support and is threatening to break down further. It is below the MAs and the oscillators are dropping in support of further downside. This translates into weaker US miners compared to the weaker gold price, and could be the end of the 7 month rally in US miners.

US Miners Matrix

The chart includes the HUI Index, GDX ETF, and the Dust Bear Index, which illustrates the potential break line and the dome top pattern which indicates the likely penetration of the break line.


The HUI penetrated 200-Dema, the GDX not quite, and Dust not yet, but it seems that penetrations will occur nevertheless. It portrays a somewhat sombre picture of US miners in relation to a dropping gold price in the short term.

Silver

The 3 year chart continues to have a well-defined negative bias and silver continues to drift down further in the reducing wedge. Price has broken down into the support zone, just, and with dropping oscillators indicating further price declines.

The 12 month chart illustrates silver dropping further down into a reducing wedge pattern, as price moves toward the triangle apex. In the nature of a reducing wedge pattern, silver may enjoy a bounce before further declines although this is unlikely.


Silver actually outperformed gold in the last 4 of the last 5 days and the Slow Stochastic has turned up at the bottom of its range. But if there is a bounce it will soon be followed by further declines.

The 3 month chart illustrates silver breaking down to lower levels and below the MAs., although with comparatively stronger 4 days out of the last 5. The momentum is decidedly down to lower prices. Also, the silver miners chart is decidedly negative which is bearish for silver (see next).

Silver Miners

Silver miners, like US gold miners, also displays a bearish dome top and penetration of the break line. There are other breakdowns including 200-Dema, and diagonal support line with every indication of lower prices to come.


It portrays a somewhat sombre picture of US silver miners in relation to a dropping silver price in the short term, although the Slow stochastic is turning up at the bottom of its range.

Gold : Silver Ratio

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

General Equities

US equities remain elevated, characterised by a number of contrary indications pointing to a market top and pending trend change. There include continued lower volumes, lower volatility, higher optimism and positive sentiment, which are all classic symptoms of exhaustion and pending trend change at the market top.


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

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Midweek Market 11 April 2019

Apr 11th, 2019 No comments

Executive summary

Commentary remains similar to last week, with US equities remaining elevated, characterised by a number of indications pointing to a market top and pending trend change. There are noticeable divergent non-confirmations between major indices and continued euphorically high investor sentiment, with every indication the US rally is in the late stages of maturation supported by overwhelming fundamental evidence of impending collapse.


The global economic slowdown is a reality with recession in some parts and the threat of recession in others. The US yield curve has inverted in very short term treasuries with the formal 10 year to 2 year still threatening, and recession in the US is expected later in 2019. The US bond market has started to normalise again, with prices declining and yields increasing, after the 5 month countertrend correction.


Global markets are sensitive to the US dollar which at the moment has had a down week in its progression through a strengthening phase. This has provided impetus to the gold market which has, correspondingly, had an up week as it progresses through a weakening phase. Markets continue to discount the US Fed’s first rate cut in the next cycle and this will assist the gold price during the remainder of 2019.

US Dollar

The US dollar index is drifting sideways as it continues to strengthen overall within the rising wedge pattern. Price is well ahead of all the MAs and looks set to move higher in the next up cycle.

The barrier triangle pattern is developing strongly to catapult the dollar up to $100.00 or higher, providing E(B) holds and is not penetrated on the downside. As the cycle turns up it will create the 1 – 2 leading to the longer and stronger 3 up leading on to complete the corrective Elliott Wave (A)(B)(C) before the next impulsive 5 wave down.

The dollar moved down this week but remains well above 200-Dema, in preparation for the next up cycle. Both oscillators are dropping and the turn up may be stalled a while.

Japanese Yen

The Yen strengthened down from resistance in accordance with the weaker dollar last week. As the US$ barrier triangle plays out to completion, so too will the Yen continue to weaken well up into the resistance region, together with the implications for a weaker gold price then.


Both oscillators are turning down suggesting the reversal will not be immediate.

US Treasuries

The benchmark US 10 year Treasury yield has bottomed and turned up, reluctantly. Once the yield rise gains momentum, creating the 1-2, so then will the Elliott Wave wave 3 start a longer and stronger rise that will eventually test the Feb 2019 high and potentially even the Oct 2018 high.


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

US Yield Curve

The official US yield curve calculated on the 10 year and 2 year is still drifting sideways at 1.074, and is still some way off the inversion trigger at 1.0 or below. There is probably little doubt that global recession is coming and the media hype of inversion (usually indicating recession) is due to the shorter term Treasuries such as 2 month and 3 month, etc.

Gold

The next major 6-month cycle low in the gold price is still far from complete. As the US$ index strengthens towards $100.00 and beyond so too will the gold price drop down into its cycle low, probably in the region of $1250 to $1230. The next up cycle may well take gold to the $1500 region later in 2019.

Gold enjoyed an up week which extended the sideways drift, before starting the descent to the 6-month cycle low. Both oscillators are dropping in support of this potential decline.


US miners (GDX, HUI, etc) have enjoyed a 7-month rally which has been positive for the metal, but silver continues to underperform gold which is negative and even negative for the whole complex.

The 12 month chart illustrates the gold price moving towards the triangle apex, at the underside of diagonal resistance, and with the good price move up this week it is now well above the MAs. But with a cycle turn up in the US$, gold is likely to still drop down into the support zone despite oscillators rising.

The short term 3 month chart illustrates the minor breakout through diagonal support, which silver has not managed to do. This is another indication of the negative divergence in the two metals and the likely further drop down into support.

South African Rand

The South African Rand strengthened 6.5% against the dollar in the 2 weeks from $14.76 when Moody’s held the rating unchanged. This of course also included generic weakening in the dollar, and with the oscillators also dropping appropriately, the Rand is now vulnerable to the next weakening cycle and dollar strength.


As the US$ gains disproportionate strength, as forecast, so too will the Rand weaken: Perhaps significantly.

HUI / Gold Ratio

The ratio continued a gradual increase along the incline channel in a 7-month rally of improved US minor performance against gold. The MAs provide support in a chart that displays a positive bias that has in fact impacted positively on the gold price itself. This is now vulnerable to a potential significant reversal.

HUI Index

The HUI index itself is behaving in similar fashion with similar commentary.

GDX US miners ETF

The GDX 12 month chart is similar to the HUI Index chart, and the commentary is identical.

DUST US Gold Miners Bear Index

The Dust chart and commentary is similar to the GDX chart, except in the opposite direction being a US miners bear index.

Silver

The 3 year chart continues to have a negative bias as against gold’s which does not. Silver continues to move down into a reducing wedge pattern which implies a potential breakout to the up. Price is also just below 50-Wema and well below 200-Wema, as against gold which is well above. So, despite any pretentions to a breakout to the upside, silver is likely to break to the downside with a negative impact on the whole precious metals complex.

The 12 month chart illustrates silver dropping further down into a reducing wedge pattern, as price moves toward the triangle apex. Despite an up week with no breakout, price is still below 200-Dema in maintaining the non-conformance with gold and gold miners as they continue above 200-Dema. This is the prelude to further price declines in Silver as well as the whole precious metals complex.

The 3 month chart illustrates silver breaking down to lower levels and below the MAs., and seemingly on the cusp of a breakout. Gold does have a breakout in its 3-month chart against silver which does not, highlighting again the negative divergence between the metals and silver’s ongoing underperformance of gold.

Gold : Silver Ratio

The gold / silver ratio continues rising to close at 86.19. This reflects the continued silver underperformance of gold which is negative for the whole precious metals complex. The rising wedge pattern continues and seemingly has a way to go yet which presupposes continued lower precious metal prices.

General Equities

US equities remain elevated, characterised by a number of indications pointing to a market top and pending trend change. There are noticeable divergent non-confirmations between major indices and continued euphorically high investor sentiment, with every indication the US rally is in the late stages of maturation supported by overwhelming fundamental evidence of impending collapse.
But, the market has not topped out yet and, from an Elliott Wave point of view, it will not have until confirmation of waves to the downside are confirmed as 5-wave impulsive and those up as 3-wave corrective: No matter how imminent it may seem.

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Midweek Market 4 April 2019

Apr 4th, 2019 No comments

Executive summary

US equities remain characterised by a number of indications pointing to a market top and pending trend change. These include divergent non-confirmations between major indices and investor sentiment euphorically high, both of which indicate the US rally is in the late stage of its advance if not now actually complete. Added to this is the global economic slowdown with recession now a reality in some parts of the G20 with recession also pending in the US. Various US yield curves are beginning to invert, especially with the short term treasuries, and this has signalled loud alerts.


The US bond market has started to normalise again, with prices declining and yields increasing, after the 5 month countertrend correction that ended with short term treasury yields spiking in response to the threat of recession. The US Fed is expected to cut rates some time in 2019, and for this to happen the 2- and 3-month treasury yields need to drop.


The US dollar index is progressing through a ‘barrier’ triangle pattern which is expected to increase value by about 3.5% to 100.00 or above. This will correspondingly put other currencies under pressure as well as gold which is forecast to correct down towards the region of $1250 – $1230. Markets are beginning to discount the US Fed’s first rate cut in the next cycle and this will assist the gold price during the remainder of 2019.

US Dollar

The dollar index continues to strengthen within the rising wedge assisted by the bullish Hammer 2 weeks ago which promised further upside. Price is well ahead of all the MAs and looks set to move higher.

The barrier triangle pattern is developing strongly to catapult the dollar up to $100.00 or higher, providing E(B) holds and is not penetrated on the downside. This will complete the corrective Elliott Wave (A)(B)(C) before the next implusive 5 wave down.


The strong rise from E could well correct down short term before the thrust up continues.

The dollar moved up this week despite the down day yesterday. The Slow Stochastic has turned at the top of its range and the dollar could well correct down somewhat before the rise continues.

Japanese Yen

The reversal break back from the flag breakout has weakened the Yen up to the diagonal resistance line (blue). As the US$ barrier triangle option plays out to completion, so too will the Yen continue to weaken well up into the resistance region, together with the implications for a weaker gold price.

Both oscillators are rising which supports further US$ strength and Yen weakness.

US Treasuries

The benchmark US 10 year Treasury rally has probably terminated with the strong bounce in yield from a potential bottom. If this is the yield bottom, which is likely with the excessively high investor sentiment at 93% bond bulls, then the Elliott Wave wave 3 of 3 is in progress which will take yield higher than the Oct 2018 high (and price lower).

This will resume the earlier collapse in the bond market which has been disrupted by partial ‘inversion’ triggered by activity in the shorter term US Treasuries threatened by the next US recession.

US Yield Curve

The official yield curve calculated on the 10 year and 2 year is still drifting sideways at 1.082, and is still some way off the inversion trigger at 1.0 or below. There is probably little doubt that global recession is coming and the media hype of inversion (usually indicating recession) is due to the shorter term Treasuries such as 2 month and 3 month, etc.

Gold

Gold is traditionally pushed to higher prices by the US Fed cutting rates, and especially by the first rate cut in a cycle. Witness the gold price (top chart) after the Fed first cut rates in Jan 2001, and then again in Jul 2007. Both rate cut cycles pushed the gold price up, but action is really started by the first cut in the cycle.

Now, the US Fed is forecast to cut rates in 2019 (as the recession bites), and some would have it that that is probably going to trigger the start of the next gold bull market. That may or may not be, because in this instance the global financial and monetary conditions are just so much worse.

This is somewhat contradictory, because usually it is argued that gold goes up during inflationary times because values deteriorate during those times. Also, during inflationary times rates are increased to counter inflation, therefore it is said gold goes up when rates go up. Well, the answer is in the evidence and the evidence is in the chart above.

And the evidence says that gold goes up when rates are cut aggressively, and that happens when markets collapse and even more importantly when confidence is lost. And we are going to have enough of that in the next period.

The 5 year gold chart illustrates the historic 6-month cycle lows, with the next cycle low in progress. This and the previous cycle low has been slow in coming (at closer to 8 months) but with the anticipated stronger dollar the next gold low should be factored into planning. Timing is always difficult, but the dollar peak may be reached sooner than we think, and gold may be well supported for the rest of 2019.

The 3 year chart illustrates Gold now dropping down towards its next cycle low. The technicals are suggesting weakness ahead but the fundamentals are starting to turn positive. Markets are starting to discount a US rate cut later in 2019, and this is the trigger for the early beginning of the next gold bull market.

US miners (GDX, HUI, etc) have recently been outperforming gold which has been positive for the metal, but now have started to underperform gold with the opposite and negative impact. But silver has steadily been underperforming gold and, except for very short term corrections, this has been negative for the whole complex.

Gold has a breakout from the bear flag, dropping price down into earlier support, although still above 200-Dema. Price is still likely to drop down further into the support zone.

The short term 3 month chart illustrates the clear breakout from the bear flag, and the likely further drop down into support.

The gold Cots data illustrates the development of dilation between Large Speculators and Commercials which is Gold bearish. Price should drop down further.

South African Rand

The South African Rand has strengthened in breaking down through the rising wedge. Both oscillators are dropping indicating further strength, but as the US$ gains disproportionate strength, as forecast, so too will the Rand weaken: Perhaps significantly.

The Rand is supported at the moment by stabilised Eskom and South African economic and political prospects, plus additional support from a stable Moody’s rating.

HUI / Gold Ratio

The ratio has retraced strongly down to 200-Dema as US miners underperform gold. The MAs are providing support in a chart that still displays a positive bias. Both oscillators are dropping and the ratio is probably going lower.

HUI Index

The HUI index itself is behaving in similar fashion with similar commentary, but with slightly more positive bias.

GDX US miners ETF

The GDX 12 month chart is similar to the HUI Index chart, and the commentary is identical.

DUST US Gold Miners Bear Index

The Dust chart and commentary is similar to the GDX chart, except in the opposite direction being a US miners bear index.

Silver

The 3 year chart continues to have a negative bias with silver breaking down from the bear flag, just. Silver is well below the MAs and is likely test lower support. Both oscillators are dropping in support of this.

The 12 month chart illustrates silver dropping well below all the MAs in maintaining the non-conformance with gold and gold miners as they continue above 200-Dema. This is the prelude to further price declines in Silver as well as the whole precious metals complex.

The 3 month silver chart illustrates silver breaking down to lower levels and below the MAs.

Gold : Silver Ratio

The gold / silver ratio is rising to close at 85.77. This reflects the continued silver underperformance of gold which is negative for the whole precious metals complex. The rising wedge pattern continues and seemingly has a way to go yet which presupposes continued lower precious metal prices.

General Equities

US equities remain characterised by a number of indications pointing to a market top and pending trend change. These include divergent non-confirmations between major indices and investor sentiment euphorically high, both of which indicate the US rally is in the late stage of its advance if not now actually complete. Added to this is the global economic slowdown with recession now a reality in some parts of the G20 with recession also pending in the US. Various US yield curves are beginning to invert, especially with the short term treasuries, and this has signalled loud alerts.

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