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Market Analysis 29 Jul 2021

Jul 29th, 2021

Executive summary

The Dow Jones continues in a topping pattern with a double top at a key break level which continues to hold. This now creates a strong trigger point which all indicates a powerful decline phase is about to start once the pattern breaks to release powerful pent-up negative energy which will cause havoc once the US market finally tops out, because 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 10 year yield continues to remain weak as US equities begin to turn down. This means, once again, failure of the acid test with US bonds and equities moving in opposite direction. This also means added support to the gold market in the short term, but Treasury yield is soon to start strengthening making the current gold advance of short duration, all supported by the deteriorating US reverse repo situation which supports a strengthening yield bias and weak gold price.


The US$ has started to weaken supported by some Euro strength. Gold now has a positive bias at the start of a strengthening phase with some support from US miners, both of which may be short term and dependent on when US Treasury yields start to strengthen.

Dow

The Dow Jones continues in a topping pattern with a double top at a key break level which continues to hold. This now creates a strong trigger point at the head of a compound sell divergence which extends back 11 months which all indicates a powerful decline phase is about to start once the pattern breaks. Added impetus will be provided once the bearish rising wedge is breached decisively to release powerful pent-up negative energy which will cause havoc once the US market finally tops out.

The Dow short term 3 months chart indicates the approach to the key break level which will either propel the index to new all-time highs or a breakdown from a significant top. The former is the more likely at the moment.

US Dollar

The US$ index indecision of late has transpired into a breakdown as the bear flag triggers in the wake of sell divergence. The MACD sell signal has finally also activated as the dollar starts a decline phase.

EuroDollar

The EuroDollar chart displays the exact opposite as Euro indecision transpires into a breakout as the bull flag triggers in the wake of buy divergence. The MACD buy signal has finally also activated as the EuroDollar starts advancing.

South African Rand

Rand bias to weakness continues but this is likely to reverse to strength soon as the dollar weakens further. The breakouts region (black circle) is likely to clarify soon into rising wedge and bear flag breakdowns, as the declining channel breakout invalidates.

US Treasuries

US Treasury 10 year yield continues to remain weak as US equities begin to turn down. This means, once again, failure of the acid test with US bonds and equities moving in opposite direction. This also means added support to the gold market in the short term, but Treasury yield is soon to start strengthening making the current gold advance of short duration, all supported by the deteriorating US reverse repo situation which supports a strengthening yield bias and weak gold price.

As Treasury yields remain weak gold should turn up in response, in accord with the historical inverse correlation of the two. This also means that once yield starts to strengthen gold will start to weaken. But there is a distortion in the above combination chart which displays inverse correlation for the first 8 months and positive correlation for the last 4 months. This will of course correct with either disproportionate Treasury yield or gold strength.

Gold

The Gold breakout from the bull flag is holding in the wake of buy divergence and continued reluctance of US Treasury yield strength. This suggests more gold strength to come, although the MACD buy signal is invalidating. Perhaps more impetus is required from US miners which thus far have been reluctant.

Hui : Gold Ratio

The HUI / Gold ratio has developed buy divergence followed by a breakout from the bull flag, plus some clarification of the MACD buy signal. Thus, it would appear US miners could now be in support of a stronger gold price.

GDX US Gold ETF

The same can be said of GDX with identical criteria. Maybe this develops sufficient momentum to close the gap above (green).

Dust US miners bear index

The Dust chart reflects a geared inverse situation of that of US miners, nearly exactly. This supports higher US miners and gold, with the potential to also close the gap below (green), but the MACD sell signal has faded.

Silver

The breakdown from the bullish silver triangle (counter-productive) is holding for now, but could invalidate and break up with support for continued Treasury yield weakness. This is all of a short-term nature as for gold.

Gold : Silver Ratio

The gold / silver ratio is holding with a yet higher close. This indicates lower metal prices ahead and reinforces the view that the higher metal prices are of a short-term nature.

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