Home > Currency, Equity, Gold > Midweek Market 27 Sep 2018

Midweek Market 27 Sep 2018

Sep 27th, 2018

Executive summary

The New York Stock Exchange continues in exhaustion mode with new lows continuing to exceed new highs in closing yesterday by a margin of minus -51, extending the negative trend for over a month now as the Dow Jones continues slightly higher peaks driven by ever lower energy. The fractured character of non-confirmations across all platforms in world equity markets continues as the interest rate in the US continues to increase with yet another rate hike yesterday while the US bond market continues it’s long term collapse as yields continue to rise. The interest rate cycle has turned up and is gathering momentum, and as basic economic theory dictates “as interest rates increase so asset values decrease”, so too will the equity markets also follow suit and bend to that basic economic law.

The US$ has resumed its decline in a multi-month correction which stalled this week, supported by the US Fed rate hike on Wednesday. The concomitant effect of a weaker dollar is a stronger gold price, which has also stalled in it’s multi-month rally. The likelihood of another US rate hike this year is strong and therefore it begs the question as to which way the dollar versus gold will tilt in the next period. Worldwide currencies versus the precious metals complex, plus miners, and indeed all resources and commodities, are therefore at a tipping point which will either extend or reverse the rallies of last month. This in turn is likely to accelerate or retard the next round in the Emerging Market contagion which stalled as the dollar weakened.

 

US$

The US$ index bottomed with the added impact of the US Fed rate hike yesterday, and is poised to move up out of the support zone. The turnaround bounced off 200-Dema and will no doubt be assisted by the ending Doji candle which usually indicates a trend reversal.

The oscillators are bottoming in support of short term dollar strength.

 

 

 

The longer term 12 month chart illustrates the potential turnaround occurred at the 38.4% Fibonacci retracement level, well short of other higher Fibonacci levels.

These are daily (short term) indicators and are supported by daily (short term) oscillators.

 

 

 

The longer term weekly 3 year chart does not indicate a potential turnaround but rather that the decline will extend further. If further declines do occur then it is more likely that the 61.8% Fibonacci retracement at about $91.00 in line with the Sep 2017 low will provide the turnaround.

This is supported by oscillators with further declines available, especially the MACD. What is more certain is eventual dollar strength which will form the beginning of the left side of the right shoulder of what could develop into a bullish inverted H&S formation which could propel the dollar much higher to $105.00 and beyond later on.

 

 

 

US Treasuries

Whilst it does appear that the US Treasury 10 year note countertrend rally is at an end with strong yield increases recently, a relief reversal is due. This is likely to occur soon with support close to both the blue horizontal at 3% and the blue diagonal below. This is likely to only be temporary with the main thrust to higher yields thereafter.

The Slow Stochastic is topping out and the MACD is starting to turn down.

 

 

The longer term 5 year chart illustrates the breakout through the top line of the triangle, plus the much earlier breakouts through all the H&S patterns. These breakouts supply thrust to the main trend of higher yields which are likely to target 5% and higher initially, as the long term bond bear market gains traction.

 

 

 

Gold

The gold multi-month rally has stalled in a sideways wedge, with a slight negative bias especially under the impact of the US rate hike yesterday. Gold is at a tipping point midway between key initial levels up and down, and although the recent increased buying interest in US miners has waned it is well to note that silver has begun to outperform gold recently.

The short term oscillators have a sideways drifting attitude.

 

 

The gold COTs data remains very positive, indicating gold strength.

 

 

The longer term 3 year weekly chart indicates the sideways wedge which could break up or down. This is a much more positive chart with the oscillators turning up in support of a breakout up. The gold rally still needs to become a reality however and if a breakout up does not occur then a break down will followed by lower prices down to test the $1125 level.

 

 

 

HUI / Gold Ratio

The earlier US miner jolt up against gold has retreated down to the bottom of the resistance zone, closing below 10-Dema. The rally has therefore stalled although the chart is still positive, but it needs to move up if it is to prevent a break down to test earlier lows.

The oscillators are turning negative which is not promising.

 

 

 

GDX US miners ETF

The GDX chart is of course similar to the Hui:Gold ratio chart and the same commentary applies. US miner investor optimism needs to be supported with higher gold prices.

 

 

DUST US Gold Miners Bear Index

The Dust chart displays virtually the exact opposite as the recent decline is offset with a price rise. although seemingly mild and still well within the resistance zone.

 

 

 

Silver

Silver has a confirmed bottom and has finally begun to slightly outperform gold. This is positive for precious metals and hopefully the position can be maintained: Silver underperformance during price declines versus silver outperformance during price advances. The silver COTs data is very positive, although the silver price reversed yesterday to close back into the support zone.

Hopefully, key initial levels can be tested on the upside while it is critical to hold the bottom support line at $14 otherwise much lower levels will be tested.

The oscillators still have more upside potential in support of hgher silver prices next.

 

 

 

The silver COTs data remains very positive, indicating silver strength. The continued convergence has in fact developed into opposite dilation, which is extremely positive for a strong rally soon.

 

 

 

USLV US Silver Miners Bull Index

The US silver miners USLV (bull index) still exhibits a strong negative bias but, like silver, is beginning to develop a consolidation at the bottom. In fact it has now a confirmed bottom, and the price drop yesterday is still above 10-Dema.

The oscillators are mixed and the chart does not look too negative.

 

 

Gold : Silver Ratio

The data has improved on last week’s improvement and a confirmed top is in place, also closing below 10-Dema at 83.27.

The Slow Stochastic is turning down but the MACD has further to drop in support of a diminishing ratio.

 

 

 

General Equities

The New York Stock Exchange continues in exhaustion mode with new lows continuing to exceed new highs as the Dow Jones continues slightly higher peaks driven by ever lower energy. The rising wedge pattern continues in this mode with interim and final collapse levels at 25 750 and 24 950.

The oscillators are dropping in support of further price declines.

 

 

 

The recent negative trend on the New York Stock Exchange of new lows continuing to exceed new highs extended to more than a month in closing yesterday by a margin of minus -51, as the market continues to be driven by ever lower energy.

New Highs against New Lows on the NYSE continues to illustrate the difference in the energy of the bull market leading up to the Jan 2018 peak (ave. 140) and the lethargy and lower energy levels of the countertrend rally in the bear market (ave. 25).

The index closed at -51 yesterday.

 

 

 

The fractured character of non-confirmations across all platforms in world equity markets continues as the interest rate in the US continues to increase with yet another rate hike yesterday while the US bond market continues it’s long term collapse as yields continue to rise. The interest rate cycle has turned up and is gathering momentum, and as basic economic theory dictates “as interest rates increase so asset values decrease”, so too will the equity markets also follow suit and bend to that basic economic law.

It is just a matter of time before equities collapse into a long term bear market.

 

 

 

 

 

 

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