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Market Analysis 27 Aug 2020

Aug 27th, 2020 No comments

Executive summary

The bear market continues to unfold as the Dow Jones continues to edge up in completing primary wave 2 up, but still remains below the market peak in Feb 2020. This creates a major non-confirmation with the other 2 major US indices in a divergence typical of the period prior to a major trend change. The market displays narrowness in the rally with negative breadth (more counters down than up), higher down volume and lower up volume, and lack of energy in waning momentum. Despite this, even more are now bullish with performance trending toward extreme behaviour patterns in over-believed, over-bought, and euphoric fear–of-missing-out that is keeping markets elevated. All compatible with the culmination of a trend.

Final activation of primary wave 3 down will trigger trend reversals in the US$, forex, bonds, and gold, as we enter a different market phase.

The dollar is building a bottom base from which to launch, and appears to be near the end of the decline phase while the Euro is doing the exact opposite, which validates the situation.

The benchmark 10 year US Treasury yield is essentially still only moving sideways. Consequently, US Treasury prices have only weakened slightly and are still in a sideways consolidation at peak levels. The acid test will only be once US equities actually resume serious declines. Short term US Treasury yields are holding in a narrow range, which is a reflection of limited US Fed interference at this stage with equities still not collapsing.

Gold and silver have declined after their spike highs and are likely to undergo large price retracements. But the very short term may still see some price gains with the gold / silver ratio still not bottomed. US miners in gold and silver present as bearish wedge and triangle patterns that should be followed by further declines in an extended multi-month phase, as they lead metals lower. But short term price gyrations may occur first.

Much depends on when US equities actually start primary wave 3 down.

Dow

Primary wave 2 in the Dow Jones continues to edge up but remains below the market peak in Feb 2020. This creates a major non-confirmation with the other 2 major US indices in a divergence typical of the period prior to a trend change. Also, it is strengthening the existing sell divergence with the oscillators edging down, which is a precursor to the eventual start of primary wave 3 down. Penetration through the support trendline will significantly reduce any further bullish potential and hasten the switch from primary wave 2 up into primary wave 3 down. So, the bear market continues to unfold as the process also continues to lack energy and breadth, characterised by extreme investor optimism, all compatible with the culmination of a trend.

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 but with weakness in the tail. This dynamic will continue for now with dollar strength once US equities resume declines into primary wave 3 down, as we enter a new phase. A more meaningful loss of confidence in the present international monetary system will change that back to long term dollar weakness in due course.
This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The artificially prompted excessive over-valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar continues to strengthen into the rally which started in early 2018, but with strong weakness in the tail at present, due to the extended delay in US equities actually starting primary wave 3 down. This has been identified as inflection point 2, which continues to be delayed in ‘slow-motion’ equity decline and corresponding ‘slow-motion’ US Dollar strength.
The present circumstance is embodied in a reducing wedge which is about to activate, in similar fashion to the earlier reducing wedge breakout in Apr 2018. A breakout now will lead to weaker gold, and vice versa.

The dollar is building a bottom base from which to launch, and appears to be near the end of the decline phase. A breakout above $94 will indicate the strengthening phase is underway.

The 3 month chart illustrates the development of the bottom base in more detail. Penetration of $94.00 is the key which will indicate that the strong advance has started.

EuroDollar

The Eurodollar chart is similar to the dollar index chart, except in the opposite direction, and sluggish US equity declines have the reciprocating effect of boosting Euro values. But the EuroDollar is developing a topping pattern which needs to breach the 1.17 level to trigger declines.

US Treasuries

The benchmark 10 year US Treasury yield strengthened in the wake of the buy divergence, into a breakout of the declining channel. But this is mild, and the yield is essentially still only moving sideways. Consequently, US Treasury prices have only weakened slightly and are still in a sideways consolidation at peak levels. This cannot as yet be termed a trend reversal, and the acid test will only be once US equities actually resume serious declines in the next major leg down. At that point resultant money flows from equities back into treasuries plus US Fed interventions will have the effect of increasing bond prices and reducing yields, yet again.

Short term US Treasury yields are holding in a narrow range, which is a reflection of US equities not collapsing. At this stage it indicates limited US Fed interference, but as equity declines gather momentum so too should 3 month yields decline. It is possible the Fed will nevertheless not manipulate yield below zero.

Gold

Gold declined after the spike high, and there is still the RSI sell divergence which should prompt a major retracement down. It appears to be an exhaustion spike that is likely to at least break down into the 1st support zone in the first decline phase. The two opposing forces impacting the gold market, in equity collapse sucking gold down and the warped global monetary system boosting gold higher, will likely prevail in the case of the former and not the latter. Gold has now probably topped at the end of a 5 year bear market rally, which is likely to move into protracted declines perhaps lasting years. The next real gold bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the gold bear market as we reach inflection point 3 at the start of currency collapse between the end of deflation and the start of serious inflation, probably around mid-2021.

Gold has declined after its spike high in the wake of the sell divergence. This will develop at least into a major retracement which is likely to penetrate well into the 1st support zone during the first decline phase. The gold cycle is now due to start weakening after a virtually uninterrupted advance from Oct 2018, and the next key support level is at $1790.

The bearish top could be developing into a more complex top with price moving towards the apex of a triangle which could break either way in the short term. After any price gyrations the support levels (as shown) are more likely to be tested than the resistance zone. Penetration of the rising wedge support line will trigger testing the lower levels.

The triangle apex could break either way in the short term.

Brent Crude Oil

Oil continues to advance slowly in line with US equities remaining elevated. However, the process continues to strengthen the sell divergence, converging into the triangle apex which should break lower. Lower oil prices lie ahead, as oil is in a bear market since 2008 and price should decline strongly once US equities actually start declining into primary wave 3.

South African Rand

The Rand strengthened to the 8 month support line before weakening slightly (US$ support – red circle). This is also in the region of the 200-Day moving average (green). The chart is converging towards a triangle apex and will break up to weakness as the dollar starts its strengthening rally, as forecast.

Hui : Gold Ratio

The ratio is declining from the peak as miners lead gold lower, in the wake of the sell divergence. The bearish topping pattern includes the peak at the apex of the expanding triangle and a breakdown from the first rising wedge.

GDX US Gold ETF

GDX has a similar bearish topping pattern which turns down from the apex of the expanding triangle and a breakout of both rising wedges. Support resides at 39 (Initial), 31 (Primary), and 27 (Secondary). This presents as bearish and should be followed by further declines in an extended multi-month phase. Once key support levels are breached the chart will test lower levels including eventually the base support at 16.


This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to testing previous lows now that the gold rally has terminated.


Dust US Miners Bear Index

The Dust chart is building a base for breakout (black rectangle) which will activate aggressively once the long term buy divergence and the reducing wedges trigger into testing resistance. This is bullish for Dust and bearish for metals and miners, being a US miners bear index. It presents as a wonderful investment opportunity with virtually no risk with price virtually at zero, but many metals and miners retracements lie ahead.

Silver

Silver declined after the spike high. But the high is well below the previous high, unlike gold, which presents as a major non-confirmation against gold and is one of the strong contributors to the metals declines into trend reversals. A major period of decline lies ahead, and as with gold, the next silver bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the silver bear market as we reach inflection point 3 at the start of currency collapse between the end of deflation and the start of serious inflation, probably around mid-2021.

Silver declined after the spike high, and is poised to eventually breakdown through the bear flag. As with gold, this will develop at least into a severe retracement or at worst into an extended multi-year decline. But other short term options may be developing first.

A decline from the spike high is now developing into a more complex top with potential breaks either way. Once short term price gyrations are complete the support levels (as indicated) should tested.

Price is moving towards the triangle apex that has developed from the complex top, and could break either way.

The silver miners chart is similar to the gold miner chart in breaking down through the rising wedge at the apex of the expanding triangle as it declines from the peak. This is bearish and should be followed by further declines in an extended multi-month phase. Support is available at the levels indicated.

Gold : Silver Ratio

The gold / silver ratio closed lower at 71.13 as metals retrace some of the earlier losses. The ratio remains in the lower regions of the declining channel and this process seems to be incomplete. It could still prompt further metal price gains before the potential to advance up the chart as metals engage major retracements down.

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Market Analysis 20 Aug 2020

Aug 20th, 2020 No comments

Executive summary

The bear market continues to unfold as the Dow Jones continues to edge up in completing primary wave 2 up. At the moment there is non-confirmation between the major US equity indices which indicates pending trend change, as they are all now close to completing their rally patterns. The process continues to lack energy and breadth, characterised by extreme investor optimism, which is all compatible with the culmination of a trend. Final activation of primary wave 3 down will trigger trend reversals in the US$, forex, bonds, and gold, as we enter a different market phase.

The dollar is building a bottom base from which to launch, and appears to be near the end of the decline phase while the Euro is doing the exact opposite, which validates the situation.

The benchmark 10 year US Treasury yield is essentially still only moving sideways. Consequently, US Treasury prices have only weakened slightly and are still in a sideways consolidation at peak levels. The acid test will only be once US equities actually resume serious declines. Short term US Treasury yields are holding in a narrow range, which is a reflection of limited US Fed interference at this stage with equities still not collapsing.

Gold has declined after its spike high and is looking bearish which will likely lead down into a major retracement, after a virtually uninterrupted advance from Oct 2018. US miners in gold and silver have broken down through bearish wedge and triangle patterns that should be followed by further declines in an extended multi-month phase, as they lead metals lower.

Dow

At the moment there is non-confirmation between the major US equity indices which indicates pending trend change, as they are all now close to completing their rally patterns. Penetration in the Dow Jones through the support trendline will significantly reduce any further bullish potential and hasten the switch from primary wave 2 up into primary wave 3 down. So, the bear market continues to unfold and the Dow also has a sell divergence which will prompt lower prices as the index nears the support trendline.

The process continues to lack energy and breadth, characterised by extreme investor optimism, which is all compatible with the culmination of a trend. Final activation of primary wave 3 down will trigger trend reversals in the US$, forex, bonds, and gold, as we enter a different market phase.

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 but with weakness in the tail. This dynamic will continue for now with dollar strength once US equities resume declines into primary wave 3 down, as we enter a new phase. A more meaningful loss of confidence in the present international monetary system will change that 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 artificially prompted excessive over-valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar continues to strengthen into the rally which started in early 2018, but with strong weakness in the tail at present, due to the extended delay in US equities actually starting primary wave 3 down. This has been identified as inflection point 2, which continues to be delayed in ‘slow-motion’ equity decline and corresponding ‘slow-motion’ US Dollar strength.
The present circumstance is embodied in a reducing wedge which is about to activate, in similar fashion to the earlier reducing wedge breakout in Apr 2018. A breakout now will lead to weaker gold, and vice versa. There is also a bullish ending candle (inner circle) which is likely to prompt a dollar breakout.

The dollar is building a bottom base from which to launch, and appears to be near the end of the decline phase. A breakout above $94 will indicate the strengthening phase is underway.

The 3 month chart illustrates the development of the bottom base in more detail. Penetration of $94.00 is the key which will indicate that the strong advance has started.

EuroDollar

The Eurodollar chart is similar to the dollar index chart, except in the opposite direction, and sluggish US equity declines have the reciprocating effect of boosting Euro values. But the EuroDollar is developing a topping pattern which needs to breach the 1.17 level to trigger declines.

US Treasuries

The benchmark 10 year US Treasury yield strengthened in the wake of the buy divergence, into a breakout of the declining channel. But this is mild, and the yield is essentially still only moving sideways. Consequently, US Treasury prices have only weakened slightly and are still in a sideways consolidation at peak levels. This cannot as yet be termed a trend reversal, and the acid test will only be once US equities actually resume serious declines in the next major leg down. At that point resultant money flows from equities back into treasuries plus US Fed interventions will have the effect of increasing bond prices and reducing yields, yet again.

Short term US Treasury yields are holding in a narrow range, which is a reflection of US equities not collapsing. At this stage it indicates limited US Fed interference, but as equity declines gather momentum so too should 3 month yields decline. It is possible the Fed will nevertheless not manipulate yield below zero.

Gold

Gold declined after the spike high, and there is still the RSI sell divergence which should prompt a major retracement down. It appears to be an exhaustion spike that is likely to at least break down into the 1st support zone in the first decline phase. The two opposing forces impacting the gold market, in equity collapse sucking gold down and the warped global monetary system boosting gold higher, will likely prevail in the case of the former and not the latter. Gold has now probably topped at the end of a 5 year bear market rally, which is likely to move into protracted declines perhaps lasting years. The next real gold bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the gold bear market as we reach inflection point 3 at the start of currency collapse between the end of deflation and the start of serious inflation, probably around mid-2021.

Gold has declined after its spike high in the wake of the sell divergence. This will develop at least into a major retracement which is likely to penetrate well into the 1st support zone during the first decline phase. The gold cycle is now due to start weakening after a virtually uninterrupted advance from Oct 2018, and the next key support level is at $1790.

A bearish top is developing after the spike high, which will likely lead down into a major retracement. The pre-, primary-, and secondary-, support levels are indicated in the chart, and penetrating the rising wedge support line could be the trigger.

The bearish top is available in more detail in the 3 month chart. This should prompt a series of new lows.

Brent Crude Oil

Oil advances slightly as it strengthens the sell divergence, converging into the triangle apex which should break down. Lower oil prices lie ahead. Oil is in a bear market since 2008 and the oil price should decline strongly once US equities actually start declining into primary wave 3.

South African Rand

The Rand weakened in the wake of the US$ buy divergence, and then strengthened slightly. The chart is converging towards a triangle apex and will break up (Rand weakness) if the US$ starts its strengthening phase.

Hui : Gold Ratio

The ratio is declining from the peak as miners lead gold lower, in the wake of the sell divergence. The bearish topping pattern includes the peak at the apex of the expanding triangle and there is a breakout from the first rising wedge.

GDX US Gold ETF

GDX has a similar bearish topping pattern which turns down from the apex of the expanding triangle and a breakout of the first rising wedge. Primary support resides at 31 with secondary support at 27. This is bearish and should be followed by further declines in an extended multi-month phase. Once key support levels are breached the chart will test lower levels including eventually the base support at 16.


This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to testing previous lows now that the gold rally has terminated.


Dust US Miners Bear Index

The Dust chart is building a base for breakout (black rectangle) which will activate aggressively once the long term buy divergence and the reducing wedges are triggered. This is bullish for Dust and bearish for metals and miners, being a US miners bear index. It presents as a wonderful investment opportunity with virtually no risk with price virtually at zero, but many metals and miners retracements lie ahead.

Silver

Silver declined strongly after the spike high. But the high is well below the previous high, unlike gold, which presents as a major non-confirmation against gold and is one of the strong contributors to the metals declines into trend reversals. A major period of decline lies ahead, and as with gold, the next silver bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the silver bear market as we reach inflection point 3 at the start of currency collapse between the end of deflation and the start of serious inflation, probably around mid-2021.

Silver declined strongly after the spike high, and is poised to eventually breakdown through the bear flag. As with gold, this will develop at least into a severe retracement or at worst into an extended multi-year decline.

A decline from the spike high has developed into a bearish top with a major retracement ahead. The primary-, and secondary-, support levels are indicated in the chart.

The bearish top is available in more detail in the 3 month chart. This should prompt a series of new lows, with the rising wedge support trendline a strong trigger.

The silver miners chart is similar to the gold miner chart in breaking down through the rising wedge at the apex of the expanding triangle as it declines from the peak. This is bearish and should be followed by further declines in an extended multi-month phase. Support is available at the levels indicated.

Gold : Silver Ratio

The gold / silver ratio closed lower at 72.07 as metals retrace some of the earlier losses. The ratio remains in the lower regions of the declining channel, but the potential is to advance up the chart as metals engage major retracements down.

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Market Analysis 13 Aug 2020

Aug 14th, 2020 No comments

Executive summary

The bear market continues to unfold as the Dow Jones continues to edge up in completing primary wave 2 up, which is still beneath the market top in Feb 2020. Once the Dow actually starts to decline into primary wave 3 it will trigger a relationship that exists with other market sectors in assisting trend reversals in the US$, forex, bonds, and gold. It has already started in the gold market.

The dollar is building a bottom base from which to launch, and appears to be near the end of the decline phase while the Euro is doing the exact opposite, which validates the situation. The benchmark 10 year US Treasury yield strengthened this week for the first meaningful advance in 8 weeks. But this cannot as yet be termed a trend reversal, and the acid test will only be once US equities actually resume serious declines. Short term US Treasury yields are holding in a narrow range, which is a reflection of limited US Fed interference at this stage with equities still not collapsing.

Gold declined after the spike high exactly on pre-support at $1875, before retracing back up to newly-created resistance. This is likely to prompt a multi-month decline with primary support at $1790 and thereafter secondary support lower down at $1670. The short term target zone lies between $1550 – $1450. Silver is responding in likewise fashion, and the gold / silver ratio has probably now bottomed.

US miners in gold and silver have broken down through bearish wedge and triangle patterns that should be followed by further declines in an extended multi-month phase, as they lead metals lower.

Dow

The bear market continues to unfold as the Dow Jones continues to edge up in completing primary wave 2 up, which is still beneath the market top in Feb 2020. This has created a new normal sell divergence in transposing from the earlier reverse sell divergence. The process continues to lack energy in ever lower advance / decline ratio levels and is close to completion, especially with extreme investor euphoria and the general expectation of a continued bull market. The sell signals are in place as the subdivisions continue towards the final trigger point at which primary wave 3 down actually starts. This will trigger a relationship that exists with other market sectors in assisting trend reversals in the US$, forex, bonds, and gold. It has already started in the gold 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 but with weakness in the tail. This dynamic will continue for now with dollar strength once US equities resume declines into primary wave 3 down, 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 artificially prompted excessive over-valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar continues to strengthen into the rally which started in early 2018, but with strong weakness in the tail at present, due to the extended delay in US equities actually starting primary wave 3 down. This has been identified as inflection point 2, which continues to be delayed in ‘slow-motion’ equity decline and ‘slow-motion’ US Dollar strength. From this point there are 2 options:
1 A strong dollar rally – weak gold;
2 A strong dollar decline – strong gold;
The first option is likely and the second not.

The dollar is building a bottom base from which to launch, and appears to be near the end of the decline phase.

The 3 month chart illustrates the development of the bottom base in more detail. Penetration of $94.00 is the key which may or may not occur at the first or second attempt.

EuroDollar

The Eurodollar chart is similar to the dollar index chart, except in the opposite direction, and sluggish US equity declines have the reciprocating effect of boosting Euro values. But the EuroDollar is developing a topping pattern which needs to breach the 1.17 level to trigger declines.

US Treasuries

The benchmark 10 year US Treasury yield strengthened this week in the wake of the buy divergence, being the first meaningful advance in 8 weeks. US Treasury prices have therefore weakened slightly in sideways consolidation at peak levels. This cannot as yet be termed a trend reversal, and the acid test will only be once US equities actually resume serious declines in the next major leg down. At that point resultant money flows from equities back into treasuries plus US Fed interventions will have the effect of increasing bond prices and reducing yields, yet again. All quite contradictory and confusing, and absolutely artificial.

Short term US Treasury yields are holding in a narrow range, which is a reflection of US equities not collapsing. At this stage it indicates limited US Fed interference, but as equity declines gather momentum so too should 3 month yields decline. It is possible the Fed will nevertheless not manipulate yield below zero.

Gold

Gold declined strongly after breaking to a new high and spiking up further. This has strengthened the RSI sell divergence and a major retracement down can be expected. It appears to be an exhaustion spike that is likely to at least break down to the 1st support zone. The two powerful confronting forces impacting the gold market, are:


1 Will US (and therefore global) equities collapse and suck the gold market down with it;
2 Will the warped global monetary system (and impending currency collapse) blast the gold market much higher;

Obviously, timing needs to be considered in these 2 options, but in the meantime gold has now probably topped at the end of a 5 year bear market rally, which is likely to move into protracted declines perhaps lasting years. The next real gold bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the gold bear market as we reach inflection point 3 at the start of currency collapse between the end of deflation and the start of serious inflation, probably around mid-2021.

Gold has declined after its spike high in the wake of the sell divergence. This will develop at least into a severe correction or at worst into an extended multi-year decline. The gold cycle is now due to start weakening due to the virtually uninterrupted advance from Oct 2018, and the next key support level is at $1790.

The consolidations in 2016 and 2018 ended in sharp declines well below the 200-Day MAs (blue) and the 2020 spike high and subsequent sell-off is also likely to penetrate well below the 200-Day MA with a likely short term target zone in the $1450-$1550 region (blue rectangle).

The gold decline after the spike high ended exactly on the rising wedge bottom line at $1875 (pre-support), before retracing back up to newly-created resistance. When the next decline wave starts it will meet primary support at $1790 and thereafter secondary support lower down at $1670.

The gold decline after the spike high should prompt at least multi-week lows with supports as indicated.

Brent Crude Oil

Oil advanced slightly in creating a yet stronger sell divergence in the vicinity of the apex of several triangles which should break lower from here. Oil is in a bear market since 2008 and the oi price should decline strongly once US equities actually start declining into primary wave 3.

South African Rand

The Rand weakened in the wake of the US$ buy divergence, and then strengthened slightly. It breached resistance at $17,55 to a new high and appears to be moving sideways towards a triangle apex. Rand value depends on dollar behaviour and if the dollar strengthens, as forecast, then the Rand should weaken further.

GDX US Gold ETF

GDX has broken down through the rising wedge at the apex of the expanding triangle as it declines from the peak. This is bearish and should be followed by further declines in an extended multi-month phase.


This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to testing previous lows now that the gold rally has terminated.


Dust US Miners Bear Index

The Dust chart has a breakout of the reducing wedge in a parabolic volume increase as the long term buy divergence activates. This is bullish for Dust and bearish for metals and miners, being a US miners bear index. It presents as a wonderful investment opportunity with virtually no risk with price virtually at zero, but many metals and miners retracements lie ahead.

Silver

Silver declined strongly after the spike high. But the high is well below the previous high, unlike gold, which presents as a major non-confirmation against gold and is one of the strong contributors to the metals declines into trend reversals. A major period of decline lies ahead, and as with gold, the next silver bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the silver bear market as we reach inflection point 3 at the start of currency collapse between the end of deflation and the start of serious inflation, probably around mid-2021.

Silver declined strongly after the spike high has finally found the energy to breakout to a new high. As with gold, this will develop at least into a severe correction or at worst into an extended multi-year decline. Silver is due to decline further and the chart presents in bear flag which could decline strongly.

A strong decline after the spike high will decline further in due course and support is to be found at the levels indicated.

The decline after the spike high should prompt multi-week or multi-month declines. Primary support is at $22.50 and secondary support at $19.00.

The silver miners chart is similar to the gold miner chart in breaking down through the rising wedge at the apex of the expanding triangle as it declines from the peak. This is bearish and should be followed by further declines in an extended multi-month phase. Support is available at the levels indicated.

Gold : Silver Ratio

The gold / silver ratio closed higher at 75.02 as metals spike down. It could be that the ratio has bottomed (just below 70) and with metal declines coming the ratio will now start moving up the chart again.

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Market Analysis 6 Aug 2020

Aug 6th, 2020 No comments

Executive summary

The bear market continues to unfold as the Dow Jones began primary leg 3 down on 8 Jun 2020 from the end of primary leg 2 up. This is where the expectation of a sell-off ends, with the remainder in rising euphoria and the expectation of a continued melt-up.

The Dow Jones Industrial Average continues to edge up, gold continues to power up, and the dollar continues to sluggishly dwell in bearish territory. But, all three are at reverse levels and triggers are about to be tripped. Much depends on when the Dow actually resumes declines into primary wave 3 down and the US jobs report tomorrow may provide impetus. If the Dow tops then the dollar bottoms, and if the dollar bottoms gold will top. Until then the cauldron continues in the 3 key market elements.

There is a strong non-confirmation between gold and US miners in the HUI Index and this is a sign of trend change which could have the miners leading the metals lower.

Dow

The bear market continues to unfold as the Dow Jones began primary leg 3 down on 8 Jun 2020 from the end of primary leg 2 up. This is where the expectation of a sell-off ends, with the remainder in rising euphoria and the expectation of a continued melt-up.

The sell signals are in place as the subdivisions continue edging up with waning energy in ever lower advance / decline ratio levels towards the point at which primary wave 3 down starts to gain momentum. This will be the final trigger to commence reverse action in the 3 key market elements in equities, US$, and gold.

US Dollar

The long term 20 year chart of the US$ index reveals that whenever the RSI punctures the 20 level (red line), indicated by the blue arrows, the dollar advances strongly, especially since 2008. This has triggered now and the dollar is developing a base to rally strongly. This is linked to the Dow resuming declines, as mentioned earlier, and a strong rally will also trigger weaker gold. Against this argument, if the dollar continues down it could develop into a strong break lower which will lead to much stronger gold prices.

US Treasuries

The benchmark 10 year US Treasury yield weakens to the bottom of the fragile support base in the wake of the sell divergence. This reflects a 10 year price at peak levels as a timely reminder that it is largely artificial (due to US Fed interventions) and that higher yields are coming as interest rates start to normalise in the period ahead. Also note that the sell divergence has transformed into a buy divergence which supports higher yields and lower prices.

However, Treasuries will be subject to the acid test once US equities actually resume serious declines in the next major leg down, because of resultant money flows from equities back into treasuries plus US Fed interventions, which all have the effect of reducing yields. All quite contradictory and confusing.

Gold

There is a correlation between $gold and the US 10 year Treasury, and this is illustrated by the 20 year chart of the ratio of gold divided by the 10 year treasury price. It is similar to the $gold price itself, and simply means that as gold increases so does the price of the 10 year treasury, except the ratio has increased from about 2 to 14 which means that gold increases faster in a bull market and declines faster in a bear market. Note also, that the H&S pattern appears to have played out and that there is also no breakout at the peak level.

Here are separate charts of the 2 components. The gold price peaked in Aug 2011 8 months before the 10 year treasury peaked, and the gold breakout now occurred 6 months after the US Treasury in Feb this year. This indicates that the US Treasury followed gold into the peak 9 years ago, and that the US Treasury led gold into the breakouts in 2020. But US Treasuries are moving into a decline phase, as mentioned earlier, and therefore this implies gold will also now follow into decline.

Gold has a breakout to a new high in a $200 melt-up. This remains near to reverse levels although still with no sign of a top. Key support levels are at $1790 (initial) and $1674 (final).

HUI Gold Bugs Index

But note the US miners chart in the HUI Index which has increased to a new high, but only just. The increase is subdued with no sign of a melt-up, and price remains at the apex of the bearish reducing wedge and expanding triangle. This non-confirmation is a sign of trend change which could have the miners leading the metals lower.

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