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Weekend Market Analysis 8 Oct 2017

Oct 8th, 2017

Conclusion

International markets remain elevated in a powerful bull trend but continue to show signs of a correction soon, with prominent negative divergences. The bond market continues to edge lower in anticipation with the US Treasury 10 year yield inching up to 2.37%.

The US$ continued with some strength in its mini-bounce but has hit resistance in touching its previous high just above 94 before closing the week slightly down. It needs to break up decisively above 94 for the rally to gain momentum. The US jobs report indicated 33 000 jobs lost because of the hurricane season (especially Harvey damage in Texas), and this prompted Dollar weakness into the close.

Gold responded inversely with some strength into the close but with a stronger silver close and even stronger close in the gold miners. The gold market is now reaching the end of its final approach to the start of the next leg up in the bull market. Technical analysts are now confidently predicting a breakout to $1400 before year end with a powerful run up to $1800 and beyond in 2018.

One of the powerful impacts supporting this concerns China’s intention to switch from its oil imports for US$ to oil imports for Yuan, convertible to gold at the Shanghai Gold Exchange. This is to commence at the start of 2018 and will have powerful and wide-ranging impacts on a number of fronts which may be the catalyst for massive changes in the financial and monetary world. This is a game changer.

 

US$

The US$ mini-bounce hit resistance at the previous high, just above 94, and remains poised to either break up or down. It needs to break out above this resistance decisively to provide momentum to the rally up to 50-Wema, or potentially continue down through support to much lower levels. The oscillators are moving up to support the former.

 

 

The Dollar daily chart illustrates penetration up and the reversal down from resistance at the previous high just above 94. However, the short term oscillators are high and due to drop. The coming week is critical in defining continued direction.

 

 

US$ / Jap Yen currency pair

The Japanese Yen closed the week on a Shooting Star candle which suggests some Yen strength in the coming week. This is supported by the oscillators which are beginning to move down. However, penetration down through support lines (blue), as indicated, is required to prompt higher gold prices.

 

 

Gold

The long term chart illustrates the gold price correction down to re-test the resistance line. This is holding, for now, together with the new bull market support line much lower down.

 

 

The short term chart illustrates the current correction down, penetrating support lines and reversing at 200-Dema at $1265. The oscillators support the reversal in beginning to turn up from low points.

 

 

The gold market is now reaching the end of its final approach to the start of the next leg up in the bull market. Technical analysts are now confidently predicting a breakout to $1400 before year end with a powerful run up to $1800 and beyond in 2018.

One of the powerful impacts supporting this concerns China’s intention to switch from its oil imports for US$ to oil imports for Yuan, convertible to gold at the Shanghai Gold Exchange. This is to commence at the start of 2018 and will have powerful and wide-ranging impacts on a number of fronts which may be the catalyst for massive changes in the financial and monetary world. This is a game changer.

It might be good to remember gold moves in cycles and you see this in a recent 20 year chart, with:

  • 8 year cycles (in blue);
  • each cycle followed 11 years later by a significant high (in red);

Expect a significant high in Dec 2019 (give or take 3-6 months either way) probably somewhere in the vicinity of $4 000.

 

 

GDX US miners ETF

Gold miners (in the US GDX) continue ahead of the gold curve in rallying up from 200-Dema and closing the week with a bullish Engulfing candle. This is supported by the oscillators turning up.

 

 

DUST US Miners bear index

The inverse picture in the US Miners Bear Index (Dust) indicates a similar reversal to GDX, closing the week with a bearish Engulfing candle (bullish for gold). This is supported by the oscillators beginning to turn down.

 

 

Silver

The silver price, which tends to lead gold, is turned up from the bottom of the region of support just below 200-Dema, together with supportive oscillators beginning to turn up.

 

 

General Equities (Dow Jones)

The longer term weekly 2 year chart of the Dow illustrates the powerful bull market in the US, but it also illustrates a number of characteristics which point to a major correction soon:

  • The upward thrust in 2017 is in a bearish rising wedge;
  • During this time the MACD is in a negative divergence;
  • Both oscillators are very high and due to turn down;
  • Volumes in the Dow have reduced markedly in the 2 year view;

All this points to a major correction soon.

 

 

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