Home > Currency, Equity, Gold > Weekend Market Analysis 12 February 2017

Weekend Market Analysis 12 February 2017

Feb 12th, 2017

The value of the US$ is usually pivotal to the world financial status, but at the moment it seems to be even more critical given the start of a tumultuous Trump administration in a world of geo-political sensitivities.

World events and the gold 8 year cycle low have impacted on the precious metals complex in resuming the next leg up in a new bull market which has seen positive price movements from the low in Dec 2015. These included a positive first half and negative second half in 2016 with the resumption of price increases from Dec 2016 which, critically, left Dec 2016 a higher low than the Dec 2015 low.

2017 has thus far been all positive and the analysis below investigates where this might lead. Key to this are the sensitivities impacting on US$ value.

US$

The US$ broke up through a triple top 2 year consolidation which indicated a much higher upside target except for the utterances of Donald Trump who wants a lower Dollar which has in fact lost 3% since.

The triple top breakout has lost its validity because of the breakback, and in fact when you view the bigger picture you can see a broadening megaphone pattern indicating the Dollar repeatedly reaching for the top trendline with limited upside to about $105, but with much downside potential.

The US$ is however now enjoying an upwards correction which can be seen in the short term 2 month chart. The US$ has 4 consecutive closes above 10-Dema and has broken up through 20- and 50-Dema as well. The weekly chart indicates a bullish engulfing candle with more upside to come, but crucially, the precious metals complex has not responded to this rise yet.

Gold price

The gold price low in Dec 2015 and Dec 2016 indicates a higher low with upward sloping support trendline increasing evidence that the 8 year cycle low has already been reached. Price increases since Dec 2016 are now overdue a downwards correction in line with the current US$ upwards correction with price at resistance at the Oct low of $1243 (as well as 200-Dema). The oscillators are also in the sell zone to support this.

The short term 2 month chart illustrates the strong price climb from the 20 Dec 2016 low including some 34 business days. Although price tested 10-Dema and support at $1219 on Friday it did not penetrate, but nevertheless has diverged from a strong silver price in turning slightly softer. In doing so it has created a bearish Evening Star candle which suggests downside potential.

All this has happened in the face of a stronger US$ and it now becomes imperative that the gold price aligns with the stronger silver price and in fact follows through in the coming week to new highs above $1243 otherwise the overdue downwards correction will become a reality.

Silver price

Silver has had a strong 7 week price advance and has reached resistance in its region of maximum historic resistance as well as the top resistance trendline in the megaphone pattern, as well as the 200-Wema (not shown on this daily chart). All the oscillators are in the sell zones.

As with gold, the short term 2 month chart illustrates the strong price climb from the 20 Dec 2016 low, but unlike gold it produced a bullish Engulfing candle on Friday and shows no sign of decline.

Also as with gold, this has happened in the face of a stronger US$ and it now becomes imperative that the silver price follows through in the coming week in breaking through resistance to new highs above $18 otherwise the overdue downwards correction will become a reality.

US General Equities

US general equities, as embodied in the S+P500, continue rising to new highs from the initial breakout in Jul 2016. The 2 year chart illustrates how the price advance from beginning 2016 forms a bearish ‘rising wedge’.

The short term 2 month chart illustrates new higher highs and new higher lows which suggest increased prices for the next period.

Conclusion

The US$ is enjoying an upwards correction with potentially more upside to come which the precious metals complex is not as yet responding to. Gold and silver prices are enjoying a strong price advance from the lows of Dec 2016 and are overdue a downwards correction in line with the US$ advance.

Gold and silver prices have reached resistance levels and either they respond by breaking through to new highs in the coming week or they will succumb to Dollar strength in downward corrections.

US general equities as embodied in the S+P500 will continue rising to new highs in the next period.

 

Categories: Currency, Equity, Gold Tags:
Comments are closed.