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Market Analysis 22 Apr 2021

Apr 22nd, 2021 No comments

Executive summary

The Dow Jones remains elevated and the bearish patterns in the sell divergence and rising wedge remain active, as the high levels of investor optimism and euphoria remain extreme. This will probably still continue for a short yet before finally topping out. We remain at the forefront of a long-term decline as the effect of numerous impacts continue to bore in and eventually collapse the structure.

US Treasury yields continue to correct down as US equities remain elevated, although an end to the correction appears to be soon. Higher interest rates are coming, no matter what. The dollar correction down and the EuroDollar correction up are close to completion. Gold and silver rallies might have a short way to go yet and US miners are providing slightly mixed signals, with prospects for metals and miners likely to start significant declines soon.

Dow

The Dow Jones remains elevated and the bearish patterns in the sell divergence and rising wedge remain active, as the high levels of investor optimism and euphoria remain extreme. This will probably still continue for a short yet before finally topping out.

US Dollar

The corrective reversal in the US$ index is beginning to show signs of completion (black circle) as the dollar prepares for the next rally. The succession of higher highs and higher lows is still intact, and this is corroborated by activity in competing currencies, especially the Euro. This is also dependent largely on the timing of US Treasury yield correction and US equity market top, both of which will support the start of a dollar rally.

Long term data in the weekly 5 year chart indicates that the dollar reversal is still incomplete and the comparison with the breakout 3 years ago still holds, but tenuously so.

EuroDollar

The corrective reversal in the EuroDollar is also beginning to show signs of completion (black circle) as the Euro prepares for the next decline. The succession of lower highs and lower lows is still intact, by way of continuing to corroborate expected dollar movements.

Long term data in the weekly 5 year chart indicates that the EuroDollar reversal is still incomplete and the comparison with the breakout 3 years ago still holds, but tenuously so.

US Treasuries

US Treasury 10 year yield continues to correct down in the wake of the sell divergence, as US equities remain elevated. We still need increased yields during the ‘acid test’ when equities are actually declining, and although this has not happened yet it could happen at any time, when equities and the bond market start declining at the same time. It appears the Treasury yield correction may not last much longer.

The above chart illustrates the negative correlation between US 10 year Treasury yield and the gold price, in a 5 year daily view. Just as the Treasury yield correction down is causing the gold rally, so also will the end of the yield correction cause the end of the gold rally and resume the start of gold declines.

Gold

The Gold rally is close to completion as both the Treasury yield correction and dollar correction appear to be close to completion. The chart illustrates the potential gold correction range and how close it is to completion. The next decline phase will threaten activation of the next H&S neckline at about $1670.

A quick look at the longer term 5 year chart indicates that gold could soon test support below $1670 all the way down to the $1450 level.

South African Rand

The Rand is close to the start of the next weakening phase as the dollar is close to resuming strength. This is supported in the chart by the creation of a dollar buy divergence as price approaches a triangle vertex-based reversal.

Hui : Gold Ratio

The HUI / Gold ratio breaks higher, but not through the declining channel, as it moves up the rising wedge towards the triangle vertex-based reversal. But the MAs continue to provide strong support.

GDX US Gold ETF

GDX has a breakout as it invalidates the earlier H&S breakdown, but has also created a mild sell divergence promising lower prices ahead. GDX is the only US miner vehicle with a breakout whilst all the others have not, as indicated on the next chart.

Other US miners

Other US miners have not achieved breakouts, including the GDXJ (Juniors).

Dust US Miners Bear Index

Dust declines continue as the gold rally continues. The chart is now reaching regions of strong support which is another indication of gold being close to the end of its rally. The opposite influence is indicated in the next chart NUGT which is a US miners bull index.

NUGT US Miners Bull Index

NUGT has a breakout (enjoying the gold rally) but in the process has developed a reverse sell divergence, which promises an end to the gold rally.

Silver

The silver rally should go higher but is limited because the dollar and Treasury yield corrections are close to completion.

Gold : Silver Ratio

The gold / silver ratio breakout is invalidated with a slightly lower close at 67.49. This becomes somewhat indecisive as the ratio also approaches the triangle apex for a break either way.

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Market Analysis 8 Apr 2021

Apr 8th, 2021 No comments

Executive summary

The Dow Jones remains elevated as the bearish patterns in the sell divergence and rising wedge remain active. This dichotomy is also evident in the US equity market structure itself with increasingly negative breadth and volume, resulting in the slowest day on Wall Street yesterday (Wed), all against continuing higher prices. Despite this negative trend, prices could still go higher before finally topping out, as the continued titanic struggle to keep US markets elevated continues. We remain at the forefront of a long-term decline as the effect of numerous impacts continue to bore in and eventually collapse the structure.

US Treasury yields turn down slightly as US equities remain elevated, and may or may not correct more aggressively in the short term. But higher interest rates are coming, no matter what. The dollar breakout and the EuroDollar breakdown are both building momentum after corrective reversals which look close to completion. The Gold and silver rallies have faded, despite current reversals, and both metals and miners look ready for likely declines ahead.

Dow

The Dow Jones remains elevated as the bearish patterns in the sell divergence and rising wedge remain active. This dichotomy is also evident in the US equity market structure itself with increasingly negative breadth and volume, resulting in the slowest day on Wall Street yesterday (Wed), all against continuing higher prices. Despite this negative trend, prices could still go higher before finally topping out.

US Dollar

The corrective reversal in the US$ index is close to completion as the dollar prepares for the next rally up-leg. The succession of higher highs and higher lows continues intact, and this is corroborated by activity in competing currencies, especially the Euro. This is also dependent largely on the potential US Treasury yield correction and US equity market decline, both of which could interfere with further dollar strength.

Long term data in the weekly 5 year chart supports the bullish dollar breakout as momentum builds, despite the corrective reversal still in process. Similarity with the breakout 3 years ago provides good evidence of dollar strength soon.

EuroDollar

The corrective reversal in the EuroDollar is close to completion as the succession of lower highs and lower lows continues in preparation for the next decline.

Long term data in the weekly 5 year chart supports the bearish Euro as downwards momentum builds, despite the corrective reversal still in process. Also, similarity with the breakdown 3 years ago provides good evidence of continued EuroDollar weakness.

US Treasuries

US Treasury 10 year yield turns down slightly in the wake of the sell divergence, as US equities remain elevated. There is little activity in yield at the moment, which may or may not correct more aggressively in the short term, spurred on by the gold cross (green square) indicating the move towards higher yields is real. The sell divergence is still active though and this indicates a potential for a reversal which has long since been indicated by long term data in the 5 year chart (not shown). We still need increased yields during the ‘acid test’ when equities are actually declining, and this has not happened yet.

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 a stronger gold rally neither of which is happening yet. 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

The Gold rally fades into a bearish decline below the H&S breakdown which indicates potential to drop all the way to about $1450. The potential corrective reversal in US Treasury yield could strengthen the gold rally which has already reversed back up towards $1750 in near completion of its potential correction range. Failing this, further declines are likely after that, because the H&S breakdown has held and the next H&S threatens activation below at about $1670.

A quick look at the longer term 5 year chart indicates that gold could soon test support below $1670 all the way down to the $1450 level.

South African Rand

The Rand continues to strengthen against the dollar but has reached a region of strong dollar support, and is now close to the start of a weakening phase as the dollar is close to the start of resuming strength.

Hui : Gold Ratio

The HUI / Gold ratio is moving sideways into an approaching triangle vertex-based reversal. Indications for further sideways movement in the short term is strong followed by further declines thereafter. The MAs appear to be providing strong resistance.

GDX US Gold ETF

The GDX is moving sideways as the H&S breakdown holds with the ultimate final target decline price in the region of $22 / $23. Price is moving towards the approaching triangle vertex-based reversal, and the chart remains bearish.


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 price is moving sideways to down towards the approaching triangle vertex-based reversal. The chart remains bullish.

Silver

The silver rally, like gold, fades into a bearish decline, but the potential corrective reversal in US Treasury yield could strengthen the silver rally which has already reversed back up towards the diagonal resistance trendline. But the breakdown is holding and if the trendline holds then further declines will test support soon.

Gold : Silver Ratio

The gold / silver ratio breakout is holding despite a slightly lower close at 68.98. This therefore still indicates higher ratios and lower metals ahead.

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Market Analysis 1 Apr 2021

Apr 1st, 2021 No comments

Executive summary

The Dow Jones remains elevated and much the same as last week, as divergence and the rising wedge continues to threaten decline waiting to happen. This is supported by non-confirmation of the 3 main US indices and the waning of breadth and volume in the equity market. The continued titanic struggle to keep US markets elevated cannot continue for much longer and we continue to be positioned at the forefront of a long-term decline as the effect of numerous impacts continue to bore in and eventually collapse the structure.


US Treasury yields continue to rise but are close to a corrective reversal which promise a weaker US dollar, extended equity gains, and higher gold. 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 building momentum which is likely to extend into multi-month phases. The Gold rally has faded and silver remains weaker than gold, as the breakout in the gold / silver ratio indicates weaker metals and miners ahead.

Dow

The Dow Jones remains elevated as the bearish patterns in the sell divergence and rising wedge remain active. This dichotomy is also evident in the non-confirmation of the 3 main US indices and the waning of breadth and volume in the equity market, as the titanic struggle to keep US markets elevated continues.

US Dollar

Multi-breakouts start to build momentum in dollar value as the rally continues. But we are getting closer to a corrective reversal before the strength phase continues to yet higher values. This is dependent largely on the potential US Treasury yield correction and US equity market decline, both of which could interfere with further dollar strength. Price has advanced through the 200-Day MA (green) without much of a pause, so there may well be further dollar gains first.

Long term data in the weekly 5 year chart supports the bullish dollar breakout as momentum builds, with corrective resistance a little way off still. The similarity with the breakout 3 years ago indicates corrections are soon but that the rally will prove to be long-lived.

EuroDollar

EuroDollar behaviour supports the strong dollar rally as it builds momentum below the breakdown. The Euro appears more bearish than the dollar is bullish, with a pronounced decline through the 200-Day MA (green).

Long term data in the weekly 5 year chart indicates the EuroDollar in freefall as it more than mimics dollar behaviour in the opposite direction.

US Treasuries

US Treasury 10 year yield remains elevated in the rising channel as US equities remain elevated, spurred on by the gold cross (green square) indicating the move towards higher yields is real. The sell divergence is still active though and this indicates a potential for a reversal which has long since been indicated by long term data in the 5 year chart (not shown). We still need increased yields during the ‘acid test’ when equities are actually declining, and this has not happened yet.

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 a gold rally which is not happening yet. 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

The Gold rally fades into a bearish decline below the H&S breakdown which indicates potential to drop all the way to about $1450. The potential corrective reversal in US Treasury yield could re-energise into a gold rally which could extend to $1750, but further declines are likely after that. The next H&S neckline will activate below about $1670.

South African Rand

The Rand is strengthening against a stronger dollar, in correcting down from dollar resistance and above that a region of strong resistance at the 200-Day MA (green). But this situation cannot last because it makes no sense, despite the potential for some dollar weakness (and further Rand strength) during a US Treasury yield corrective reversal to lower yields.

Longer term data in the US$zar weekly 5 year chart indicates the Rand moving sideways in a declining channel. This illustrates the likely dollar advance into a breakout of the channel and subsequent Rand weakness.

Hui : Gold Ratio

The HUI / Gold ratio is moving sideways into an approaching triangle vertex-based reversal. Indications for further sideways movement in the short term is strong followed by further declines thereafter. The MAs appear to be providing strong resistance.

GDX US Gold ETF

The GDX breakdown from the H&S is holding with the ultimate final target decline price in the region of $22 / $23. Price is moving sideways with strong resistance from the MAs towards the approaching triangle vertex-based reversal. The chart remains bearish.


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 price is moving sideways towards the approaching triangle vertex-based reversal. The chart remains bullish.

Silver

The silver breakdown gains momentum as silver remains weaker than gold in a chart that looks 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 69.93 as the breakout holds. The chart is beginning to look as if it has bottomed which means higher ratios and lower metal prices ahead. Technically, the breakout of the declining expanding channel trendline has invalidated, although this may be short-lived.

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