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Market Analysis 24 Jun 2021

Jun 24th, 2021

Executive summary

The Dow Jones continues to develop a topping pattern which is beginning to indicate breakdowns which could extend declines. 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.
US Treasury yield breakdowns continue to hold, as Treasuries rally slightly against the US equity breakdowns. This means the acid test is failing at the moment with bonds and equities moving opposite to one another. Also, it is worthy noting that current yield lethargy is not supporting the gold price which the historical inverse correlation of the two indicates it should do.
The US$ rally has ended with a slight turndown in the vicinity of resistance at the 200-day moving average. Price is however positioned to move up or down with direction as yet undecided.
The rally in gold has ended with further price declines likely with no support from miners, but there are some slight indications that a retracement rally could start soon.

Dow

The Dow Jones continues to develop a topping pattern in the wake of the sell divergence as it also breaks down through the rising wedge. 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 looks more bearish in highlighting the breakdowns, as well as curtailing the breakback at the 50-Day moving average.

US Dollar

The US$ index rally from the reducing wedge breakout has turned softer in the vicinity of resistance at the 200-day MA (green). Price is now in the middle of the expanding triangle with future direction in the balance which could go either up or down. This situation is reflected nearly exactly by the Euro chart in the opposite direction.

EuroDollar

The EuroDollar chart continues to reflect the exact opposite of the dollar chart with declines from the breakdown in the rising wedge pattern turning up slightly in the vicinity of support at the 200-day MA (green). Price is now in the middle of the expanding triangle with future direction in the balance which could go either up or down.

South African Rand

Rand weakness from the dollar breakout ends as dollar sell divergence develops and the Rand starts to strengthen. This occurs within the overall downsloping channel formation indicating further dollar slippage, until that is finally breached.

US Treasuries

US Treasury 10 year yield breakdowns continue to hold, as Treasuries rally slightly against the US equity breakdowns. This means the acid test is failing at the moment with bonds and equities moving opposite to one another. Also, it is worthy noting that current yield lethargy is not supporting the gold price which the historical inverse correlation of the two indicates it should do. The deteriorating US reverse repo situation will support a strengthening yield bias (as does the Gold Cross (green square)), and it could be that yield may have bottomed.

Treasury yields have not started to strengthen yet and yet the gold price has started to weaken, meaning that yield and gold are moving in the same direction which is contra to the historical inverse correlation of the two. This also means that either yield is about to strengthen or gold is about to strengthen.

Gold

The rally in gold has ended with a breakdown and a 7% overall drop in price. This has activated the bear flag which could cause further price declines. Additionally, the gold price is not supported by US miners nor by US treasury yield.

Hui : Gold Ratio

The HUI / Gold ratio is weaker than the gold price itself and has declined by 13% including a breakdown through the rising channel. The chart indicates further price declines.

GDX US Gold ETF

GDX is similar to the HUI / Gold ratio, although not quite as bearish with a 9% price decline. It also includes activating the bear flag with further price declines to come.

GDX Junior : GDX Ratio

The GDXJ:GDX ratio breakout is holding, although with some weakness in the tail. This indicates the junior miners are stronger than the major miners which could herald a retracement rally in gold.


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.


Dust US miners bear index

Dust has a breakout from the bull flag, reflecting the breakdown in US miners. Can this be maintained? Because the chart has developed a sell divergence which could herald the start of a turnaround which would reflect retracement rallies in the miners.

Silver

Silver is stronger than gold and the chart indicates it may derive some strength from the expanding triangle. This would strengthen chances for a start in any gold retracement rally. It is also impacted similarly to gold and will rise if Treasury yields decline, although that now seems unlikely.

Gold : Silver Ratio

The gold / silver ratio breakout is holding and the closing is again slightly higher. This indicates continued metal price declines ahead, although the chart is essentially really only moving sideways at the moment and therefore is largely still relatively neutral. We need to see move chart development to make constructive projections.

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