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Market Analysis 24 Feb 2021

Feb 24th, 2021 No comments

Executive summary

Rising interest rates cause asset prices to decline and the currency to advance, and they are rising in the US as Treasury yields continue to rise. Gold seems to be the first asset class to succumb and the dollar is also in the process of bottoming. But, the rise has been swift and there are signs that a correction is close which will include reversals in declining Treasury yields which will trigger lower dollar, higher gold, and ironically even yet a higher Dow Jones. But that will be a correction followed by the main trend again in higher interest rates, stronger dollar, lower gold, and equity and bond markets in a culminating bull market which will morph into a bear market as the year 2021 progresses.
The dollar is weakening in a correction before it resumes its strengthening phase. Gold and US miners have started potential rallies which, once complete, will resume further declines.

Dow

The Dow Jones remains at a peak in a chart structure including a bearish rising wedge combined with a sell divergence in a threatening structure that awaits the final sell trigger. Rising interest rates cause asset prices to decline and this will impact the Dow if the trend continues. But, the rise has been swift and there are signs that a correction is close. But that will be a correction followed by the main trend again in higher interest rates, stronger dollar, lower gold, and equity and bond markets in a culminating bull market which will morph into a bear market as the year 2021 progresses.

US Dollar

The dollar is weakening in the wake of a reverse sell divergence (red circles) which could see the currency move to a new low. But marginal strength is still holding within the bullish reducing wedge pattern, powered by the consecutive buy divergences (blue circles), which will see the dollar return to its primary strength phase as Treasury yields finally strengthen and equities decline. This is supported by essentially bullish Cots data.

In long term data in the weekly 5 year chart the dollar breakout is just holding, although weakening fast. This may justify reversals in declining US Treasury yields and a gold rally. Once the dollar has a decisive breakout from the bullish reducing wedge pattern it is likely to follow the breakout of 3 years ago on a fractal basis, in substantial gains with concomitant impact on equity and bond declines as well as lower gold prices.

US dollar Cots data, which admittedly is not a short term indicator, is still dollar bullish although the slight dilation (red circles) could be cause for interim dollar weakness before the final strength phase starts in earnest.

EuroDollar

The EuroDollar is strengthening in the wake of a reverse buy divergence (blue circles) which could see further strength. But marginal weakness is still holding within the bearish rising wedge pattern, powered by the consecutive sell divergences (red circles), which will see the EuroDollar return to its primary weakening phase. The Euro is a follower not a leader, and will be driven inversely by the impacts driving the dollar. Euro weakness is also supported by the increasingly negative economic data coming out of the EU (certainly when compared with the US which is bad enough).

US Treasuries

US Treasury 10 year yield continues to advance as US equities continue to grind out new highs, spurred on by the 50-Day MA (red) crossing up over the 200-Day MA (green) indicating the move towards higher yields is real. However, the sell divergence in the long term data 5 year chart (next chart) indicates a strong correction to lower yields at some point. So, yield still continues to grind up slowly within the confines of the rising channel, but we still need increased yields during the ‘acid test’ when equities are actually declining, which they are not doing yet.

The weekly chart indicates the 10 year yield actually gapped up for a second week running but still the sell divergence signal holds, and this indicates lower yields next. This is in the long term data and yield declines may actually be lengthy. This in turn could promise protracted declines in interest rates and the dollar, and protracted and continued increases in US equities.

Gold

Gold starts a potential rally off the double bottom which has stalled the multi-breakdowns. This could be a strong rally if US Treasury yields start declining, or otherwise mild if not. Otherwise gold is positioned to decline further with support from rising interest rates and the dollar, plus continued bullish Cots data.

Gold Cots data indicates continued 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 against a dollar also weakening, in the wake of a dollar/Zar buy divergence. But price remains well within the reducing channel formation which it needs to breach before any sustained Rand weakness, as price drifts sideways towards the triangle vertex-based reversal point which will supply impetus either way.

Hui : Gold Ratio

The HUI / Gold ratio bearish dome holds, but the buy divergence could breakout up to destroy the dome. However, a H&S pattern has developed and any decisive breakdown through the neckline will be bearish in testing the support zone all the way down to the bottom at a ratio of 0.115. The chart continues to look bearish for now, with the promise of lower miner and gold prices to come.

GDX US Gold ETF

GDX has a similar chart with competing buy divergence and H&S pattern that could see either the dome destroyed or severe declines down to the $22/$23 level.


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 continues in a long time coming, with any breakout soon countered by a gold rally.

Silver

Silver is still stronger than gold and the continued non-confirmation implies an end to any precious metal rally potential, being more normal at times of major trend change. Silver therefore seems poised to decline because of this and the bearish Cots data, although still vulnerable (like gold) to the cocktail of impacts in US Treasury yield movement, interest rate change, dollar value, etc. The recent spike in silver interest is probably subsiding.

Silver Cots data indicates continued 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 advanced slightly to 65.22, as it continues to drifts sideways to down. But we need more price movement to make more intelligent judgements.

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Market Analysis 18 Feb 2021

Feb 18th, 2021 No comments

Executive summary

US interest rates are rising and this will cause asset prices to decline and the dollar to advance. Gold is the first asset class to start declining and the dollar has seemingly bottomed. This will spill over to equities if the trend continues, and the Dow Jones is about to oblige as it grinds out another new high in a chart structure that threatens declines about to happen.

The US dollar strengthening phase has started because interest rates are rising, although this may correct if US Treasury yields start to weaken again. Gold has started to weaken and is poised for further declines although silver is the stronger of the two. US miners continue to look bearish.

Dow

US Treasury yields are the principle driver of US interest rates, and they are rising. Rising US interest rates cause asset prices to decline and the dollar to advance. Gold is the first asset class to start declining and the dollar has seemingly bottomed. This will spill over to equities if the trend continues, and the Dow Jones is about to oblige as it grinds out another new high in a chart structure that threatens declines about to happen. The bearish rising wedge continues as the sell divergence extends in a threatening structure that awaits the final sell trigger. This is a culminating bull market which will morph into a bear market as the year 2021 continues to progress, with many different aspects of investor sentiment having evolved through exuberant to euphoric and beyond as the market surge moves through various risk barriers towards madness.

US Dollar

The dollar is powered by rising interest rates and the support of bullish Cots data, whilst technically it is still in the reducing wedge pattern in spite of the 2 consecutive buy divergences. It may still correct down further because of the strong link through US equities and interest rates, to US Treasury yields which may still weaken. If there are further equity gains then the dollar will continue to languish, and vice versa. Dollar strength will become supercharged once US equities actually start real declines caused by higher interest rates.

In long term data in the weekly 5 year chart the dollar breakout has held with some strength after the ‘kiss goodbye’. This truly pregnant moment continues, as we await developments in US Treasury yields which impact interest rates, equity and bond values, as well as the gold price.

US dollar Cots data, which admittedly is not a short term indicator, is still dollar bullish (for close to 3 months now). And whether the dollar weakens next or not it will strengthen eventually, and quite soon too.

EuroDollar

The EuroDollar is in a weakening phase, although still in the rising wedge pattern despite the 2 consecutive sell divergences and the additional support of bearish Cots data (not shown). And, like the dollar except opposite, this correction may still develop more upward momentum, but the Euro is a follower not a leader, and will be driven inversely by the impacts driving the dollar. Euro weakness is also supported by the increasingly negative economic data coming out of the EU (certainly when compared with the US which is bad enough).

US Treasuries

The US Treasury 10 year yield rally indicates rising interest rates, as US equities continue to grind out new highs. But in so doing it has created a sell divergence which promises lower yields next. This is in addition to the sell divergence in the long term data 5 year chart (next chart). So, yield still continues to grind up slowly within the confines of the rising channel, but we still need increased yields during the ‘acid test’ when equities are actually declining, which they are not doing yet.

The weekly chart indicates the 10 year yield actually gapped up but still the sell divergence signal holds, and this indicates lower yields next. This is in the long term data and yield declines may actually be lengthy. This in turn could promise protracted declines in interest rates and the dollar, and protracted and continued increases in US equities.

Gold

Gold is poised to decline further with support from rising interest rates and the dollar, plus continued bullish Cots data. Technically there are multi-breakdowns with every evidence of further testing of the support zone. But there is now a double bottom with the previous low in Nov 2020, and if we have US Treasury yield declines we could have another gold rally.

Gold Cots data indicates continued 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 against a stronger dollar, in the wake of a dollar buy divergence. But price remains well within the reducing channel formation which it needs to breach before any sustained Rand weakness.

Hui : Gold Ratio

The HUI / Gold ratio dome turns bearish again as miners lead gold lower, with the ratio turning down from resistance at the 50-Day MA (red). The chart continues to look bearish with the promise of lower miner and gold prices to come.

GDX US Gold ETF

GDX has a similar chart but is more bearish, with a breakdown through the H&S neckline which should produce further sharp declines. Using the height of the H&S as a backsight the target GDX decline price is in the range of $22 / $23 (30% decline).


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 a breakout soon continues to appear probable.

Silver

Silver is stronger than gold at the moment but is also poised to decline with bearish Cots data, and the cocktail of impacts in US Treasury yield increases, higher interest rates, stronger dollar. But with the spike in recent silver interest and continued overflow, silver could rally first.

Silver Cots data indicates continued 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 declined with silver stronger than gold, and this may persist for a while longer. The ratio continues to drift sideways to down and we need more price movement to make more intelligent judgements.

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Market Analysis 11 Feb 2021

Feb 11th, 2021 No comments

Executive summary

The Dow Jones extends its rally to a new high as the start of a decline phase awaits. This is a culminating bull market which will morph into a bear market as the year 2021 continues to progress. Many different aspects of investor sentiment have evolved through exuberant to euphoric and beyond as the market surge has swollen through various risk barriers towards madness. When the final turn is triggered it will be a deluge probably setting more records than the climb to the top.


The US dollar strengthening phase has stalled and may weaken further before eventually becoming supercharged once US equities actually start real declines. Gold is poised to resume declines and US miners continue to look bearish.

Dow

The Dow Jones extends its rally to a new high as it extends the sell divergence and rising wedge pattern which in turn threatens the start of a decline phase. This is a culminating bull market which will morph into a bear market as the year 2021 continues to progress. The sell divergence is in fact a compound divergence of numerous sub-sets stretching back nearly 6 months. Many different aspects of investor sentiment have evolved through exuberant to euphoric and beyond as the market surge has swollen through various risk barriers towards madness. When the final turn is triggered it will be a deluge probably setting more records than the climb to the top.

US Dollar

The dollar corrects down in its strengthening phase, although still powered by 2 consecutive buy divergences with the additional support of bullish Cots data. This correction may still develop more downward momentum, but there is a strong link between dollar strength and US equity decline. If there are further equity gains then the dollar will continue to languish, and vice versa. Dollar strength will become supercharged once US equities actually start real declines.

In long term data in the weekly 5 year chart the dollar breakout has stalled and could be invalidating. If not, it may turn out to be a ‘kiss goodbye’ providing momentum to the dollar rally. This is truly a pregnant moment, because dollar strength now reflects US equity weakness as well as gold weakness, and of course vice versa.

US dollar Cots data, which admittedly is not a short term indicator, is still dollar bullish (for close to 3 months now). And whether the dollar weakens next or not it will strengthen eventually, and quite soon too.

EuroDollar

The EuroDollar corrects up in its weakening phase, although still powered by 2 consecutive sell divergences with the additional support of bearish Cots data (not shown). And, like the dollar except opposite, this correction may still develop more upward momentum, but the Euro is a follower not a leader, and will be driven inversely by the impacts driving the dollar. Euro weakness is also supported by the increasingly negative economic data coming out of the EU (certainly when compared with the US which is bad enough).

US Treasuries

The US Treasury 10 year yield rises above the 11 month peak, as US equities go to a new high, but in so doing it creates a sell divergence. This is in addition to the sell divergence in the long term data 5 year chart (not shown this week). So, yield still continues to grind up slowly within the confines of the rising channel, and this is supported by the ‘gold cross’ (black arrow) 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, which they are not doing yet.

Gold

Gold is poised to decline further with support from Cots data (next chart). There is a strong link between the gold price and US equities and the dollar, and fortunes in the gold market are driven more by this link than by the gold chart at the moment. There is a breakdown below the expanding triangle support line, but the gold price still meanders down the reducing channel which could threaten a breakout to higher levels if breached. Gold may rally slightly further but is destined to decline severely soon. A key rally level would be at the start of resistance at $1875, and thereafter a test of the support zone down towards $1670.

Gold Cots data indicates continued 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 strengthens against a weaker dollar, and continued Rand strength seems likely. Much depends on dollar strength which in turn depends on US equity direction. For now, the US$ZAR continues to drift lower within the confines of the reducing channel which eventually 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 correcting up slightly, in the wake of the buy divergence, although resistance at the 50-Day MA (red) appears to be holding. The bearish dome continues to hold out but the chart continues to look bearish with the promise of lower miner and gold prices to come.

GDX US Gold ETF

GDX has a similar chart but is somewhat less bullish. The bearish dome continues to hold out and the H&S continues to promise severe declines once the neckline is breached. At the moment the 50-Day (red) and 200-Day (green) MAs provide resistance which is holding. 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 a breakout soon continues to appear probable.

Silver

Silver is poised to decline further with support from Cots data (next chart). But, recent interest in silver has spiked and this could trigger a rally again. But much still depends on US equity direction which will accelerate (or retard) dollar strength.

Silver Cots data indicates continued 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 declined due to the bogus and temporary silver short squeeze. This reflects the increased silver price but on the chart has the effect of simply extending the double bottom. The ratio continues to drift sideways and we need more price movement to make more intelligent judgements.

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Market Analysis 4 Feb 2021

Feb 4th, 2021 No comments

Executive summary

Market mania in the US reached crazy heights this week as the Reddit / Robinhood raiders induced retail investors to create hyper bubbles in especially ‘Gamestop’ and ‘Silver’ that is going to end badly. Obsessed investors market manipulated mainly these 2 assets in a short squeeze by:
. buying up call options;
. forcing market makers to buy the underlying assets;
. forcing short sellers to buy their assets back;
. forcing prices to sky-rocket;
The play is finished, and asset prices are dropping back markedly, in a market rapidly increasing in volatility which could be the forerunner of a collapse in the overall market. The short squeeze in silver has certainly been bogus, as evidenced by Cots data which shows speculators are net long and not short as incorrectly reported, reflecting the crazy distorted condition in US markets which can only end badly.

The Dow Jones corrects up slightly after the recent low with price still within the boundary of the threatening rising wedge, which it needs to breach either up or down to signal strongly. The market awaits a significant break to signal a solid trend change, which inevitably must come at some point, because what is happening is not sustainable.

The US dollar is now in a strengthening phase which is set to accelerate, supported by reciprocal evidence in the EuroDollar chart, but will become supercharged once US equities actually start real declines. Gold is poised to resume declines and US miners continue to look bearish.

Dow

The Dow Jones corrects up slightly after the recent low as it advances back above 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 or even go to a new high. It needs to penetrate down below the rising wedge to signal what could then be significantly bearish. However, equity breadth yesterday remains flat (at 1.28 advances :1.0 declines) and volume has been contracting for 5 days. The market awaits a significant break to signal a solid trend change, which inevitably must come at some point, because what is happening is not sustainable.

US Dollar

The dollar is now in a strengthening phase powered by 2 consecutive buy divergences. This will accelerate into a strong advance once the reducing wedge is penetrated (which has already occurred in the long term data in the weekly 5 year chart). This is supported by reciprocal evidence in the Euro chart but will become supercharged once US equities actually start real declines.

Long term data in the weekly 5 year chart indicates there is in fact a breakout of the reducing wedge which will accelerate the dollar advance, as evidenced by the wedge breakout 3 years ago on a fractal basis. The breakout now will support the notion of much weaker gold ahead.

EuroDollar

The EuroDollar is now in a weakening phase powered by 2 consecutive sell divergences. There is a breakdown through the rising wedge and this will now accelerate into a strong decline which is supported by the increasingly negative economic data coming out of the EU (certainly when compared with the US which is bad enough).
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 rises back up towards a 10 month peak, with this week’s slight correction up in US equities, as bond prices turn down. So, yield still continues to grind up slowly within the confines of the rising channel, and this is supported by the ‘gold cross’ (black arrow) 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.

A nagging contrary view is provided by the weekly 5 year chart which illustrates a reverse sell divergence indicating lower yields to come next. This is based on long term weekly data and may not happen soon.

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 advancing 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 strengthens again against a stronger dollar, against the dollar buy divergence. This is all inexplicable and should reverse soon. The dollar buy divergence and actual strength in the dollar should prevail in a weakening Rand next. 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 continues to hold out and promise lower miner and gold prices, miners lead gold lower. The slight uptick in the ratio has met resistance at the 50-day (red) and 200-day (green) Mas, and further declines will test the major support zone.

GDX US Gold ETF

GDX has a similar chart and is also 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 a breakout soon continues to appear probable.

Silver

Silver shows a sharp advance and decline this week in the wake of the bogus short squeeze. Like gold, silver is poised to decline further with support from Cots data (next chart), plus a stronger dollar. But much still depends on US equity direction which will accelerate (or retard) dollar strength.

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 declined due to the bogus and temporary silver short squeeze. This reflects the increased silver price but on the chart has the effect of simply extending the double bottom. The ratio continues to drift sideways and we need more price movement to make more intelligent judgements.

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