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Market Analysis 30 April 2020

Apr 30th, 2020 No comments

Executive summary

The bear market is in its initial stages. The first major leg down in the Dow Jones is complete and the first major countertrend move up is very close to completion, if not already complete. When complete, the second major leg down will decline to fresh new lows, in the bear market which probably will endure for a decade. These first major countertrend moves up in a bear market are an emotional challenge that require patience, because they recreate the bullish spirits of the prior peak. Investors become convinced that the bull market is back and intact, in a paradox of market behaviour.

Investors are clamouring to buy gold and gold shares, but the precious metal remains in a bear market, soon to start the next major decline as it becomes enveloped in the equity collapse which will eventually devour all in its path. Similarly, the major countertrend move up in gold from the Dec 2015 low is very close to completion, if not already complete. South African gold shares are in ‘Jaws of death’ patterns with price at the upper diagonal, with potentially dire consequences as the metal starts a major decline. This is more pronounced in silver which continues a major non-confirmation with gold; traditional behaviour at major trend changes.

At the same time, the global monetary system is collapsing and the world is moving into a period towards currency collapse which argues strongly in favour of gold and gold-related investments. Therefore, the period ahead needs to be navigated very carefully between preparation and action. Government deficits are huge and increasing rapidly in response to lockdown economies, which will all promote deflation (witness the oil collapse) with inflation thereafter followed by hyperinflation as currencies collapse.

So, the pathway ahead consists of collapsing assets on the one hand and appreciating assets on the other, such as the US$ which attracts money flows (as the international reserve currency) at times of fear. This will present as a matrix evolving towards an inflection point with potential profit in strong currencies before and gold investments after.

But for now, the markets are as they were a week ago. The Dow Jones has not resumed declines yet, the dollar has not resumed gains yet, US Treasuries are not moving much, and gold has yet to start declining. Even the gold/silver ratio has moved sideways for 6 weeks.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which has already exceeded the previous high at the start of 2017. This will corrupt the dynamic with dollar strength into continued equity collapse, as we enter a new phase until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The excessive over valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar is trending up as demand increases with equities in the late stage of the rally and close to the end of the current upward correction.

The shorter term 12 month chart reveals the dollar moving sideways with upward inclined support from the 50-Day MA (red). This presents as a pivotal moment as US equities complete the final stages of the current countertrend rally, which is also indicated by other currencies opposite to the dollar, such as the Euro.

The short term 3 month chart illustrates the sideways movement in more detail, with the dollar actually weakening slightly in the tail. This all coincides exactly with the Dow Jones behaviour, except in the opposite direction. This means it is likely to strengthen once the Dow Jones starts to weaken, which is forecast to occur very soon.

EuroDollar

The Eurodollar, as the virtual opposite of the US dollar index, is in a clear weakening mode, as it continues to trend lower. This to a degree gives credence to dollar strength ahead, as the EuroDollar is behaving technically nearly exactly opposite.

US Treasuries

The benchmark 10 year US Treasury yield continues to weaken towards the previous low as the US bond market rises towards the previous peak. This is all powered by the twin impacts of US equities poised to resume declines in an unfolding bear market and the US Fed pumping ludicrous amounts of currency into the market in their massive QE program which has the effect of reducing interest rates.

In spite of this, real interest rate expectations are for increasing rates as deflation starts to kick in eventually, before inflation and hyper-inflation starts in the phase that will follow. All that will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities, and dollar value resumes a weakening phase as confidence in currencies decline.

Short term US Treasury yields are holding in a narrow range at 0.10%. The 3 month yield is subject to the same influences as the benchmark 10 year, except that it is more directly responsive to US Fed activity because the bond purchasing program (QE) includes mainly short term Treasuries. The acid test will occur once equities actually resume significant declines in the bear market and what the US Fed response will be. This 3 month rate is the one that guides the US Fed into rate decisions.

Gold

Long term gold still has an active sell divergence in place which should lead to declines from here, although prices continue to remain at these elevated levels for now. The next gold bull market will drive price many times higher, but only after further declines to new lows first. These lows will finally signal an end to the gold bear market in a world of approaching currency collapse, and monetary and political chaos.

The 5 year weekly chart highlights the sell divergence in more detail, as well as the massive drop in volume as the gold price peaked. This all indicates lower prices ahead, despite prices remaining at these elevated levels for now. Market response to technical signals vary from immediate to days, weeks, or months later.

The 12 month chart illustrates a shorter term and additional sell divergence which, together with culmination of the rising wedge and rising channel patterns playing out, should propel gold to much lower levels soon. Although the technical signals are there, market reaction is proving to be slow.

Gold advanced towards the apex of the rising wedge as the sell divergence activated, with a sideways to down price reaction and a break down through the rising wedge in progress. This should propel prices lower in due course.

Brent Crude Oil

The oil price bounced up off the bottom of last week with potential buy divergence implications. But the fundamentals in the oil market remain bearish with economic activity at such anaemic levels, and the various implications need to still work through the system before real directional signals can be meaningful. This indicates much lower gold prices to come with the historic high correlation between gold and oil.

The gold / oil ratio, which equals the number barrels of oil that 1oz of gold will purchase, is rising steeply in a narrow channel despite weakening in the tail to 70.7. The ratio dropped 17% during the week as the oil price increased, and this should continue with forecast gold weakness ahead.

South African Rand

The dollar weakened against the slightly stronger Rand, in a breakout down through the bear flag. This should reverse soon with dollar strength as US equities resume declines.

HUI / Gold Ratio

The ratio increased to a mild new high which may prove to be false, with forecast lower gold prices ahead. This is a danger signal with euphoric investors clamouring to buy gold shares in the face of potentially lower gold prices. Price gaps are usually closed later on and there is a small gap lower down at the top of the support zone.

HUI The Arca NYSE Gold Bugs Index

The HUI itself has a similar chart to the HUIGold ratio, but has broken to a higher new high and includes 2 gaps lower down. A correction down is next and the threat of penetration through the 185 level will drop price down to test the Mar low at 142.5.

The long term 10 year chart illustrates a strong 7 year basing pattern which is poised to break either up or down. A breakout will propel price toward the 600 region, whilst a break down will depress price toward the 125 region. So, this is quite a meaningful inflection point, but will require a strong gold price and buoyant market to succeed in moving up, which seems unlikely.

This same dynamic is also evident in the other US miner vehicles on US markets such as GDX, GDX Juniors, and XAU (charts not shown), and declines through key supports will drop prices down to test the March low levels.

Dust US Miners Bear Index

The Dust chart is a US miners bear index which responds in the opposite direction to the miners themselves. It is also geared and is a valuable indicator as well as being a valuable investment vehicle as well.

The chart illustrates a strong long term buy divergence which will lead to higher prices to come. But this amplifies lower metals and miners prices (not higher), being an inverse bear index.

Silver

Long term silver continues to trend lower, despite the recent rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, as silver leads the price declines. As with gold, the next silver bull market will drive price many times higher, but only after further declines to yet lower lows first. These lows will finally signal an end to the precious metals bear market in a world of approaching monetary and political chaos.

The most notable behaviour in silver is its major non-confirmation with gold which is historically typical at major trend changes. The recent rally has silver underperforming gold and this should lead to lower prices. A key pivotal level remains the previous major low point at $13.60 which has already been breached once.

The 12 month chart illustrates the 3 key support levels (red lines) which if penetrated will encourage yet lower prices in testing the support zone. Penetrating these key levels should lead to much lower prices to test the March low, as with the miners.

The 3-month chart illustrates the silver price rolling over as it breaks down through the rising channel (red circle). The lower key support level is at $13.90 and penetration of this level will drop price down to test the March low, as with the miners.

Silver miners are poised to break up or down. Breakout to a new high will advance price significantly, but a break down through $22.90 will drop price significantly to test the March low at $16. This latter seems more likely, given all the scenarios.

Gold : Silver Ratio

The gold / silver ratio closed lower at 111.88 in a chart that continues to present an upward bias which is negative for metal prices. The chart bias is positive which promises yet higher ratios, and yet lower metal prices. But the ratio has moved sideways for 6 weeks and should break up soon, as all this indicates a continued era with substantial silver underperformance which remains negative for metal prices.

General Equities
The bear market continues to unfold, but is in the very early stages of development.

The Dow Jones Industrial Average has completed the first major leg down in the bear market and the countertrend advance in the correction up is now complete or very nearly so. The next major leg down has either already started or is very nearly to do so. Also note the severely declining volumes which reflect the exhaustion in the advance. This bear market will be severe and long-lasting, and global human activity will be massively impacted as negative economic intensity gathers momentum.

These first major countertrend moves up in a bear market are an emotional challenge that require patience, because they recreate the bullish spirits of the prior peak. Investors become convinced that the bull market is back and intact, in a paradox of market behaviour.

This chart reflects the Dow Jones Ind Ave performance from the 2008 Global Financial Crisis, and illustrates very basic Elliott Wave counts indicating where we are in the collapse. Declines since the final top of the market at 5 have very nearly completed the 1-2 correction up in a 5 wave leg down that is next to drop severely in wave 3 down. 3rd Waves are the longest and strongest and this wave 3 is likely to decline towards a level of 15 000 from 25 000 at 2.

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Midweek Market 23 April 2020

Apr 23rd, 2020 No comments

Executive summary

The bear market continues to unfold, and the big news this week is the oil market collapse. This is one of the more obvious casualties of the current economic implosion. The implications of this could be catastrophic in as much as it could even lead to war in some form or another. Historically, there has mostly been a high correlation between oil and gold, and the implication is therefore that this will lead to a much lower gold price. Paradoxically, the fear factor could be one of the reasons the gold price continues at elevated levels. But financial and monetary trouble or even collapse usually trumps fear as the main impact on gold. So, there is quite an impactful and toxic mixture in the world at the moment.

The US equity market is where we were last week with the Dow having either already started or is very nearly to start the next major leg down which will be severe. The dollar is trending up slightly as demand increases with equities in the late stage of the rally and close to the end of the current upward correction, all in contradistinction to the EuroDollar which is trending down slightly.

The benchmark 10 year US Treasury yield continues to weaken towards the previous low as the US bond market rises towards the previous peak. This is all powered by the twin impacts of US equities poised to resume declines in an unfolding bear market and the US Fed pumping ludicrous amounts of currency into the market in their massive QE program which has the effect of reducing interest rates.

In spite of this, real interest rate expectations are for increasing rates as deflation starts to kick in eventually, before inflation and hyper-inflation starts in the phase that will follow. All that will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities, and dollar value resumes a weakening phase as confidence in currencies decline.

This is all good for gold, but there are a number of negative impacts in the market which is likely to see gold at lower prices ahead, despite prices remaining at these elevated levels for now. Market response to technical signals vary from immediate to days, weeks, or months later. Severity in the equity bear market will engulf everything in its path including gold which will be driven down to new lows first, before the start of the next true gold bull market.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which has exceeded the previous high at the start of 2017. This will corrupt this dynamic with dollar strength into continued equity collapse, as we enter a new dynamic until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The excessive over valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar is trending up as demand increases with equities in the late stage of the rally and close to the end of the current upward correction; also indicated on the 12 month chart.

The 12 month chart shows the dollar in a strengthening mode as dollar demand increases with equities in the very late stage of the rally, if not already completed. This presents as a pivotal moment, as also indicated by other currencies opposite to the dollar, such as the Euro.

In the short term, the dollar is in rising mode in stabilising after its recent correction down, which all coincides exactly with the Dow Jones behaviour, except in the opposite direction. This means it is likely to strengthen once the Dow Jones starts to weaken, which is forecast to occur very soon. The dollar is supported by the 50-Day MA (red) and has moved up above the 10-Day MA (blue) and is holding that position, all well above the 200-Day MA (green).

EuroDollar

The Eurodollar, as the virtual opposite of the US dollar index, is in a clear weakening mode, as it continues to trend lower. This to a degree gives credence to dollar strength ahead, as the EuroDollar is behaving technically nearly exactly opposite.

US Treasuries

The benchmark 10 year US Treasury yield continues to weaken towards the previous low as the US bond market rises towards the previous peak. This is all powered by the twin impacts of US equities poised to resume declines in an unfolding bear market and the US Fed pumping ludicrous amounts of currency into the market in their massive QE program which has the effect of reducing interest rates.

In spite of this, real interest rate expectations are for increasing rates as deflation starts to kick in eventually, before inflation and hyper-inflation starts in the phase that will follow. All that will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities, and dollar value resumes a weakening phase as confidence in currencies decline.

Short term US Treasury yields are holding in a narrow range at about 0.12%. The 3 month yield is subject to the same influences as the benchmark 10 year, except that it is more directly responsive to US Fed activity because the bond purchasing program (QE) includes mainly short term Treasuries. The acid test will occur once equities actually resume significant declines in the bear market and what the US Fed response will be. This 3 month rate is the one that guides the US Fed into rate decisions.

Gold

Long term gold still has an active sell divergence in place which should lead to declines from here, although prices continue to remain at these elevated levels for now. The next gold bull market will drive price many times higher, but only after further declines to new lows first. These lows will finally signal an end to the gold bear market in a world of approaching monetary and political chaos.

The 5 year weekly chart highlights the sell divergence in more detail, as well as the massive drop in volume as the gold price peaked. This all indicates lower prices ahead, despite prices remaining at these elevated levels for now. Market response to technical signals vary from immediate to days, weeks, or months later.

The 12 month chart illustrates a shorter term and additional sell divergence which, together with culmination of the rising wedge and rising channel patterns playing out, should propel gold to much lower levels soon. Although the technical signals are there, market reaction is proving to be slow.

Gold advanced to the apex of the rising wedge as the sell divergence activated, which should soon propel prices lower.

Brent Crude Oil

The oil price has collapsed, to be one of the more obvious casualties of the current economic implosion. The implications of this could be catastrophic in as much as it could even lead to war in some form or another. Historically, there has mostly been a high correlation between oil and gold, and the implication is therefore that this will lead to a much lower gold price. Paradoxically, the fear factor could be one of the reasons the gold price continues at elevated levels. But financial and monetary trouble or even collapse usually trumps fear as the main impact on gold. So, there is quite an impactful and toxic mixture in the world at the moment.

This chart reflects the $gold / Brent oil ratio, which equals the number barrels of oil that 1oz of gold will purchase. Considering the amount of money involved in the global oil industry, it could be assumed the chart will probably settle at a gravitational pull from 85 down to a region above the support zone between say 40-50, until economies begin to open up after the lockdown periods. There may well be an oil price explosion after that, but it will take many years before the oil industry recovers. After this collapse, gold prices will be depressed.

South African Rand

The dollar starts to strengthen again against the slightly weaker Rand, having come down from peak dollar strength. But the dollar is forecast to strengthen further as US equities resume declines, and this will weaken the Rand further, as it continues to look fragile and volatile.

HUI / Gold Ratio

The earlier breakout in the ratio has run its course into negative sell divergence which will lead to lower ratio values. The increase up to 0.153 indicates higher US gold miner (HUI) prices than even the higher gold price. The ratio needs to break through resistance to new highs otherwise it will be subject to weakening substantially, and potentially testing the March lows.

HUI The Arca NYSE Gold Bugs Index

The HUI itself has a similar chart to the HUIGold ratio, but is still poised to drop significantly as the key support level of 185 is penetrated with a lower gold price. Penetration of this support level will test the March low at 142.5.

The long term 10 year chart illustrates a strong 7 year basing pattern which is poised to break either up or down. A breakout will propel price toward the 600 region, whilst a break down will depress price toward the 125 region. So, this is quite a meaningful inflection point, but will require a strong gold price and buoyant market to succeed.

This same dynamic is also evident in the other US miner vehicles on US markets such as GDX, GDX Juniors, and XAU (charts not shown), and declines through key supports will drop prices down to test the March low levels.

Dust US Miners Bear Index

The Dust chart is a US miners bear index which responds in the opposite direction to the miners themselves. It is also geared and is a valuable indicator as well as being a valuable investment vehicle as well.

The chart illustrates a strong long term buy divergence which will lead to higher prices to come. But this amplifies lower metals and miners prices, being and inverse bear index.

Silver

Long term silver continues to trend lower, despite the recent rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, as silver leads the price declines. As with gold, the next silver bull market will drive price many times higher, but only after further declines to yet lower lows first. These lows will finally signal an end to the precious metals bear market in a world of approaching monetary and political chaos.

The most notable behaviour in silver is its major non-confirmation with gold which is historically typical at major trend changes. The recent rally has silver underperforming gold and this should lead to lower prices. A key pivotal level remains the previous major low point at $13.60 which has already been breached once.

The 12 month chart illustrates the 3 key support levels (red lines) which if penetrated will encourage yet lower prices in testing the support zone. Penetrating these key levels should lead to much lower prices to test the March low, as with the miners.

The 3-month chart illustrates the silver price rolling over as it breaks down through the rising channel (red circle). The lower key support level is at $13.90 and penetration of this level will drop price down to test the March low, as with the miners.

The Silver miners chart is poised to break up or down. Breakout to a new high will advance price significantly, but a break down through $22.90 will drop price significantly to test the March low at $16.

Gold : Silver Ratio

The gold / silver ratio closed higher at 113.36 in a chart that continues to present an upward bias which is negative for metal prices. The chart bias is positive which promises yet higher ratios, and yet lower metal prices. All this indicates a continued era with substantial silver underperformance which remains negative for metal prices.

General Equities
The bear market continues to unfold.

The Dow Jones Industrial Average has completed the first major leg down in the bear market and the countertrend advance in the correction up is now complete or very nearly so. The next major leg down has either already started or is very nearly to do so. Also note the severely declining volumes which reflect the exhaustion in the advance. This bear market will be severe and long-lasting, and global human activity will be massively impacted as negative economic intensity gathers momentum.

This chart reflects the Dow Jones Ind Ave performance from the 2008 Global Financial Crisis, and illustrates very basic Elliott Wave counts indicating where we are in the collapse. Declines since the final top of the market at 5 have completed the 1-2 correction up in a 3 wave leg that is next to drop severely in wave 3 down. 3rd Waves are the longest and strongest and this wave 3 is likely to decline towards a level of 15 000 from 24 000 at 2.

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Midweek Market 16 April 2020

Apr 16th, 2020 No comments

Executive summary

The bear market continues to unfold.

The Dow Jones Industrial Average has completed the first major leg down in the bear market and the countertrend advance in the correction up is now complete or very nearly so. The next major leg down has either already started or is very nearly to do so, accompanied by severely declining volumes which reflect the exhaustion in the advance. The next major leg down will likely drop another third to the region of 15000 points, last seen 7 years ago in 2013. This bear market is severe and long-lasting, and global human activity will be massively impacted as negative economic intensity gathers momentum.

Despite real currency erosion, the US dollar gains value during equity collapse as demand increases with global dollar loan requirements increasing in currencies eroding faster than the dollar, as well as the search for an apparent ‘safe haven’ during chaos. Also, the fate of the dollar and US Treasuries are closely linked. The US Fed is the only real buyer of government bonds at these excessive and artificial levels as they inflate currency value and depress interest rates by injecting ludicrous levels of liquidity into the system to keep ’the patient’ alive. This artificial stimulation increases the severity of collapse and promotes the demise in both the dollar and US Treasuries.

This all guarantees vast gains in Gold which is the ‘bedrock’ of the next international monetary system design once the current system starts to fail. But first, severity in the equity bear market will engulf everything in its path including gold which will be driven down to new lows first, before the start of the next true gold bull market.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which could soon exceed the previous high at the start of 2017. This will corrupt this dynamic with dollar strength into continued equity collapse, as we enter a new dynamic until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The excessive over valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar is trending up as demand increases with equities close to the end of the current upward correction; also indicated on the 12 month chart.

The 12 month chart shows the dollar in a strengthening mode as dollar demand increases with equities in the very late stage of a rally, if not already completed. This presents as a pivotal moment, as also indicated by other currencies opposite to the dollar such as the Euro.

The US$ has corrected down from the high at $104 over a period of 18 trading days which coincides exactly with the Dow Jones correction up over the same trading period. This means it is likely to strengthen once the Dow Jones starts to weaken, which is forecast to occur very soon. The dollar has stabilised and moved up slightly, co-incidentally, from the support of the 50-Day MA (red).

EuroDollar

The Eurodollar, as the virtual opposite of the US dollar index, is in a clear weakening mode, as it continues to trend lower. This to a degree gives credence to dollar strength ahead.

US Treasuries

The benchmark 10 year US Treasury yield turns down again as it breaches the mini rising trendline, in a potential bottom which could be weakening again. This indicates the US Bond market is rising slightly as equities appear to be resuming declines in an unfolding bear market. However, we are approaching the pivotal point at which US interest rates start rising despite the efforts of the US Fed pumping ludicrous amounts of currency into the market in their QE program. The acid test is when US equities resume the collapse which is forecast any time soon, and whether that causes Treasuries to increase again as money flows from equities into bonds.

Short term US Treasury yields are increasing with the 3 month note way off zero, although the recent mild trend up has turned down through the 10-Day MA (blue). The US Fed continues to pump vast quantities of currency into the system which has the effect of reducing rates, all printed from nothing. This 3 month rate is the one that guides the US Fed into rate decisions, which means they probably cannot justify another rate cut at the moment whether equities start to drop again or not.

Gold

Long term gold still has an active sell divergence in place which should lead to declines from here. The next gold bull market will drive price many times higher, but only after further declines to new lows first. These lows will finally signal an end to the gold bear market in a world of approaching monetary and political chaos.

The 5 year weekly chart highlights the sell divergence in more detail, as well as the massive drop in volume as the gold price peaked. This all indicates lower prices ahead. These are the signals, but as usual the action may only follow after days or even weeks.

The 12 month chart illustrates the rising wedge pattern as price peaked with the likely decline from the apex of the wedge.

Gold advanced to the apex of the rising wedge with a bearish candle at the top (black circle) indicating a potential top.

South African Rand

The dollar starts to strengthen again against the slightly weaker Rand, having come down from peak dollar strength. But the dollar is forecast to strengthen further as US equities resume declines, and this will weaken the Rand further, as it continues to look fragile and volatile.

HUI / Gold Ratio

The ratio has a breakout from its recent consolidation, which indicates higher US gold miners (HUI) than even a higher gold price. But if the gold price declines then the ratio will weaken substantially, and evaluation of the various US miner entities indicate the potential for testing the March lows.

HUI The Arca NYSE Gold Bugs Index

The HUI itself has a similar chart to the HUIGold ratio, but is still poised to drop significantly as the key support level of 185 is penetrated with a lower gold price. Penetration of this support level will test the March low at 142.5.

GDX US Gold ETF

This same dynamic is event in the GDX, and penetrating down through the key support level at 23 will drop price down to test the March low at 16.

GDXJuniors US Gold ETF

This same dynamic is evident in the GDX Juniors, except that the breakout is not to a new high, and therefore this non-confirmation with GDX presents as a typical trend change and likelihood of declines ahead. Penetrating down through the key support level at 27.60 will drop price down to test the March low at 16.18.

XAU Philadelphia Gold Miners Index

This applies to the XAU also, except to a lesser extent. Penetrating down through the key support level at 77.80 will drop price down to test the March low at 62.80.

Silver

Long term silver continues to trend lower, despite the recent rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, as silver leads the price declines. As with gold, the next silver bull market will drive price many times higher, but only after further declines to yet lower lows first. These lows will finally signal an end to the precious metals bear market in a world of approaching monetary and political chaos.

The most notable behaviour in silver is its major non-confirmation with gold which is historically typical at major trend changes. The recent rally has silver underperforming gold and this should lead to lower prices. A key pivotal level remains the previous major low point at $13.60 which has already been breached once.

The 12 month chart illustrates the 3 key support levels (red lines) which if penetrated will encourage yet lower prices in testing the support zone. Penetrating these key levels should lead to much lower prices to test the March low, as with the miners.

The 3-month chart illustrates silver’s recent rally in a bearish rising channel formation, and also still in non-confirmation with gold. There is resistance at the 50-Day MA (red) with price starting to roll over. The lower key support level is at $13.90 and penetration of this level will drop price down to test the March low, as with the miners.

The silver miners chart mirrors that of US gold miners with a breakout, but not to a new high. The key support level is at the bottom of the gap in the advance which is at $22.90. If this level is penetrated then price will drop significantly to test the March low at $16.

Gold : Silver Ratio

The gold / silver ratio closed higher at 112.23 in a chart that continues to present an upward bias which is negative for metal prices, and vice versa. The chart bias is positive which promises yet higher ratios, and yet lower metal prices. All this indicates a continued era with substantial silver underperformance which remains negative for metal prices.

General Equities

The bear market continues to unfold.

The Dow Jones Industrial Average has completed the first major leg down in the bear market and the countertrend advance in the correction up is now complete or very nearly so. The next major leg down has either already started or is very nearly to do so. Also note the severely declining volumes which reflect the exhaustion in the advance. This bear market will be severe and long-lasting, and global human activity will be massively impacted as negative economic intensity gathers momentum.

This chart reflects the Dow Jones Ind Ave performance from the 2008 Global Financial Crisis, and illustrates very basic Elliott Wave counts indicating where we are in the collapse. Declines since the final top of the market at 5 have completed the 1-2 in a 5 wave leg that is next to drop severely in wave 3 down. 3rd Waves are the longest and strongest and this wave 3 is likely to decline towards a level of 15 000 from 24 000 at 2.

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Midweek Market 9 April 2020

Apr 9th, 2020 No comments

Executive summary

Recent events have alerted a wider audience to the destruction of value in financial markets, as the unfolding bear market unleashes a torrent of increased ’money printing’ in a futile effort to stabilise and prevent further declines. These extreme circumstances are the result of a hundred years of malpractice by governments and central banks in creating ‘currency’ out of nothing, now exacerbated by the horrific Covid-19 pandemic.

Global economies are imploding and currency values continue to erode as the wider financial dislocation becomes more evident. G4 currency values measured against gold over 50 years are collapsing, as evidenced in the log scale chart below by courtesy of Goldmoney.

The Yen dropped by over 91% and the US$, Euro and British Pound by 96-99%. This is a collapse playing out in the ‘death of currencies’ caused by central bank mismanagement, and when confidence in fake money is finally lost, a new international monetary system has to be created based on gold.

Imploding economies include estimates that the US will decline by close to 40%, and the jobs report last Friday provides an inkling of what is to come. Jobs in the US fell by 701,000 between February and March, ending a 113-month streak of net job creation, and that still excludes the last 2 weeks of the month in which 10 million Americans filed for unemployment insurance.

The unemployment rate rose by 0.9 percentage points to 4.4%, so we are just at the start of this thing.

The Dow Jones Industrial Average has completed the first major leg down in the bear market (38% drop) and has been advancing in the first major correction since (29% rise). This correction is in a very late stage which is near to completion. The next major leg down will likely drop another third to the region of 15000 points, last seen 7 years ago in 2013. This bear market is severe and long-lasting, and global human activity will be massively impacted as negative economic intensity gathers momentum.

Despite real currency erosion, the US dollar gains value during equity collapse as demand increases with global dollar loan requirements increasing in currencies eroding faster than the dollar, as well as the search for an apparent ‘safe haven’ during chaos. Also, the fate of the dollar and US Treasuries are closely linked. The US Fed is the only real buyer of government bonds at these excessive and artificial levels as they inflate currency value and depress interest rates by injecting ludicrous levels of liquidity into the system to keep ’the patient’ alive. This artificial stimulation increases the severity of collapse and promotes the demise in both the dollar and US Treasuries.

This all guarantees vast gains in Gold which is the ‘bedrock’ of the next international monetary system design once the current system starts to fail. But first, severity in the equity bear market will engulf everything in its path including gold which will be driven down to new lows first, before the start of the next true gold bull market.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which could also exceed the previous high at the start of 2017. The very recent dollar indication of the start to a potential weakening phase will have to wait as, for a while yet, dollar value will correlate inversely with US equities which are forecast to start collapsing soon into the next major leg down in the bear market. The current US equity correction up is in the very late stage and near completion which has the dollar very near to further strength. This dollar / equity dynamic may well soon change the structure of the above chart until more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The excessive over valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar is starting to turn up as demand increases with equities close to the end of the current upward correction.

The 12 month chart shows the dollar turning up in a narrow rising channel as demand increases with equities in the late stage of a rally. This presents as a pivotal moment, but as usual, may take days and perhaps even weeks to ignite.

The short term 3 month chart illustrates the dollar poised to breakout, as it holds above the 10-Day MA (blue).

EuroDollar

The Eurodollar, as the virtual opposite of the US dollar index, is in a clear weakening mode, as it continues to hold below the 10-Day MA (blue). This to a degree gives credence to dollar strength ahead.

US Treasuries

The benchmark 10 year US Treasury yield turns up slightly and starts to indicate a potential bottom, to confirm a higher low: This as a consequence of the US bond market turning down off its high point. We are now close to the pivotal point at which US interest rates start rising despite the efforts of the US Fed pumping ludicrous amounts of currency into the market in their QE program. The acid test is when US equities resume the collapse which is forecast any time soon, and whether that causes Treasuries to increase again as money flows from equities into bonds.

Short term US Treasury yields are increasing with the 3 month note doubling this week from 0.1% to 0.2% as rates continue to edge up despite the US Fed pumping vast quantities of currency into the system. This 3 month rate is the one that guides the US Fed into rate decisions, which means they probably cannot justify another rate cut at the moment whether equities start to drop again or not.

Gold

The sell divergence extended to a higher price but is still active and therefore gold will still go lower after the recent rally. The next gold bull market will drive price many times higher, but only after further declines to new lows first. These lows will finally signal an end to the gold bear market in a world of approaching monetary and political chaos.

The 5 year weekly chart highlights renewal of the sell divergence as it extends the timeframe to a new price peak. Divergence is therefore still active and price should decline from here. This is the signal, but as usual the action may only follow after days or even weeks.

The 12 month chart illustrates only the extended portion of the sell divergence, and the likely decline of the gold price from here. This may only occur in a number of days or even weeks.

Gold advanced to the peak and ended with a bearish red candle which indicates a potential top. The top included a breakout of the inverted H&S pattern, but which was immediately invalidated (very bearish). Declines in the gold price could well occur sooner rather than later.

South African Rand

The dollar weakens slightly from the peak against a slightly stronger Rand, as the dollar pauses before resuming a stronger bias. Some Rand strength is also the result of a recent lengthy weakening phase powered by fundamentals in South Africa. The Rand therefore continues to look fragile and volatile, and is likely to weaken further as the dollar resumes strength.

HUI / Gold Ratio

The ratio is consolidating after a period of volatility and is creating a pennant formation which indicates further declines ahead. There is a slight recent increase in the ratio in the latter stages of the consolidation which indicates US miners (HUI) are tending to move ahead of the gold price. But weakness ahead will test support lower down.

HUI The Arca NYSE Gold Bugs Index

The HUI itself has a similar chart to the HUIGold ratio, but is still poised to drop significantly as the key support level of 185 is penetrated. This is likely to test support and the March low at 142.5 once ignited.

GDX US Gold ETF

This same dynamic is event in the GDX, and penetrating down through the key support level at 23 will drop price down to test the March low at 16.

This pattern is also similarly reflected by the GDX Juniors and XAU (charts not shown), although somewhat different in the inverse Dust chart which is shown next.

Dust US Miners Bear Index

The buy divergence in the US Miners bear index (Dust) is still active and this will lead to higher Dust prices which amplify lower miner prices, which in turn has the added potential for reducing metal prices.

Silver

Long term silver continues to trend lower, despite the recent rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, as silver leads the price declines. As with gold, the next silver bull market will drive price many times higher, but only after further declines to yet lower lows first. These lows will finally signal an end to the precious metals bear market in a world of approaching monetary and political chaos.

The most notable behaviour in silver is its major non-confirmation with gold which is historically typical at major trend changes. The recent rally has silver underperforming gold and this should lead to lower prices. A key pivotal level remains the previous major low point at $13.60 which has already been breached once.

The 12 month chart illustrates the formation of a bearish pennant and once key levels are penetrated should lead to much lower prices to test the March low, as with the miners.

The 3-month chart illustrates silver’s recent rally ending with a bearish candle which turned down close to the 50-Day MA (red). Also the negative chart bias illustrates the major non-confirmation with the positive gold chart bias. Both these impacts should lead to sharply lower silver prices in due course.

The Silver miners chart mirrors that of US gold miners, and is poised to drop significantly. Penetration of the key support level at 22.90 still applies to drop price down to test the March low at 16.

Gold : Silver Ratio

The gold / silver ratio closed lower at 110.77 in a chart that continues to present an upward bias which is negative for metal prices, and vice versa. The ratio is building a pennant formation which promises yet higher ratios, and yet lower metal prices. All this indicates a continued era with substantial silver underperformance which remains negative for metal prices.

General Equities

The bear market continues to unfold.

The Dow Jones Industrial Average has completed the first major leg down in the bear market (38% drop) and has been advancing in the first major correction since (29% rise). This correction is in a very late stage and near to completion. The next major leg down will likely drop another third to the region of 15000 points, last seen 7 years ago in 2013. This bear market is severe and long-lasting, and global human activity will be massively impacted as negative economic intensity gathers momentum.
This collapse is likely to be greater than any other collapse in history, and with greater consequences. In simple terms, the core problem is that money value (measured against gold) is collapsing, and when confidence in the fake money system is finally lost, a new international monetary system has to be created based on gold.

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Midweek Market 2 April 2020

Apr 2nd, 2020 No comments

Executive summary

The bear market continues to unfold.

This is a collapse that history will likely blame on the ‘death of currencies’ caused by a hundred years of malpractice by governments and central banks in creating ‘currency’ out of nothing. And this collapse is likely to be greater than any other collapse in history, and with greater consequences. In simple terms, the core problem is that money value (measured against gold) is collapsing, and when confidence in the fake money system is finally lost, a new international monetary system has to be created based on gold.

All this is great for gold, but as the chaos and collapse escalates so too will gold collapse with everything else. The true gold bottom will be reached when confidence in the fake money system finally collapses. But there is a way to go yet. Because, guess what, in this environment of deepening gloom the US dollar is seen as a ‘safe haven’ and is rallying to new highs (rate cut and all). However, the fate of the dollar and US Treasuries are closely linked, and the excessive (and artificial) over valuation of the US bond market will eventually lead to the collapse of both.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which could also exceed the previous high at the start of 2017. The very recent dollar indication of the start to a potential weakening phase will have to wait as, for a while yet, dollar value will correlate inversely with US equities. The current US equity correction up is very near completion which has the dollar very near to further strength. This dollar / equity dynamic may well soon change the structure of the above chart until more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The excessive over valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar is starting to turn up as demand increases with equities close to the end of the current upward correction.

The dollar turns up after playing out the sell divergence, as dollar demand starts to increase with equities potentially starting to turn down. This is a pivotal moment.

The short term 3 month chart illustrates the dollar poised to breakout. It turns up and is supported by the 50-Day MA (red).

EuroDollar

The Eurodollar, as the virtual opposite of the US dollar index, turns down after advancing in playing out the buy divergence.

US Treasuries

The benchmark 10 year US Treasury yield continues down towards its previous low point, as US Treasuries rise toward their previous high point. We are now close to the pivotal point at which US interest rates will start rising and the bond market will start declining in tandem with the equity collapse and the inevitable onset of recession. Yield declines below the previous low point will obviously delay any such turning point.

Short term US Treasury yields bounce up off zero, such as the 3 month yield in quickly rising to 0.09%. This 3 month rate is usually the one that guides the US Fed into rate decisions, which means they probably cannot justify another rate cut at the moment whether equities start to drop again or not.

The US jobs report comes out tomorrow, and this time it may have a profound effect on yields!!!

Gold

The sell divergence is still active and therefore gold will still go lower after the recent rally. The next gold bull market will drive price many times higher, but only after further declines to new lows first. These lows will finally signal an end to the gold bear market in a world of approaching monetary and political chaos.

The 5 year weekly chart highlights the sell divergence is still active despite the snap-back rally. The gold price is actually starting to decline from the peak of snap-back rally and this should continue from here, probably driven by severe declines in the miners.

The 12 month chart illustrates the sell divergence and snap-back rally in more detail, with repeat declines now becoming evident after the snap-back rally.

Gold declines start to gather a little momentum, although reaching support at the confluence of 10-Day and 50-Day MAs. The bearish double top will assist declines, once activated.

South African Rand

The dollar peaks against the Rand at new lows, which continues to look fragile and volatile. This is likely to now become the new normal with a stronger dollar and especially also with very weak Rand fundamentals, such as rating agency downgrades.

HUI / Gold Ratio

The ratio is consolidating in partial recovery after the declines in the wake of the sell divergence, some way still below the 50-Day and 200-Day MAs. This indicates US miners (HUI) are tending to move in tandem with the gold price until more divergent breakaways occur in either.

HUI The Arca NYSE Gold Bugs Index

The HUI itself looks poised to drop significantly, as well as the other US miner indices. Penetrating down through the key support level at 185 will drop price down to test the March low at 142.50. That is significant, and it may be that the miners trigger significant falls in the metals.

GDX US Gold ETF

This same dynamic is event in the GDX, and penetrating down through the key support level at 23 will drop price down to test the March low at 16.

This pattern is also similarly reflected by the GDX Juniors and XAU (charts not shown), although somewhat different in the inverse Dust chart which is shown next.

Dust US Miners Bear Index

The buy divergence in the US Miners bear index (Dust) of last week has led to the start of higher prices. This is an indication of higher Dust prices which amplifies the potential for significantly lower prices in US miners, which in turn has the potential for reducing metal prices.

Silver

Long term silver continues to trend lower, despite the recent rally which broke back up through the previous low point of Dec 2015 at $13.60. Despite this the chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, as silver leads the price declines. As with gold, the next silver bull market will drive price many times higher, but only after further declines to yet lower lows first. These lows will finally signal an end to the precious metals bear market in a world of approaching monetary and political chaos.

The silver snap-back rally in the wake of buy divergence underperforms gold, and therefore should lead to continued lower prices. A key pivotal level remains the previous major low point at $13.60.

The 12 month chart produced an earlier sell divergence and this has produced an early end to the recent rally and a resumption in price declines which should continue.

The 3-month chart illustrates silver’s recent rally end with a minor selloff, as the bearish trend starts to gain small momentum.

The Silver miners chart mirrors that of US gold miners, and is poised to drop significantly. Penetration of the key support level at 22.90 will drop price down to test the March low at 16. This is significant, and may well be the trigger to activate a selloff in silver itself.

Gold : Silver Ratio

The gold / silver ratio closed higher at 113.80, as the ratio continues to build higher again in a chart that continues to present an upward bias. All this indicates a continued era with substantial silver underperformance which remains negative for metal prices.

General Equities
The bear market continues to unfold.

Using the Dow Jones Ind Ave as a proxy for general equities, one can see the potential completion of the first major leg down as well as the potential completion of the first major correction up. This is likely to continue in a series of down legs and up corrections, some stronger and some weaker, in a time frame which is likely to unfold over most of the next decade.

This is a collapse that history will likely blame on the ‘death of currencies’ caused by a hundred years of malpractice by governments and central banks in creating ‘currency’ out of nothing. And this collapse is likely to be greater than any other collapse in history, and with greater consequences. In simple terms, the core problem is that money value (measured against gold) is collapsing, and when confidence in the fake money system is finally lost, a new international monetary system has to be created based on gold.

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