Home > Uncategorized > Midweek Market 16 Jan 2020

Midweek Market 16 Jan 2020

Jan 16th, 2020

Executive summary

US investor euphoria continues unabated, despite increasing threats to the international monetary system, as equity markets remain elevated and buoyed by the expectation that Modern Monetary Theory will continue to solve all the problems. In fact Ben Bernanke was heard to say this week that zero interest rates are on their way. So the longest bull market in history continues as US stock markets continue to eke out moderately higher new highs, followed in sync by most world markets, as they grind towards a climactic end when the ‘Everything bubble’ finally bursts.

Other financial markets have tended to stall marginally, aided by the US$ which is forecast to weaken but which has steadfastly extended its rally which started at the beginning of 2018. US Treasury yields have stalled in starting to increase as world bond markets are slow to resume the long term collapse which started in mid-2016.

The gold bear market rally seems to have peaked as both precious metals and miners prices start to decline, with a multitude of sell divergences to propel prices lower. 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, and it is critical to identify gold’s true bottom in the period that lies ahead.

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 earlier dollar break from the rising wedge is likely to lead to yet lower values. There is negative divergence in the chart structure to assist further declines but the dollar is stuck at the 50-Week MA (red) support for now.

The daily 12 month chart illustrates the bearish dome structure which will lead to lower dollar values, and the dollar already appears to be turning down at the confluence of the 50- and 200-Day MAs (black circle). There are also a number of developing H&S patterns which could be triggered to add additional impetus.

The short term 3 month daily chart provides a closer view of the dollar rollover at the combined 50- and 200-Day MAs.

EuroDollar

The Eurodollar starts to strengthen again as it moves up from the 50-Day MA (red) towards the 200-Day MA (green), assisted by the bullish inverted dome pattern. Once the 200-Day MA is penetrated it will provide strong support for further gains.

US Treasuries

Although the US Treasury countertrend rally completion is all but confirmed, final yield breakout at 1.94% continues to stall. There is the first sign of minor weakness as a minor trendline is breached (black circle) as the attempt at breakout continues to delay. Breaching the key breakout level at 1.94% yield will confirm the trend which nevertheless still looks set to occur soon. The higher yields which appear to lie ahead will provide 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

The strong gold bear market rally highlights a clear sell divergence which indicates likely lower gold prices ahead. 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.

The 5 year weekly chart also highlights the sell divergence which should lead to lower gold prices. Price is still well ahead of all the moving averages and the support zones which start at $1450.

The daily 12 month chart illustrates the gold reversal momentum, powered by the sell divergence, as it approaches the first support level at $1521.

The 3-month chart illustrates the peak and ominous Shooting Star reversal candle powering price to lower levels.

Gold Cots data indicates a continued build-up of Large Commercial short positions (red declining chart) as against a continued build-up of Large Speculator long positions (green advancing chart). This is the perfect setup in massive dilation between the two, indicating strong declining potential in gold.

South African Rand

The US$/ZAR currency pair chart indicates divergence: Rand sell and dollar buy, indicating Rand weakness ahead. However, this can be contradicted in some way by forecast dollar weakness ahead and the potential ‘good bye kiss’ at the H&S neckline which both support Rand strength.

HUI / Gold Ratio

There is HUI/gold retracement up after the bear flag breakout, which could also be a potential ‘goodbye kiss’. But the more powerful signal is a sell divergence (red circles) which is likely to send the ratio lower. This could mean that miners will lead gold to lower prices.

GDX US miners ETF

The GDX is drifting sideways however with no sell divergence. Price of this US miner ETF is supported by the 50-Day MA (red) with no indication of a break to lower prices.

GDX Junior Gold ETF

The GDX Juniors are more bearish however and they too have a sell divergence with a potential break to lower prices into support. There is also the potential for a bear flag break to lower levels.

XAU Gold and Silver Philadelphia Index

The XAU chart is also more bearish with a sell divergence and potential bear flag break.

Dust US Miners Bear Index

The inverse Dust chart also indicates a buy divergence which should lead to higher prices. This means lower metals and miners prices, being an inverse bear index.

Silver

The silver charts generally are more mundane with no divergence. The strong bear market rally has not made a new high and therefore has a non-confirmation with gold, which is typical of a trend change and generally lower prices ahead. 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 12 month chart illustrates the reversal gathering momentum.

The main driver of decline potential is the ominous Shooting Star candle and the lower prices gathering momentum 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 chart also has a sell divergence which should promote lower prices. It seems in the case of silver, it may well be the miners that drive metal prices lower.

As with gold, silver Cots data has the identical structure indicating lower silver prices ahead.

Gold : Silver Ratio

The gold / silver ratio closed slightly higher at 86.39 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. There is also a clear sell divergence which should perhaps now trigger some sort of change in breaking the mould of higher highs and higher lows.

Elliott Wave analysis of the Dow indicates completion of the various wave counts ending in a top 5 of numerous degrees which presumes the final top or 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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