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Market Analysis 24 Mar 2021

Mar 24th, 2021 No comments

Executive summary

The status in US equities remains much the same as last week as divergence and the rising wedge continues to threaten decline waiting to happen. Rising US interest rates are set to correct down slightly and this is leading to conflicting signals in the markets which will probably lead to increased volatility until main trends continue. Lower US Treasury yields promise a weaker US dollar, higher gold, and extended equity gains, but technically it looks like the reverse could happen. A breakout in the gold / silver ratio promises lower metals which implies a stronger dollar and US equities are in a topping pattern. But higher interest rates are coming, no matter what: Despite world governments need to prevent it.

The dollar breakout and the EuroDollar breakdown are both holding in confirming the start of the dollar strengthening phase which could be multi-month. US Treasury yields continue to move up, but with the potential now for a reversal which may already have started. Gold is still in a rally but silver is weaker and looks vulnerable, while miners look bearish.

Dow

The Dow Jones turns down slightly from the top as the equity markets show signs of running out of steam. Technically, the Dow remains the same as last week as divergence and the rising wedge continues to threaten decline and trend change waiting to happen. Rising US Treasury yield is set to correct down slightly which may now already have started, and this will provide some relief which should extend equity gains further. But once the main US Treasury yield trend resumes, equity and bond markets will morph into a bear market as the year 2021 progresses. Much depends on the extent of the interest rate correction.

US Dollar

The dollar breakout holds and starts to build momentum at the beginning of the dollar strength phase. But this is dependent on US Treasury yield strength and US equity market decline, both of which could interfere with further dollar strength. This is also reflected in the dollar chart as price approaches strong resistance including the 200-Day MA (green). If the US Treasury yield correction is quick and the Dow Jones continues to decline then dollar strength could ultimately develop into a multi-month rally, and more.

Long term data in the weekly 5 year chart supports the bullish dollar breakout which is similar to the breakout 3 years ago and should develop into a strong rally. If this is true, it must be because of a short US Treasury yield correction down as well as continued US equity declines and lower gold prices.

EuroDollar

EuroDollar behaviour supports the strong dollar rally as it holds its breakdown in starting to build weak momentum. Although it too is now at strong support in the 200-Day MA (green).

Long term EuroDollar data in the weekly 5 year chart is also mimicking dollar behaviour in the opposite direction with a successful breakdown of the rising wedge similar to that of 3 years ago, indicating multi-month EuroDollar weakness.  

US Treasuries

US Treasury 10 year yield continues to move up in the rising channel, spurred on by the gold cross (green square) indicating the move towards higher yields is real. But, it has now developed sell divergence which creates potential for a reversal which has long since been indicated by long term data in the 5 year chart (next). We still need increased yields during the ‘acid test’ when equities are actually declining, and this has not happened yet.

Weekly yield has started to turn down in the 5 year chart. This has been prompted for some time now and is finally also signalled in the 12 month chart (previous). Because this is long term weekly data it may indicate the start of a lengthy correction which in turn could promise protracted declines in interest rates and the dollar, as well as continued increases in US equities and gold. Despite the fact it seems unlikely, and even impossible.

The above chart illustrates the negative correlation between US 10 year Treasury yield and the gold price, in a 5 year daily view. Any sustained yield correction down now is likely to provide energy for the gold rally to continue. Much depends on the extent and timing of any US Treasury yield correction which will impact directly on US interest rates, dollar value, equity and bond market behaviour, and gold.

Gold

Gold is starting to rally, and this will be supported further by US Treasury yield declines and retarded by dollar advances. Some indication of extent is provided by the chart which suggests the gold correction may reach as far up into the region of the H&S neckline. This covers a range from $1670 to $1800 which is a potential 8% gain.

South African Rand

The Rand is strengthening against a stronger dollar, in correcting down from the top of the reducing channel. There is a region of strong dollar resistance there including the 200-Day MA (green). Further dollar strength could propel the Rand into a breakout of the reducing channel which will be additionally bearish the Rand, but much depends on the pending US Treasury correction as to whether this happens sooner or later.

Hui : Gold Ratio

The HUI / Gold ratio reacts down sharply as miners lead gold lower. The ratio has reacted down below both the 200-Day (green) and 50-Day (red) MAs as it moves sideways towards a triangle vertex-based reversal. The chart is again beginning to assume a bearish appearance.

GDX US Gold ETF

GDX reacts down sharply from the H&S neckline (and 200-Day MA (green) as the breakdown holds, and price moves sideways towards a triangle vertex-based reversal. The chart remains bearish and the final H&S target decline remains in the region of $22 / $23.

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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 continues in a long time coming, and the gold rally has resulted in price declining from resistance. But price has moved up off support as it continues sideways before the next breakout attempt.

Silver

Silver is now decidedly weaker than gold and has a mini-breakdown as it starts to look bearish. As with gold, silver is supported by Treasury yield decline and retarded by dollar advance.

Gold : Silver Ratio

The gold / silver ratio advanced to 68.38 in a breakout. This is the first sign in a while that indicates higher ratios and lower metal prices ahead. Technically, we need to breakout the declining expanding channel trendline.

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Market Analysis 17 Mar 2021

Mar 17th, 2021 No comments

Executive summary

The status in US equities remains much the same as last week as divergence and the rising wedge continues to threaten decline waiting to happen. Rising US interest rates are set to correct down slightly and this is leading to conflicting signals in the markets which may be aggravated further by US Fed pronouncements today, as this is FOMC week in the US. This could all add to increased volatility in probably extending equity gains further, weakening the dollar, and strengthening the gold rally. But once the main US Treasury trend resumes, equity and bond markets will be under increased bearish pressure as the year 2021 progresses.

The dollar breakout and the EuroDollar breakdown are both holding in confirming the start of the dollar strengthening phase which could be multi-month. US Treasury yields continue to move up, but with the potential now for a reversal which has the effect of retarding dollar gains and supporting a gold rally which has started.

Dow

The Dow Jones continues to edge up to new highs despite the sell divergence signal holding. The status therefore remains the same as last week as divergence and the rising wedge continues to threaten decline and trend change waiting to happen. Rising US interest rates are set to correct down slightly which will provide some relief and probably extend equity gains further, but once the main US Treasury yield trend resumes, equity and bond markets will morph into a bear market as the year 2021 progresses. Much depends on the extent of the interest rate correction.

US Dollar

The dollar breakout is holding in confirming the start of the dollar strength phase. This could ultimately develop into a multi-month rally but momentum is dependent on the pending US Treasury yield correction, in timing and extent. Declining yield will retard dollar gains. But once complete, the dollar will return to its primary strength phase as Treasury yields finally strengthen and equities decline.

Long term data in the weekly 5 year chart illustrates the bullish dollar breakout which, on a fractal basis, is not only likely to be similar to the breakout 3 years ago but in fact looks nearly identical. Despite short term interruptions caused by the Treasury yield correction, the dollar strength phase could be major with corresponding negative impact on equity and bond declines as well as lower gold prices.

EuroDollar

The EuroDollar breakdown is holding in confirming the start of the weakening phase, and also corroborating dollar strength. This could ultimately develop into a multi-month decline but, like the dollar, is dependent on the pending US Treasury yield correction, in timing and extent. Declining yield will retard Euro declines. But once complete, the EuroDollar will return to its primary weakening phase as US Treasury yields finally strengthen and equities decline.

US Treasuries

US Treasury 10 year yield continues to move up in the rising channel, spurred on by the gold cross (green square) indicating the move towards higher yields is real. But, it has now developed sell divergence which creates potential for a reversal which has long since been indicated by long term data in the 5 year chart (next). We still need increased yields during the ‘acid test’ when equities are actually declining, and both are not doing this yet.

Weekly yield has started to turn down in the 5 year chart. This has been prompted for some time now and is finally also signalled in the 12 month chart (previous). Because this is long term weekly data it may indicate the start of a lengthy correction which in turn could promise protracted declines in interest rates and the dollar, as well as continued increases in US equities and gold. Despite the fact it seems unlikely, and even impossible.

The above chart illustrates the negative correlation between US 10 year Treasury yield and the gold price, in a 5 year daily view. Any yield correction now is likely to provide energy for the gold rally to continue. Much depends on the extent and timing of any US Treasury yield correction which will impact directly on US interest rates, dollar value, equity and bond market behaviour, and gold.

Gold

Gold is starting to rally, and this will be supported further by US Treasury yield declines and retarded by dollar advances. Some indication of extent is provided by the chart which suggests the gold correction may reach as far up into the region of the H&S neckline. This covers a range from $1670 to $1800 which is a potential 8% gain.

South African Rand

The Rand is strengthening against the dollar, in correcting down from the top of the reducing channel. There is a region of strong dollar resistance there including the 200-Day MA (green). Further dollar strength could propel the Rand into a breakout of the reducing channel which will be additionally bearish the Rand, but much depends on the pending US Treasury correction as to whether this happens sooner or later.

Hui : Gold Ratio

The HUI / Gold ratio rises in the wake of the buy divergence as miners lead gold higher in a potential rally that has also deactivated the earlier H&S formation. But the ratio is beginning to react down from a region of strong resistance, including the 200-Day MA (green). A new potential H&S pattern could be forming lower down at the bottom of the support zone, as the ratio moves sideways towards the triangle apex from which a break is inevitable, either up or down.

GDX US Gold ETF

GDX has corrected up to the H&S neckline. From here price will either invalidate the H&S or confirm the breakdown, as price moves sideways towards the triangle apex may develop into a strong reversal point, including the 200-Day MA (green) at about $35. Invalidation of the H&S breakdown will rule out the target decline price at $22/ $23 for now.


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, and the gold rally has resulted in price declining from resistance. Dust will now move sideways to down before any further breakout attempt.

Silver

Silver has started to rally but is doing so weaker than gold, for now. Price, as with gold, is supported by Treasury yield decline and retarded by dollar advance.

Gold : Silver Ratio

The gold / silver ratio advanced slightly to 66.57, as it continues to drift sideways to up. But we still need more price movement to make more intelligent judgements.

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Market Analysis 10 Mar 2021

Mar 10th, 2021 No comments

Executive summary

The status in US equities remains much the same as last week as divergence and the rising wedge continues to threaten decline waiting to happen. Rising US interest rates are beginning to correct down slightly which will provide some relief and probably extend equity gains further, weaken the dollar, and strengthen the gold rally, but once the main trend resumes, equity and bond markets will morph into a bear market as the year 2021 progresses.

The dollar has a breakout which confirms the start of a strengthening phase which could be multi-month. US Treasury yields continue to move up, but with the potential now for a reversal which has the effect of retarding dollar gains and supporting a gold rally which has started.

Dow

The Dow Jones continues to hold to new highs despite declines in the oscillators which has developed divergence into a compound sell divergence. The status therefore remains the same as last week as divergence and the rising wedge continues to threaten decline waiting to happen. Rising US interest rates are beginning to correct down slightly which will provide some relief and probably extend equity gains further, but once the main trend resumes, equity and bond markets will morph into a bear market as the year 2021 progresses.

US Dollar

The dollar has a breakout from the reducing wedge which confirms the start of a strengthening phase which could be multi-month. But US Treasury yields could be starting a downward correction which will retard dollar gains. Once complete however, the dollar will return to its primary strength phase as Treasury yields finally strengthen and equities decline.

Long term data in the weekly 5 year chart illustrates the bullish breakout which, on a fractal basis, is likely to be similar to the breakout 3 years ago. Despite short term interruptions caused by Treasury yield corrections, the dollar strength phase could be major with corresponding negative impact on equity and bond declines as well as lower gold prices.

EuroDollar

The EuroDollar has a breakdown from the rising wedge, confirming the start of its primary weakness phase as US Treasury yields and the US dollar strengthen. The Euro is a follower not a leader, and will be driven inversely by the impacts driving the dollar.

US Treasuries

US Treasury 10 year yield continues to move up in the rising channel, spurred on by the gold cross (green square) indicating the move towards higher yields is real. But, it has now developed sell divergence which creates potential for a reversal which has long since been indicated by long term data in the 5 year chart (next). We still need increased yields during the ‘acid test’ when equities are actually declining, and both are not doing this yet.

Weekly yield has started to turn down in the 5 year chart. This has been prompted for some time now and is finally also signalled in the 12 month chart (previous). Because this is long term weekly data it may indicate the start of a lengthy correction which in turn could promise protracted declines in interest rates and the dollar, as well as continued increases in US equities and gold. Despite the fact it seems unlikely, and even impossible.

The above chart illustrates the negative correlation between US 10 year Treasury yield and the gold price, in a 5 year daily view. Any yield retracement now is likely to cause gold to increase, providing some measure of extent in both cases. Much depends on the extent and timing of any Treasury yield correction which will impact directly on US interest rates, dollar value, equity and bond market behaviour, and gold.

Gold

Gold is starting to rally, and this will be supported by Treasury yield declines and retarded by dollar advances. Some indication of extent is provided by the chart which suggests the gold correction may reach as far up into the region of the H&S neckline. This covers a range from $1670 to $1800 which is a potential 8% gain.

South African Rand

The Rand has started to weaken against the dollar but has corrected down from the top reducing wedge trendline in a region of strong resistance, just below the 200-Day MA (green). Any further dollar strength could propel the Rand into a breakout of the reducing channel which will be additionally bearish the Rand.

Hui : Gold Ratio

The HUI / Gold ratio rises in the wake of the buy divergence as miners lead gold higher in a potential rally. But in the scheme of things price is really only moving sideways towards the triangle apex. The chart has lost its bearish character, as well as any H&S breakdown potential.

GDX US Gold ETF

GDX has started to correct up despite the H&S breakdown which is still active. However, correction potential is increasing and this will start to test resistance soon. The triangle apex is approaching and may develop into a strong reversal point, including the 200-Day MA (green) at about $35. Invalidation of the H&S breakdown will rule out the target decline price at $22/ $23 for now.


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, and the gold rally has resulted in price declining from resistance. Dust will now move sideways to down before any further breakout attempt.

Silver

Silver has started to rally and could technically go to a new high. But price, as with gold, is supported by Treasury yield decline and retarded by dollar advance.

Gold : Silver Ratio

The gold / silver ratio advanced slightly to 65.57, as it continues to drifts sideways to down. But we still need more price movement to make more intelligent judgements.

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Market Analysis 3 Mar 2021

Mar 3rd, 2021 No comments

Executive summary

The Dow Jones remains close to a peak in a threatening structure that is much the same as last week. But rising US Treasury yields are probably due a correction which will provide some relief in extending equity gains further, weaken the dollar, and initiate a gold rally. But that will be a correction followed by the main trend again afterwards including 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 trending sideways which could see the currency move to a new low during the US Treasury correction, followed by a return to its primary strength phase as Treasury yields strengthen again and equities decline. Gold declines are close to a reversal.

Dow

The Dow Jones remains close to a peak but is nibbling at a breakdown through the rising wedge, while the sell divergence signal remains active. The index actually broke below the rising wedge but bounced up to invalidate the break. Otherwise, the threatening structure remains the same as last week, awaiting the final sell trigger. Rising US interest rates are probably due a correction which will provide some relief and extend equity gains further. Once the main trend resumes, equity and bond markets will morph into a bear market as the year 2021 progresses.

US Dollar

The dollar is trending sideways but in the wake of a reverse sell divergence (red circles) could see the currency move to a new low during the US Treasury correction. Once complete, the dollar will return to its primary strength phase as Treasury yields finally strengthen and equities decline. This is supported by essentially bullish Cots data (not shown).

Long term data in the weekly 5 year chart indicates more dollar weakness before the bullish wedge breakout, similar to the breakout of 3 years ago on a fractal basis. This will lead to substantial gains with concomitant impact on equity and bond declines as well as lower gold prices.

EuroDollar

The EuroDollar is trending sideways but in the wake of a reverse buy divergence (blue circles) could see the currency move to a new high during the US Treasury correction. Once complete, the Euro will return to its primary weakness phase as US Treasury yields and the US dollar strengthen. The Euro is a follower not a leader, and will be driven inversely by the impacts driving the dollar.

US Treasuries

US Treasury 10 year yield continues to advance in the rising channel, spurred on by the gold cross (green square) indicating the move towards higher yields is real. However, it is starting to take a breather as US equities take a breather. Also, the sell divergence in the long term data 5 year chart (next chart) indicates a strong correction to lower yields at some point, and this might be now. We still need increased yields during the ‘acid test’ when equities are actually declining, and both are not doing this yet.

The weekly chart indicates the 10 year yield reverse sell divergence signal indicating a correction to lower yields. Yield has actually started to move down already and this might be the start of the correction which could be lengthy because this is weekly long term data. This in turn could promise protracted declines in interest rates and the dollar, and protracted and continued increases in US equities.

Gold

Gold declines in multi-breakdowns including activation of the H&S which theoretically could jettison price by the height of the head down to base support at $1450. But gold is well into the support zone and could be close to a correction as it nears $1670. Also, US Treasury yields are starting to decline and this could trigger a weaker dollar and stronger gold. Continued bearish Cots data supports lower gold and any correction therefore might be shortlived.

Gold Cots data indicates a slight narrowing of the dilation which proportionately represents the gold declines to date. The data supports further gold declines, with or without any correction.

South African Rand

The Rand has started to weaken against the dollar in the wake of the dollar 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 bearish dome holds as the H&S activates and then invalidates, as the ratio rises in the wake of the buy divergence. This indicates a sideways move with the US miners not really more bearish than gold itself, despite a more bearish GDX in the next chart. The chart retains a bearish character, but if a gold correction up is to be expected soon, as seems likely, then the dome structure might be threatened. Any decisive break down is obviously bearish US miners.

GDX US Gold ETF

GDX has a more bearish chart in that the H&S has activated and is holding within the bearish dome. Technically, this presumes price could jettison by the height of the head down to the level of $23 but, as with gold itself, is probably close to a correction up first.


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, and the gold decline has resulted in only a tepid breakout attempt that has met resistance. As gold is close to a countertrend rally it seems probable that Dust will now move sideways to down before any further breakout attempt.

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 bearish Cots data, but still vulnerable (like gold) to the cocktail of impacts in US Treasury yield movement, interest rate change, dollar value, etc., which suggests a silver correction up next.
Pic Silver Cots 3y

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 slightly to 64.50, as it continues to drifts sideways to down. But we need more price movement to make more intelligent judgements.

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