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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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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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