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Midweek Market 19 Dec 2019

Dec 19th, 2019 No comments

Executive summary

The Dow Jones Industrial Average continues to hover just above 28 000 as it evolves towards the eventual systemic collapse which has been developing in earnest for about 50 years now, as the longest bull market in history (since 2009) winds down towards its climactic end. Modern Monetary Theory has created the ‘Everything bubble’ in all asset classes as global debt rises exponentially with interest rates at historic lows in order to service debt with an ever increasing abundance of fiat money that continues to lose all its value when measured against gold. At the same time we bear witness to natural market forces as they compete against the false force of central bank actions that continue to inflate the ‘Everything Bubble’ that takes the world to the edge of the abyss.


In accordance with Elliott Wave Theory the Dow has been traversing through a 2 year expanding triangle that was forecast to decline soon by 20%-22% to be followed by a strong reversal to a new high in 2020 before finally starting the final collapse, estimated to be worse that the collapse in 1929. However, due to constant market manipulation, the Dow continues to edge higher to moderately ever higher new highs, which has now invalidated the original expanding triangle matrix and the 20% decline and strong reversal into 2020. The decline now, with or without any moderately higher new highs first, is the final collapse.

US Treasury yields have started to increase and world bond markets are resuming the long term collapse which started in mid-2016. We are therefore witness to the titanic forces of central banks’ need for cutting rates and the market force for increasing yield.

The US$ decline is starting to gain momentum as it resumes its multi-month weakening phase which eventually will develop into a multi-year weakening phase, with added momentum from the stronger Euro in the light of the UK elections and imminent BREXIT. Gold is in a period of moving with the dollar (as opposed to the more normal against) and is also in a multi-month weakening phase although currently in a mild rally. It will also derive added downside momentum from BREXIT with its linked reduction in uncertainty. The whole precious metals complex is set to decline further after earlier key breaks below trigger levels.

US Dollar

The US$ is in long term decline but has been in a rally since 2008, although the decline is now just visible in this long term chart. By a number of different yardsticks the long term dollar decline is likely to take the index into the low 60’s in the next 5 years, although there will no doubt be substantial partial strengthening in search for ‘safe haven’ as equity and bond markets decline.

The dollar has penetrated down through support from the 50-week moving average (red), which is likely to provide impetus for further declines to test the support zone (red) lower down. The ever-present negative divergence adds further force to the downside.

The daily 12 month chart illustrates the resumption of dollar decline penetrating the H&S, although invalidated for now by the correction up to test resistance at the 200-day moving average (green). The prominent bearish dome adds a strong propellant for further declines to accelerate into support.

The short term 3 month daily chart provides a closer view of the dollar decline as it gains momentum, below all the moving averages.

EuroDollar

The Eurodollar as the inverse of the dollar index is looking increasingly bullish after breaking up through the 50-Day moving average (red). Penetration through the declining channel and 200-Dema (green) is a powerful propellant for further gains (dollar weakness).

US Treasuries

The US Treasury countertrend rally completion is all but complete as the breakouts continue to hold. Breaching the key breakout level at 1.94% yield will confirm the trend which looks set to occur soon. Higher yields do now appear to lie ahead and this provides the structure upon which the US Treasury market will be said to be resuming its long term collapse which started in mid-2016. Central banks continue to nevertheless manipulate interest rates and we are therefore witness to the titanic forces of central banks’ need for cutting rates and the market force for increasing yield.

Gold

Long term gold continues to decline slowly after key levels were breached on the downside, despite tiny rallies. Gold is forecast to decline further in the next period.

Gold is still forecast to eventually decline severely to much lower levels below those of Dec 2015 before the start of the next gold bull market which will eventually provide the structure to the reset of the international monetary system after the existing one collapses.

The $Gold decline has stalled with the current tiny rally in the tail, but the decline process is set to resume with strong support lower down in the region of the 50-week moving average (red) between $1383 and about $1420. Major support below starts at $1380.

Gold is still in mini-rally, but is set to drop further soon. Price is consolidating at resistance provided by the 50-day moving average (red), but the chart structure itself and that of the dollar suggests it is now set to resume further declines soon. Breaching the near term levels of $1484 up and $1445 down will determine the gold’s next direction. If down, strong support can be expected at the 200-day moving average (green) at the confluence of the lower diagonal trendline.

The 3-month chart illustrates the rally weakening and the probability of resuming declines towards the key levels at $1463 and $1447.

Gold volatility continues declining after the mini-spike, and investor interest continues to wane.

South African Rand

The Rand breaks out to strength through 2 breakouts as the H&S activates the large topping pattern. This is therefore likely to continue, especially with the support of dollar weakness (as forecast).

HUI / Gold Ratio

The H&S breakout is holding as the gold rally holds. This is tenuous though and over-enthusiasm in the US miners compared with gold could prove costly if gold resumes decline as forecast.

GDX US miners ETF

The GDX chart is less bullish than the HUI/Gold chart and is moving sideways towards the triangle apex as the gold rally holds. This too therefore presents severe reversal potential once gold breaks down as forecast.

The GDX break down potential applies equally to the GDX Juniors, XAU, and inverse Dust (charts not shown).

Silver

Long term silver continues to decline slowly after key levels were breached on the downside, despite a tiny rally. Silver is forecast to decline further in the next period, and is still forecast to eventually decline severely to much lower levels below those of Dec 2015 before the start of the next silver bull market.

Silver is declining, despite rallies, before testing the support zone at $16.55 down to $15.70. Silver is still supported by the 200-week moving average (green) which it needs to breach decisively if it is eventually to test $15.70.

Silver continues to breach to lower levels but strong support resides at the confluence of the 200-Day moving average (green) and 2 important diagonal trendlines just above $16.55. Breakout levels are $17.40 on the upside and $16.55 on the downside, and penetration through one will void any potential penetration through the other.

The 3-month daily chart illustrates in more detail the negative bias of the chart, as well as decline potential as the mini-rally peters out.
Pic Silver miners

The US silver miner breakout through the expanding triangle and H&S pattern is being sustained as the silver rally holds. This counter is even more acutely miner over-enthusiastic and will prove costly as silver itself continues to weaken, as forecast.

Gold : Silver Ratio

The gold / silver ratio closed slightly lower at 86.73 as the drift in a rising wedge continues to rise slowly, which is negative for metal prices, and vice versa. Gold continues to outperform silver marginally as the ratio creeps up, and this looks likely to continue further.

General Equities

In hovering just above 28 000 the Dow Jones ekes out yet another moderately higher new high in closing down at 28 239. Key breaks below 27 800 and 27 325 will provide confirmation of a top and the start of a declining phase.

In accordance with Elliott Wave Theory the Dow has been traversing through a 2 year expanding triangle that was forecast to decline soon by 20%-22% to be followed by a strong reversal to a new high in 2020 before finally starting the final collapse, estimated to be worse that the collapse in 1929. However, due to constant market manipulation, the Dow continues to edge higher to moderately ever higher new highs, which has now invalidated the original expanding triangle matrix and the 20% decline and strong reversal into 2020. The decline now, with or without any moderately higher new highs first, is the final collapse.

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Midweek Market 5 Dec 2019

Dec 6th, 2019 No comments

Executive summary

Markets were disrupted this week by Donald Trump’s comments on perhaps delaying a Chinese trade deal until after the US presidential elections in Nov 2020. This caused US equities to decline from peaks by about 3% as well as boosting the bond markets slightly. It also boosted gold by about 2%. Conventional wisdom suggests if this in fact happens then it is nearly certain the US will be in recession by then with Trump’s re-election potential somewhat diminished. He probably knows this and therefore it is all most likely just practicing his negotiating skills with the equal likelihood of more corrective comments from him in due course. It would appear equities, bonds, and gold are retracing earlier moves accordingly.

Technically however, equities are due to decline anyway, as are bonds and gold. So, market tops are likely to be confirmed in the foreseeable future whether or not US equities again achieve new highs or not. Asset bubbles are quite real and threatening and world markets continue to be accompanied by sound structural and numerous sentiment and momentum indicators signalling rally ends with the next bear phase imminent.

US Treasury yields have started to increase and world bond markets are resuming the long term collapse which started in mid-2016. This certainly provides a defining moment with titanic forces (Treasury yields increasing) against supposedly immovable objects (Government and central banks cutting rates) acting in opposite directions.

The US$ has now completed a retracement rally and is set to resume its multi-month weakening phase which eventually will develop into a multi-year weakening phase. Gold is in a period of moving with the dollar (as opposed to the more normal against) and is also in a multi-month weakening phase albeit with its recent 2% rally, and the whole precious metals complex is set to decline further after earlier key breaks below trigger levels.

US Dollar

The US$ is in long term decline but has been in a rally since 2008. The dollar retreat down from resistance has stalled, although it now has resumed its decline which cannot be seen of this long term chart yet. By a number of different yardsticks the long term dollar decline is likely to take the index into the low 60’s in the next 5 years.

The 5 year weekly chart illustrates the start of a decline down to the bottom trendline of the rising wedge as it approaches the 50-week moving average (red). This is an area (circle) of increased support and penetration down will provide impetus for further declines to test the support zone (red). Negative divergence remains evident and this will provide much energy to achieve the declines.

The daily 12 month chart illustrates the resumption of dollar declines, down to the 200-day moving average (green) at the diagonal trendline (Circle). Penetration of this area is a strong propellant for further declines into support.

The short term 3 month daily chart provides a closer view of the breakout to weakness through the bear flag (circle). Despite the bullish end candle further declines are now likely. Also note the break in the MACD to propel further declines.

Japanese Yen

The Yen strengthens as the dollar / Yen currency pair weakens down to the bottom of the bear flag, with a potential breakout pending (circle). There is also some negative divergence evident to assist in further dollar weakness / Yen strength.
The traditional link between Yen strength and gold strength is not evident at the moment with gold and the dollar moving together as opposed to the more normal against.

US Treasuries

The US Treasury countertrend rally completion is getting closer to confirmation as the earlier breakouts continue to hold. Key achievement levels are 1.9% and 1.94% yield, as the sequence of higher highs and higher lows continues to build and provide support. Higher yields do now appear to lie ahead and this provides the structure upon which the US Treasury market will be said to be resuming its long term collapse which started in mid-2016. The whole process has been interrupted by central bank QE and artificially depressing interest rates.

Gold

Long term gold continues to decline slowly after key levels were breached on the downside, despite the tiny 2% gold rally. Gold is forecast to decline further in the next period.

Gold is still forecast to eventually decline severely to much lower levels below those of Dec 2015 before the start of the next gold bull market which will eventually provide the structure to the reset of the international monetary system after the existing one collapses.

The weekly 5 year chart indicates the $Gold decline has stalled with the 2% rally in the tail. But the decline process is set to resume with strong support in the region of the 50-week moving average (red) between $1383 and about $1420. Major support below starts at $1380.

The gold rally has penetrated up through the 50-day moving average (red) towards the top diagonal trendline, but is set to resume further declines. Near term key levels are $1524 on the upside and $1445 on the downside. Penetration of $1445 will void any threat of gold moving higher. Strong support is expected at the 200-day moving average (green) at the confluence of the lower diagonal trendline.

Break down through the bear flag will end the gold rally and resume the weakening trend, with key levels at $1447 – $1450 on the downside and $1520 on the upside.

Gold volatility has a mini-spike up to coincide the gold rally which indicates a small increase in investor interest. However the chart has a negative bias with further testing of support in the next phase.

South African Rand

The Rand continues to weaken slightly within the rising channel. But a large topping pattern (circle) could activate into Rand strength provided by dollar weakness (as forecast).

HUI / Gold Ratio

There is definite investor over-enthusiasm in the US miners compared with gold, and this is evident in the chart with a clear positive bias compared to gold itself. The miners are outperforming the metals, and this could prove costly if gold resumes decline as forecast. There is a clear breakout in the ratio (circle) as gold rallied. This therefore presents severe reversal potential once gold breaks down.

GDX US miners ETF

The GDX chart is less bullish than the HUI/Gold chart but also has a clear breakout (circle). This too therefore presents severe reversal potential once gold breaks down

The GDX break down potential applies equally to the GDX Juniors, XAU, and inverse Dust (charts not shown).

Silver

Long term silver continues to decline slowly after key levels were breached on the downside, despite a tiny rally. Silver is forecast to decline further in the next period, and is still forecast to eventually decline severely to much lower levels below those of Dec 2015 before the start of the next silver bull market.

The weekly 5 year chart indicates that Silver has declined to the support zone which extends down to $15.70. Silver has touched and bounced up off the 200-week moving average (green) which it needs to breach decisively if it is eventually to test $15.70.

Price bounced off the 200-day moving average (green) to energise the rally, but has already declined at the end of the rally down to the diagonal trendline (circle). Key levels are $17.45 on the upside and $16.62 on the downside. Penetration through one will void any potential penetration through the other.

The 3-month daily chart illustrates in more detail the negative bias of the chart, and the late drop in price at the end of the bear flag. Break down through the bear flag will end the silver rally and resume the weakening trend, with key levels indicated on the chart.

US silver miners are volatile, with bullish 2 weeks ago, bearish last week, and now bullish once more. There is a breakout through the top diagonal to coincide the (weak) silver rally. This counter is even more acutely miner over-enthusiastic and will prove costly as silver itself continues to weaken, as forecast.

Gold : Silver Ratio

Silver has begun to underperform gold which is bearish for the whole precious metals complex, this is evident in the chart closing higher this week at 87.50 by more than 2%. The continued sideways drift towards the triangle apex has now broken up in a breakout which adds slightly to the upward drift of the chart, pointing towards yet higher levels.

General Equities
US equities declined from peaks by about 3% this week, although clawing back some 40% of that drop as this written. Technically, equities are liable to decline seriously soon whether or not they again achieve new highs or not. So, maybe this is the start of a serious decline but it still needs to be confirmed. Because asset bubbles are quite real and threatening and world markets continue to be accompanied by sound structural and numerous sentiment and momentum indicators signalling rally ends with the next bear phase imminent.

The Dow Jones Ind Ave breaks down below the previous low followed by a retracement back above the previous low. More time is therefore required before a confirmed top can be claimed. But whether this is a top or whether another new high follows is almost irrelevant as equities are now due serious declines.

The following chart is a reminder of one long term Elliott Wave analysis of the Dow Jones from the Global Financial Crisis in 2008 to 2021, indicating actual at D (where we are now) to E (very soon), and further out to (5) at a possible new high.

We are now likely to witness the Dow declining from D to E (probably 20%-22% decline) followed by an increase to a new high at (5) (at or just after the re-election of Donald Trump in Nov 2020) followed by the start of a systemic crisis and market collapse. This collapse is the culmination of all the global central banks activities over the last 50 years in modern monetary theory (MMT) resulting in hyper-stagflation and currency value destruction, which will take the Dow Jones from 28 000 to 1 000 (worse than the 1929 crash that led to the great depression).

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