Home > Currency, Equity, Gold > Midweek Market 18 Oct 2018

Midweek Market 18 Oct 2018

Oct 18th, 2018

Executive summary

There is little change to world financial markets from a week ago as they remain poised to weaken and roll over in response to their overwhelmingly precarious positions, both fundamentally and technically. The US bond market is leading the charge, already in the 3rd year of a long term bear market, which is gradually going global as it also now begins to spill over into stock markets and other markets such as commodities, currencies, etc.

The US$ index spiked up yesterday but in a complex wave structure that could still decline further providing short term strength to other currencies like the Euro as well as precious metals. This is supported by COTs data projecting further dollar declines and gold strength, but in relatively indecisive mode with silver still not confirming gold’s recent strength. But most of the precious metals and ancillary associated charts are looking positive with a number of key breakouts.

 

US$

The US$ index spiked yesterday after recent weakness in a complex wave structure that could move either way. The question remains as to whether the Elliot Wave correction is complete or whether the B wave is still in process to still generate a much lower C.

The oscillators are seemingly becalmed in a sideways drift.

 

 

 

The US$ COTs data illustrates the ever wider dilation in the chart which supports further weakness.

 

 

 

The 3 year weekly chart illustrates the dollar poised below resistance, and with bearish Cots data, may still fully develop the potential H&S pattern in further declining to the 61.8% Fibonacci target zone at the level of 91 in line with the Sep 2017 low.

 

 

 

US Treasuries

The US bond market collapse continues although a short term relief reversal is possible with yield likely to test the lower blue horizontal. Additional bond weakness will of course test the higher blue horizontal which in time will take yields much higher.

 

 

The longer term 5 year weekly chart illustrates US bonds in a long term bear market since mid-2016. Yields have punched through the multi-H&S patterns which are likely to take yields higher by the depth of the head to above 5% as the first stage target.

 

 

 

Gold

Gold has broken up through the sideways wedge and the earlier high at $1221 in a positive thrust in it’s multi-month rally. With strong gold COTs data and weak dollar COTs data the rally is likely to gain further momentum, although the ultra short term may see a reversal which is indicated by the oscillators.

 

 

The gold COTs data continues to indicate the bullish reverse dilation which is likely to generate additional gold strength and by definition also a weaker dollar.

 

 

 

The longer term weekly 3 year chart illustrates the sideways wedge breakout together with much more scope for additional strength in the oscillators.

 

 

US Treasuries and Gold

The relationship between gold and the US Treasury 10 year price is reflected in the chart below with rising bias in strong gold / weak bond price, and reducing bias in weak gold / strong bond price. The chart is starting to indicate bullish gold bias as it breaks up against a declining bond price. This may now move strongly toward the neckline of the H&S pattern which will be bullish gold and bearish US bonds.

 

 

 

HUI / Gold Ratio

The HUI / Gold ratio has a breakout through the H&S neckline which will add momentum to the US gold miners’ outperformance against gold. This in itself will also add momentum to gold.

 

 

 

GDX US miners ETF

The GDX chart is of course similar to the Hui:Gold ratio chart and it also exhibits a breakout through the H&S neckline which will add momentum to the GDX, as it also will to the gold price itself.

 

 

 

In the longer term 3 year weekly chart you can see that whilst GDX is gaining momentum it is still below the earlier range-bound region between 21 and 25. So, although positive it has much still to do.

US gold miners could well ignite and explode up if gold moves up strongly. There is much internet commentary about ‘BANGS’ superceeding ‘Faangs’ as the next super performers in equities. ‘FAANGS’ we all know but few of us know who the ‘BANGS’ are. How about Barrick, Anglogold, Newmont, Goldfields, and Sibanye?

 

 

DUST US Gold Miners Bear Index

The Dust chart displays virtually the exact opposite and is positive for US miners if it declines. Well, it too has a breakout through the neckline of the H&S patter, and is building momentum to the downside which promises a lower Dust price and higher GDX and gold price.

 

 

Silver

Silver regained some momentum this week and is also developing a H&S pattern with the neckline at the key level of $14.97. It needs to penetrate this level and is likely to do so with all the impact factors at present, principally the bullish COTs data.

But silver still continues to underperform gold and still does not confirm gold’s rally. This will be achieved with penetration at $14.97. Otherwise silver will continue to impact negatively on the whole complex, although it continues to hold support levels.

 

 

 

The silver COTs data remains very positive with continued bullish reverse dilation, indicating silver strength and likely stronger rally.

 

 

An interesting silver ratio to watch is the US Silver Miners vs Dow.  This illustrates the balance between silver miners and general equities and indicates a large double bottom with the potential to move. IE Silver miners up and/or Dow down.

The oscillators are bullish in support.

 

 

 

Gold : Silver Ratio

The data deteriorated very slightly this week due to silver’s non-confirmation of the gold rally. It closed at 83.71 although there appears to be potential for a consecutive lower high. Much may develop in the next period.

 

 

General Equities

The Dow Jones bear market is underway having completed initial down waves that are retracing some losses. In simple terms the Elliott Wave structure has the impulse down wave moving to 5 (below 3) after 4 has run it’s course. The interim collapse support at 25 760 has been penetrated and the final collapse support level awaits at 24 950.

 

 

 

The negative trend of narrow low energy persists on the New York Stock Exchange with new lows continuing to exceed new highs. Although there has been some recovery, closing yesterday at -114 compared to -468 a week ago, it is still signalling a market collapse.

The index closed at -114 yesterday.

 

 

 

The fractured character of non-confirmations across all platforms on the New York Stock Exchange has finally changed to the start of a collapse in unison. Now the key questions are more involved in timing and quantity.

The first serious support level on the Dow Jones will be encountered between 23 600 and 23 250, about another 9% further down.

 

 

 

 

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