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Market Analysis 28 Jan 2021

Jan 28th, 2021 No comments

Executive summary

The Dow Jones reacts down this week to incline support but still within the boundary of the threatening rising wedge, and could hold above these levels. It needs to penetrate down below the rising wedge to signal what could then be significantly bearish. However, US equities continue to enjoy general investor sentiment at historic extremes which is compatible with a rally (or bubble) which should now be at absolute completion. It could be that the start of a major reversal to collapse the structure is very close at hand.


The bottoming process in the US dollar continues to look bullish, although there is still no breakout – which could be close. A reducing wedge breakout will propel the dollar into a strong advance, and this is supported by COTS data and reciprocal evidence in Euro behaviour. Gold is poised to resume declines and US miners continue to look bearish.

Dow

The Dow Jones reacts down to the influence of the sell divergence to incline support at the 50-Day MA (red). Price is still within the boundary of the rising wedge and well above the 200-Day MA (green), and could hold above these levels. It needs to penetrate down below the rising wedge to signal what could then be significantly bearish. However, yesterday’s activity on the NYSE resulted in a solidly negative advance / decline ratio of nearly 5 with general investor sentiment at historic extremes which is compatible with a rally (or bubble) which should now be at absolute completion. It could be that the start of a major reversal to collapse the structure is very close at hand.

US Dollar

The bottoming process in the US dollar index continues to look bullish, powered by 2 consecutive buy divergences. There is still no breakout although that could be close, depending largely on whether US equity weakness continues. A breakout up through the reducing wedge will propel the dollar into a strong advance. This is supported by COTS data (next chart) and reciprocal evidence in the Euro chart.

US$ Cots data indicates a ’constriction’ phase (black circles) that is starting to dilate which supports continued dollar strengthening, as it did from Mar 2018 (blue circle).

The 5 year dollar chart illustrates the similarity between the current bullish reducing wedge and that of about 3 years ago. The breakout now has still not occurred, but once completed it will lead into the next strength phase, which supports the notion of much weaker gold ahead.

EuroDollar

The Eurodollar chart reflects the virtual opposite of the dollar index chart, also supported technically by 2 consecutive sell divergences. This should reduce Euro value and a downside break from the top pattern, which reciprocally supports a stronger US dollar. The EU economy is under-performing the US economy and this should unwind into the forecast weaker Euro and stronger dollar.
Euro Cots data (not shown) also supports a weaker Euro with a virtually identical chart to the US dollar, except opposite.

US Treasuries

The US Treasury 10 year yield turns down more meaningfully with this week’s weakening US equities, as bond prices rise. But at this stage yield still continues to grind up slowly within the confines of the rising channel. This is supported by the ‘gold cross’ with the 50-Day MA (red) crossing up through the 200-Day MA (green) which finally signals a move towards higher interest rates. But for certainty, we need increased yields during the ‘acid test’ when equities are actually declining. Also, the weekly 5 year chart (next) indicates that yield could be declining soon.

The weekly 5 year chart presents as a potential bottom with yield doubling over the last 6 months. However, this has occurred simultaneously with the creation of a reverse sell divergence which indicates lower yields next, long term (being weekly data).

Gold

Gold is poised to decline further with support from Cots data (next chart). The gold price has 2 minor breakdowns as it ‘meanders’ further down the reducing channel, which could of course turn out to be a large bull flag!!! But precipitous equities and bottoming dollar (plus gold cots data) all indicate further gold declines.

Gold Cots data indicates massive dilation (red circle) which is bearish with gold declines to continue. This can be seen (verified) by the opposite massive constriction which occurred in Sep 2018 at the start of a strong strengthening phase in gold.

South African Rand

The Rand starts to weaken again under the influence of the dollar buy divergence, as the US$ZAR continues to drift lower within the confines of the reducing channel which should see greater Rand weakness once the top trendline is breached in what could end up as a large dollar bull flag.

Hui : Gold Ratio

The HUI / Gold ratio bearish dome pattern produces multi-breakdowns as miners lead gold lower. This all presents as a bearish chart with further declines to test support likely.

GDX US Gold ETF

GDX has a similar chart although somewhat less bearish, but remains poised for more breakdowns. If the gold Cots data plays out true then US miners should soon test support also.


This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to further breakdowns.


Dust US Miners Bear Index

The Dust chart base breakout is proving to be a long time coming, and continues into 7 months. It has still not broken up, although there are now signs of a breakout soon.

Silver

Like gold, silver is poised to decline further with support from Cots data (next chart). The silver price also has 2 minor breakdowns, but much still depends on US equity direction and dollar value which does indicate lower silver.

Silver Cots data indicates massive dilation (red circle) which is bearish with silver declines to continue. This can be seen (verified) by the opposite massive constriction which occurred in Sep 2018 at the start of a strong strengthening phase in silver.

Gold : Silver Ratio

The gold / silver ratio advances slightly above the double bottom level, indicating the start of potential metal price declines. But we need more price movement to judge accurately, as the ratio is at present only drifting sideways.

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Market Analysis 21 Jan 2021

Jan 21st, 2021 No comments

Executive summary

The Dow Jones continues to hold to new highs and remains close to a major reversal. Yet it may still go higher as it basks in the euphoria of a very successful US presidential inauguration with many positive political slants towards nation rebuilding and recovery. This, in spite of real market problems such as a broken international monetary system, artificially low interest rates in a world awash with exponential debt, and post-Covid economic devastation. So, the long term deflationary spiral will be severe, when it finally starts, which is forecast to happen at any time soon.

The US dollar appears to have bottomed at the start of the next strengthening phase. This is linked to US equities, and a top there could see a bottom in the dollar. Gold is poised to resume declines and US miners continue to look bearish.

Dow

The Dow Jones continues to hold to new highs and remains close to a major reversal. Yet it may still go higher as it basks in the euphoria of a very successful US presidential inauguration with many positive political slants towards nation rebuilding and recovery. Technically, the chart presents as an enlarging rising wedge climaxing into an enlarging sell divergence which will collapse the structure at any moment. This is a potential top waiting to happen, as it remains elevated by nothing more than continued exuberance of US equity investor optimism.

Real market problems remain however, such as a broken international monetary system, artificially low interest rates in a world awash with exponential debt, and post-Covid economic devastation. So, the long term deflationary spiral will be severe, when it finally starts, which is forecast to happen at any time soon.

US Dollar

The US dollar index appears to be bottoming, driven by 2 consecutive buy divergences in a 6-month bottoming pattern which promises the start of a new strengthening phase. This is supported by COTS data (next chart) and reciprocal evidence in the Euro chart. The US dollar is in the lower regions of a well-defined reducing wedge which should propel price well up into resistance after a successful breakout.

US$ Cots data indicates a ’constriction’ phase (black circles) which supports dollar strengthening, similar to Mar 2019.

The 5 year dollar chart illustrates the similarity between the current bullish reducing wedge and that of about 3 years ago. A breakout of the reducing wedge now will lead into the next strength phase, which supports the notion of much weaker gold ahead.

EuroDollar

The Eurodollar chart reflects the virtual opposite of the dollar index chart, also supported technically by 2 consecutive sell divergences. This should reduce Euro value and a downside break from the top pattern, which reciprocally supports a stronger US dollar.

Euro Cots data (not shown) also supports a weaker Euro with a virtually identical chart to the US dollar, except opposite.

US Treasuries

There is virtually no change in US Treasuries. The 10 year yield continues to grind up slowly which means Treasury prices continue to decline off peak levels slowly. There is a small interruption to the process (horizontal black arrow) with yield dropping slightly as US equities go to new highs. But yield has doubled to 1.10% in the last 6 months and a ‘gold cross’ has been created with 50-day moving ave. (red) crossing up over 200-day moving ave. (green) (inclined black arrow), which finally signals a move towards higher interest rates. But for certainty, we need this to happen during the ‘acid test’ when equities are actually declining, which they are not at the moment. Also, the weekly 5 year chart (next) indicates that the whole process could be reversing soon anyway.

The weekly 5 year chart presents as a potential bottom with yield doubling over the last 6 months. However, this has occurred simultaneously with the creation of a reverse sell divergence which indicates lower yields next.

Gold

Gold is poised to decline further with support from Cots data (next chart). The gold price has a breakdown from the bear flag as it ‘meanders’ further down the reducing channel, which could of course turn out to be a large bull flag!!! Much depends on US equity direction and dollar value, and break lines need to be watched carefully in the gold price.

Gold Cots data indicates massive dilation (red circle) which is bearish with gold declines to come next. This can be seen (verified) by the opposite massive constriction which occurred in Sep 2018 at the start of a strong strengthening phase in gold.

South African Rand

The Rand corrects into strength (inexplicably fundamentally) while the dollar buy divergence is still active. The US$ZAR continues to drift lower within the confines of the reducing channel which should see greater Rand weakness once the top trendline is breached in what could end up as a large dollar bull flag.

Hui : Gold Ratio

The HUI / Gold ratio bearish dome pattern is still intact, creating high potential for breakdowns. If the gold Cots data plays out true then the HUI / Gold ratio could soon test support. The chart remains bearish and should weaken further.

GDX US Gold ETF

GDX has a similar chart with the bearish dome still intact, creating high potential for breakdowns. If the gold Cots data plays out true then US miners should soon test support also.

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This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to further breakdowns.

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Dust US Miners Bear Index

The Dust chart base breakout is proving to be a long time coming, and continues into 6 months. It has still not broken up, although indications point to a strong breakout at some point, which will be triggered by the end of the gold and US dollar rain dance.

Silver

Like gold, silver is poised to decline further with support from Cots data (next chart). The silver price also has a breakdown from the bear flag, but much still depends on US equity direction and dollar value, and break lines need to be watched carefully in the silver price.

Silver Cots data indicates massive dilation (red circle) which is bearish with silver declines to continue. This can be seen (verified) by the opposite massive constriction which occurred in Sep 2018 at the start of a strong strengthening phase in silver.

Gold : Silver Ratio

The gold / silver ratio advances slightly above the double bottom level, indicating the start of potential metal price declines. But we need more price movement to judge accurately, as the ratio is at present only drifting sideways.

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Market Analysis 7 Jan 2021

Jan 7th, 2021 No comments

Executive summary

The Dow Jones continues to yet new highs with continued exuberance of US equity investor optimism. This, in spite of real market problems such as a broken international monetary system, artificially low interest rates in a world awash with exponential debt, and post-Covid economic devastation. So, the long term deflationary spiral will be severe, when it finally starts, which is forecast to happen soon.

The US dollar is in the late stage of a long weakening phase as it drops to yet another new low, but could now be close to bottom and the start of the next strengthening phase. This is linked to US equities, and a top there could see a bottom in the dollar. Gold has had a small countertrend rally which could now have completed and US miners continue to look bearish.

Dow
Pic Dow 12m

The Dow Jones continues to yet new highs as the sell divergence intensifies and remains active. This presents as a potential top as the bearish rising wedge extends out to the 10th month with continued exuberance of US equity investor optimism.

Real market problems remain however, such as a broken international monetary system, artificially low interest rates in a world awash with exponential debt, and post-Covid economic devastation. So, the long term deflationary spiral will be severe, when it finally starts, which is forecast to happen soon.

US Dollar

The US dollar index is in the late stage of a weakening phase after 10 months of decline, as it drops to yet another new low. It presents as 2 consecutive buy divergences in a 6-month bottoming pattern which promises a potential bottom at the start of a new strengthening phase. This is also supported by COTS data (next chart) and reciprocal evidence in the Euro chart. The US dollar is in the lower regions of a well-defined reducing wedge which should propel price well up into resistance after a successful breakout.

US$ Cots data indicates a ’constriction’ phase (black circles) which supports dollar strengthening, similar to Mar 2019.

The long term 30 year chart of the US$ index presents the dollar in long term decline with a strong rally since 2008 which is particularly weak in the tail (black circle). US equities are very likely to top out any time soon at the start of a severe bear market, and this is the ignition trigger to start the next dollar rally.

The 5 year dollar chart illustrates the similarity between the current bullish reducing wedge and that of about 3 years ago. A breakout of the reducing wedge now will lead into the next strength phase, which is also likely to result in much weaker gold.

EuroDollar

The Eurodollar chart presents as the virtual opposite of the dollar index chart, also supported technically by 2 consecutive sell divergences. This should reduce Euro value and a downside break from the top pattern, which reciprocally supports a stronger US dollar.
Euro Cots data (not shown) also supports a weaker Euro with a virtually identical chart to the US dollar, except opposite.

US Treasuries

There is virtually no change in US Treasuries. The 10 year yield continues to grind up slowly which means Treasury prices continue to decline off peak levels slowly. But for interest rates to start normalising (rising) they will have to do so during the ‘acid test’ when equities are actually declining, which they are not at the moment. During equity declines money flows back into bonds plus central bank interventions (bond purchasing) has the effect of reducing yields. So there is very little occurring in the US Treasury market at the moment.

Gold

The Gold countertrend spike up could be ending as the breakout invalidates, all within a developing bear flag pattern. Cots data (next chart) indicates gold declines are very likely next.
Pic Gold Cots 3y

Gold Cots data indicates massive dilation (red circle) which is bearish with gold declines to come next. This can be seen (verified) by the opposite massive constriction which occurred in Sep 2018 at the start of a strong strengthening phase in gold.

South African Rand

The Rand starts to weaken as the dollar buy divergence kicks in, after a 9 months strengthening phase since its low point in Apr 2020. This, within the confines of a reducing channel formation, should see greater weakness once the top trendline is breached.

Hui : Gold Ratio

The HUI / Gold ratio bearish dome pattern could be ruptured by the late rally, but miners still lead gold lower. Although the threat may have passed now with gold and miners likely to weaken going forward. The chart remains bearish and should weaken further, in the wake of decline from the apex of the expanding triangle, and consecutive breakdowns in rising wedges.

GDX US Gold ETF

GDX has a similar chart with the bearish dome threatened by the late rally. However, the chart has similar bearish overtones, in the wake of decline from the apex of the expanding triangle, and consecutive breakdowns in rising wedges. This all indicates further potential breakdowns and weakness in US miners.


This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to further breakdowns.


Dust US Miners Bear Index

The Dust chart base breakout is proving to be a long time coming, and continues into 6 months. It has still not broken up, although indications point to a strong breakout at some point, which could be triggered by the end of US dollar decline.

Silver

Like gold, the silver countertrend spike up could be ending with indicative Cots data (next chart), as price moves into a developing bear flag pattern indicating silver declines are very likely next.

Silver Cots data indicates massive dilation (red circle) which is bearish with silver declines to come next. This can be seen (verified) by the opposite massive constriction which occurred in Sep 2018 at the start of a strong strengthening phase in silver.

Gold : Silver Ratio

The gold / silver ratio declines into a double bottom during the recent metals countertrend spike as silver outperforms gold slightly. This could be the start of a weaker metals price phase as the ratio advance to higher levels.

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