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Market Analysis 10 Jun 2021

Jun 10th, 2021

Executive summary

US equities are beset with lethargy at elevated levels while weakening very slightly, as a prelude to further weakening before yet potential new highs. Threatening sell divergence and rising wedge patterns remain in place.
US Treasury yields are weakening slightly as they take up some of the equity lethargy, with the dollar poised to weaken further to a potential new low. If the Treasury yield decline extends much this will encourage the gold rally to increase and perhaps ignite miners to follow suit. The deteriorating US reverse repo situation will eventually support strengthening Treasury yields and dollar, with weaker equities and lower gold price.

Dow

The Dow Jones weakens slightly at elevated levels while the threatening sell divergence and rising wedge patterns remain in place. But there is still the nagging potential for yet another new high before any serious declines occur, although the index is likely to decline further first.

The Dow short term 3 months chart continues to look bearish with further likely declines to test support towards the 50-Day MA (red), before any further increases to a potential new high.

US Dollar

The US$ index downtrend continues while US equities continue at elevated levels, but the expanding triangle and reducing wedge are bullish patterns. This suggests the dollar is likely to rally strongly later, but probably only after declining to a potential new low first. The set of bearish candles (red circle) will encourage this, and the deteriorating US reverse repo situation will support the dollar rally after that.

EuroDollar

The EuroDollar chart continues to reflect the exact opposite of the dollar chart with a continued uptrend. By contrast the Euro is likely to achieve a new high before the inevitable weakening phase starts which will be supported by the expanding triangle and rising wedge patterns.

South African Rand

The Rand continues to strengthen against the dollar downtrend, and the continued dollar RSI buy divergence has been destroyed in that process, although the MACD buy divergence remains evident. The continued dollar weakness ensures further Rand strength but a Rand weakness cycle will start soon because it’s strength has been disproportionate compared to other currencies such as the Aussie dollar and British pound for example.

US Treasuries

US Treasury 10 year yield has a breakdown which probably will ensure further countertrend yield weakness before the strength cycle continues. This mild Treasury price strength is occurring at a time of mild US equity lethargy, and will all be reversed once equities resume an advance to yet another new high. This countertrend window of yield decline will encourage gold to extent its rally. The deteriorating US reverse repo situation will support a strengthening bias (as does the Gold Cross (green square)).

If Treasury yields continue to weaken slightly this will extend the gold rally, due to the inverse correlation between the two.

Gold

The rally in gold has become indecisive, and could break either way dependent mainly on Treasury yield movement. Gold is not being supported by US miners and this could force the gold price lower, as does the continuing silver non-confirmation and the deteriorating US repo situation. Gold needs to breakout or risk activating the bear flag.

Hui : Gold Ratio

The HUI / Gold ratio is weaker than the gold price itself and is also indecisive as to breakout or breakdown. The ratio also needs to breakout or risk activating the bear flag.

GDX US Gold ETF

GDX is similar to the HUI / Gold ratio, although not quite as bearish. It is also indecisive as to breakout or breakdown, and also needs to breakout or risk activating the bear flag.

GDX Junior : GDX Ratio

The GDXJ:GDX ratio breakout is holding, indicating junior miners are stronger than major miners. This also indicates strength ahead, and is the one indication (amongst all others) doing so.


The XAU US Gold and Silver Miners Index and the NUGT US Miners Bull Index are both reflecting the identical same patterns as the other metals and miners.


Silver

Silver still exhibits non-confirmation with gold, which is bearish precious metals. It is also impacted similarly to gold and will rise if Treasury yields decline.

Gold : Silver Ratio

The gold / silver ratio breakout is holding (declines ahead) but is largely still relatively neutral. We need to see move chart development to make constructive projections.

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