Home > Uncategorized > Midweek Market 9 Jan 2020

Midweek Market 9 Jan 2020

Jan 9th, 2020

Executive summary

The debt trap which the US Government is in will be exposed as US Treasury Bond yields continue to rise, as forecast. Markets are not aware of this yet, but the dollar- based monetary system is spinning out of control. This will all unfold and be revealed as the credit cycle reaches its inevitable crisis stage, which the world is now entering.

Monetary inflation is still camouflaged. As governments have to increasingly fund themselves through QE, central banks will be forced to inflate even more so to pay for deficits significantly greater than currently forecast. Markets will eventually stop believing government inflation pronouncements after which the interest cost of government funding will increase exponentially as all fiat currencies then lose purchasing power at an accelerating rate.

In a world where all fiat currencies will face enormous challenges such as servicing exponentially increasing debt, using yardsticks such as trade weighted indices will be misleading. The best gauges of value stated in fiat currencies will be commodities, particularly gold and silver.

In spite of this, US stock markets continue to eke out moderately higher new highs 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.

The Dow Jones continues to edge higher to moderately ever higher new highs, in developing a major topping pattern which is leading towards final collapse.

US Treasury yields have started to increase and world bond markets are resuming the long term collapse which started in mid-2016. The US$ is in long term decline although currently enjoying a temporary rally as the Euro, UK pound, and other majors, start a strengthening cycle.

Gold is in a strong bear market rally which has made a new 7 year high, not matched by silver or major US miners in a number of non-confirmations typical at trend changes. There are a number of factors indicating that the top is in and that the decline has resumed. The next gold bull market will drive price to many times higher than the 2011 high but will be preceded by a sharp decline first. This battle will be fought in a world of approaching monetary and political chaos.

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.

Having penetrated down through the rising wedge and 50-Wema (red), the dollar is in a rally which is testing 50-Wema on the upside. However, negative divergence and the chart structure suggests that further weakness is likely to test the support zone soon.

The daily 12 month chart illustrates the bearish dome structure together with a number of H&S necklines which, once activated, will accelerate dollar declines. The rally is approaching strong resistance at the 50- and 200-Day moving averages.

The short term 3 month daily chart provides a closer view of the dollar rally in a mini-break up to test resistance at the MAs.

EuroDollar

The Eurodollar as the inverse of the dollar is now testing 50-Dema on the downside. However, there is strong support from the bullish inverted dome pattern which is likely to propel the Euro up by the depth of the dome. Once this activates 200-Dema will be penetrated which will provide strong support thereafter.

A long term 10 year view of the Euro Dollar highlights the breakout of the reducing wedge which should propel the currency up by the height of the wedge, which is substantial.

US Treasuries

The US Treasury countertrend rally completion is all but confirmed 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. This will in time expose the US Government debt trap and hasten the spiral towards the collapse of the monetary system as we know it.

Gold

Gold is in a strong bear market rally which has made a new 7 year high, not matched by silver or major US miners in a number of non-confirmations typical at trend changes. There are a number of factors indicating that the top is in and that the decline has resumed. The next gold bull market will drive price to many times higher than the 2011 high but will be preceded by a sharp decline first. This battle will be fought in a world of approaching monetary and political chaos.

Gold has a breakout to a new high within the rising channel. Price is well ahead of all the moving averages and the support zones. There are no resistance zones and support starts at $1450.

Gold has multiple breakouts to a new high, but the start of the decline is in the form of an ominous-looking reversal pattern.

The 3-month chart illustrates the peak and the ominous Shooting Star reversal candle. The first support level is down at $1521, and all well ahead of all moving averages.

Gold volatility has increased, but in a non-confirmation with the pattern of the gold increase to a new high.

South African Rand

The Rand breakout to strength is still active, but is correcting to weakness as the dollar rallies. The chart structure is still positive with more Rand strength as the dollar rally turns to weakness.

HUI / Gold Ratio

The bear flag breakout signals lower ratio prices as US miners are outperformed by gold itself. The 50-day moving average has been penetrated on the downside which should assist in propelling the ratio to further weakness. This could mean that miners will lead gold to lower prices.

GDX US miners ETF

The GDX chart is less bullish than the HUI/Gold chart and has not achieved a new high in creating non-confirmation with gold. This is bearish which will be confirmed if the bear flag proves to be real.

GDX Junior Gold ETF

The GDX Juniors are more bullish in making a new high, with no non-confirmation with gold. It also could have a bear flag in the making which could be bearish.

XAU Gold and Silver Philadelphia Index

The XAU chart is also more bullish and could also have a bear flag in the making.

Dust US Miners Bear Index

The inverse Dust chart also indicates a new low within a declining channel with strong resistance above. This indicates a continued strong gold price.

Silver

Silver is in a strong bear market rally but has not made a new high and therefore has a non-confirmation with gold, which is typical of a trend change. This could indicate that the top is in, but silver could also make a late charge to a new high. Irrespective, the next silver bull market will drive price to many times higher than the 2011 high but will be preceded by a sharp decline first. Like gold, this battle will be fought in a world of approaching monetary and political chaos.

Silver fails to make a new high and could next test support which starts at about $17.80.

The Silver rally includes multiple breakouts but not to a new high. This non-confirmation could lead to declines with the key support level down at $16.55.

The main driver of decline potential is the ominous Shooting Star candle with first support at $17.80.

The US silver miners have made a new high and therefore have a non-confirmation with silver itself. This is an additional driver of decline potential, and the miner chart also illustrates the potential bear flag which could be an additional driver of decline potential. Key support is at $30.00.

Gold : Silver Ratio

The gold / silver ratio closed slightly higher at 85.88 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

The Dow Jones continues to edge higher to moderately ever higher new highs, in developing a major topping pattern which is leading towards eventual final collapse.

In accordance with Elliott Wave Theory the Dow has been building a bull market since the Lehman collapse in 2009 that has been impulsive in a number of 5 wave advances of varying degrees, interspersed with corrective abc waves. This has evolved in its structure to what is now believed to be its final 5th wave, or certainly very close to the final top. This top is also to be the start of a serious decline that could extend into most of the next decade.

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