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Weekend Market Analysis 1 July 2018

Jun 30th, 2018

Executive summary

Equity markets were down again this week as the world moves into a powerful ‘tipping point’ period. Extremes in sentiment have developed to a degree where, very soon (like next week), reversal patterns will start to reduce US$ value, increase precious metals, and re-ignite the stock market collapse. The dollar rally is complete after peaking at $95.529 as it now begins a period of weakness with, conversely, every evidence of the start of a sustained gold rally having bottomed at $1245.85 on Thursday. On the New York Stock Exchange the 10 week long countertrend rally in the Dow Jones is either complete or should end next week, after which serious declines should follow as the slowly evolving bear market continues to unfold worldwide. Measures of investor optimism remain at elevated levels as the impending threat remains virtually completely unnoticed. The US bond market is probably still in a countertrend rally with a little way to go yet before it too re-ignites into the evolving bear market which started in mid-2016.

 

US$

The US$ has a confirmed top after peaking at $95.529 and is likely now to move lower through a period of weakness. The chart pattern still needs to develop further before more accurately determining the extent of weakness, but a previous low sits at $93.80 with a broader support zone below that.

The oscillators are turning down in support of a weaker dollar.

 

 

 

The longer term 3 year weekly chart illustrates the bearish twin Star candles at the peak which indicates weakness, whilst both moving averages converge with a previous low at $92.80 to provide strong support. Once this conflict is resolved it will provide more clues as to dollar movements beyond that.

 

 

 

 

Japanese Yen

The US$/Yen has been pushed back up into resistance which for now is preventing further Yen strength. The chart structure has a bias towards Yen weakness and as long as this persists the dollar is unlikely to lose value quickly. Although this may reverse, both oscillators are rising supporting the opposite view.

 

 

 

US Treasuries

The benchmark US Treasury 10 year yield continues to move in a sideways channel closing at 2.85%. The countertrend correction is therefore still in progress which may see the yield still move lower towards the support line at 2.72% before resuming the climb towards higher yields once again. The main trend towards higher yields may be delayed if stock market declines resume in the coming week which will generate increased need for ‘safe haven’ investments which will in turn increase switching from equities to bonds.

 

 

 

Gold

Gold dropped sharply down to a new 6 month cycle low at $1248, but all evidence now indicates a strong rally in the short term. This is mostly due to the low levels of sentiment towards precious metals and the high level of investor pessimism. Also, when you add the cyclical nature of the charts and the high probability of dollar weakness in the next period, then the next gold phase is probably up.

The oscillators are now bottoming and supportive of this argument.

 

 

 

The longer term 3 year chart has the diagonal supports breached (although not seriously), but it also illustrates the high probability that this is definitely a new 6 month cycle low. The next phase is therefore up and this is strongly supported by the oscillators.

 

 

 

The yet longer term massive pentagon base pattern continues to hold and remain intact, also with strong oscillator support for the next phase up.

 

 

 

HUI / Gold Ratio

The HUI / Gold ratio illustrates how the US miners strongly outperfprmed gold on Friday. The spike up very nearly reached the critical 0.1406 level still needed for the miners to start gaining real traction. The oscillators have also turned up in support.

 

 

 

GDX US miners ETF

Although GDX is still moving sideways with a negative bias, it has of course also spiked up close to the diagonal resistance line. This chart will probably see strong upward moves in the coming week, and also has  strong supportive oscillators.

 

 

 

 

The longer term GDX chart continues to illustrate the range-bound nature of the chart structure, and what needs to happen of course is to break the diagonal resistance line if any real progress is to be achieved. The volume decline is an added indication of investor pessimism.

 

 

 

DUST US Gold Miners Bear Index

The DUST chart continues to move sideways towards the triangle apex, but with a very weak Friday which is positive. The oscillators are pointing towards further weakness.

 

 

 

Silver

Silver dropped sharply down to a new 6 month cycle low at $15.95, but all evidence now indicates a strong rally in the short term. As with gold, this is mostly due to the low levels of sentiment towards precious metals and the high level of investor pessimism. Also, when you add the cyclical nature of the charts and the high probability of dollar weakness in the next period, then the next silver phase is probably up.

 

 

 

The longer term 3 year chart reducing wedge patterns continue to hold as the price moves sideways towards the triangle apex which is now likely to break up.

MACD continues its 18 month long process of honing to a point while the Slow Stochastic moves sideways.

 

 

 

Gold : Silver Ratio

The ratio has broken clearly through the bottom of the 2 year pattern (red) and maintains a positive downward sloping bias which augurs well for the next period. The oscillators are also dropping which is positive for a yet lower ratio soon, which is positive for metal prices.

 

 

 

 

General Equities

Extremes in sentiment have developed to a degree where, very soon, patterns will start to re-ignite the stock market collapse. On the New York Stock Exchange the 10 week long countertrend rally in the Dow Jones is either complete or should end next week, after which serious declines should follow as the slowly evolving bear market continues to unfold worldwide. Measures of investor optimism remain at elevated levels as the impending threat remains virtually completely unnoticed.

The Dow has a clear breakout through the bottom of the bearish rising wedge pattern, which is likely to now propel prices lower. The recent drop includes 11 consecutive closes below 10-Dema. The next break points are indicated at ‘A’ and ‘B’ which are the next levels to be tested at 23550 and then 23344.

 

 

 

 

 

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