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Market Analysis 26 Aug 2021

Aug 26th, 2021 No comments

Executive summary

The Dow Jones still looks like it will continue to yet higher new highs in the short term, before the strong bearish patterns trigger severe declines after the bullish pattern plays out. Much depends on all the interconnected influencing market factors which continue to impact outcomes. We remain at the forefront of a long-term decline but many contradictory outcomes can still occur before this as the effect of numerous impacts continue to bore in and eventually collapse the structure.

US Treasury 10 year yield strengthens slightly as US equities hold at elevated levels. But there are indications that yield may in fact start weakening soon which will be in accord with a weaker dollar and gold price strength over the next period of months.

The US$ weakens slightly with indication of further weakness to come which will be caused by Treasury yield weakness. Other forex, especially the Euro will strengthen accordingly. Gold weakens slightly but will start to rally depending on the timing of any Treasury yield weakness, and miners will follow suit.

Dow

The Dow Jones break up through the key break level is holding which indicates yet higher new highs in the short term. Despite breaching this strong trigger point the even stronger bearish patterns remain in place with the compound sell divergence and rising wedges which threaten severe declines once the bullish pattern plays out.

US Dollar

The US$ index edges lower in the wake of sell divergence which could still weaken into a period of months, once the key break line breaches. This also implies that weaker US Treasury yield will be the cause and that gold will consequently strengthen over that same time period. The corollary will of course be strength in other currencies especially the Euro.

EuroDollar

The EuroDollar edges up in the wake of buy divergence which is likely to still strengthen further over a period of months, once the key break line breaches.

South African Rand

The Rand edges up in the wake of dollar sell divergence which is likely to still strengthen further over a period of months, once the key break line breaches.

US Treasuries

US Treasury 10 year yield strengthens into a mini-break in the wake of buy divergence, as US equities hold at elevated levels. This means the acid test fails because bonds and equities are moving in opposite direction. Yield strength over the last month could actually be developing into a bear flag (red arrow), in which case lower yields will follow after the flag activates. This would be in perfect accord with lower dollar and higher gold.

Treasury yield strengthens slightly and gold declines slightly, restoring the historic correlation between these two elements. Much depends on how Treasury yield responds in the next period, because this is the main driver of investment decisions.

Gold

Gold moves down slightly as Treasury yield strengthens slightly. For the rest the 12 month gold chart is indicating very little.

But the 2 year gold chart illustrates the pivot triangle that has developed with the potential of a very bullish breakout (blue) and a very bearish breakdown (red). If Treasury yield dose in fact break lower then gold will advance on the bullish diagonal above, and vice versa.

Hui : Gold Ratio

The HUI / Gold ratio turns down in sympathy with gold in a chart that continues to look bearish, and providing little else in potential future movement.

GDX US Gold ETF

But the GDX chart in fact looks bullish after turning up at a double bottom in the wake of buy divergence.

Silver

Silver continues to underperform gold in a continually increasing gold/silver ratio, but could in fact be responding up from a triple bottom.

Gold : Silver Ratio

The strong gold / silver ratio breakout continues to hold for now, indicating still lower metal prices ahead.

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Market Analysis 12 Aug 2021

Aug 13th, 2021 No comments

Executive summary

The Dow Jones breaks up through the double top at a key break level which indicates yet higher new highs in the short term, and perhaps even medium term. Despite breaching this strong trigger point the bearish patterns remain in place indicating a powerful decline phase to follow once the pattern breaks and finally tops out. Much depends on whether the bearish patterns are maintained or invalidated, because at the moment 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 starts to strengthen as US equities hold at elevated levels. This now means the acid test fails because bonds and equities are moving in the same direction. This also means that if US equities advance further Treasuries could also advance and therefore yield will weaken. This seems to be a period of acid test failure during equity strength and acid test success during equity weakness.

The US$ rallies back into indecision, whilst the earlier bearish signals continue to threaten. The earlier breakdown is invalidating, and future dollar movement depends largely on what US Treasury yield does. Gold responds to recent Treasury strength with severe breakdowns invalidating earlier bullish signals, although now enjoying a relief rally. But the situation is set for further gold weakness once all relief rally activity exhausts, and US miners are bearish in sympathy.

Dow

The Dow Jones breaks up through the double top at a key break level which indicates yet higher new highs in the short term. Despite breaching this strong trigger point the bearish patterns remain in place with the compound sell divergence and rising wedges which threaten severe declines once the bullish pattern plays out.

The Dow short term 3 months chart indicates the breakout of through the key break level to a new high. This is likely to propel the index to yet new all-time highs.

US Dollar

The US$ index rallies back into indecision, whilst the earlier sell divergence holds and continues to threaten. The earlier bear flag breakdown is invalidating, and future dollar movement depends largely on what US Treasury yield does.

EuroDollar

The EuroDollar declines back into indecision with the earlier bull flag breakout invalidating. The earlier buy divergence has extended and looks set to advance Euro value but the MACD buy signal has invalidated and consequently Euro value suffers indecision, similar to the dollar.

South African Rand

The Rand also declines back into indecision, reflecting the dollar rally back into indecision with the wedge and flag breakdowns invalidating. The reducing channel breakout is still active, after a brief invalidation, and this promises dollar strength and Rand weakness.

US Treasuries

US Treasury 10 year yield starts to strengthen in the wake of buy divergence, but also as US equities hold at elevated levels. This means the acid test fails because bonds and equities are moving in the same direction. This also means that if US equities advance further Treasuries could also advance and therefore yield will weaken. This seems to be a period of acid test failure during equity strength and acid test success during equity weakness.

Treasury yield strengthens slightly and gold declines quite markedly, restoring the historic correlation between these two elements. Much depends on how Treasury yield responds in the next period, because this is the main driver of investment decisions.

Gold

Gold responds with two severe breakdowns to recent Treasury strength. This invalidates the earlier bull flag breakout, although gold is enjoying a relief rally. But the situation is now set for further gold weakness once all the relief rallying activity exhausts. The MACD buy signal has invalidated and US miners are bearish in sympathy with gold.

Hui : Gold Ratio

The HUI / Gold ratio breakout is invalidating as US miners decline in sympathy with gold. This process has also developed sell divergence which should prompt further declines.

GDX US Gold ETF

The same can be said of GDX with identical criteria of the bull flag invalidating and development of sell divergence which should prompt further declines.

GDX Junior : GDX Ratio

The GDXJ:GDX ratio indicates Juniors leading Majors down the reducing channel which indicates more miner weakness ahead.

Silver

Silver’s earlier picture of zig-zag indecision has resolved into multiple breakdowns in sympathy with gold and Treasury yield strength. This too will enjoy some level of relief rallies, as with gold, but is now set for further silver weakness once all the relief rallying activity exhausts.

Gold : Silver Ratio

The strong gold / silver ratio breakout indicates lower metal prices ahead.

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Market Analysis 5 Aug 2021

Aug 5th, 2021 No comments

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 continue to hold at elevated levels, which indicates the ‘acid test’ is holding with both US equities and Treasuries moving in the same upward direction. But this is not likely to persist much longer which also means added support to the gold market may very soon be at an end.

The US$ is still in decline which is likely to last a while longer, with support from the Euro in opposite mode. Gold has a positive bias at the start of a rally with some support from US miners, both of which may be short-lived because US Treasury yields may start to strengthen soon.

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 yet new all-time highs but a breakdown beckons which will test support levels. The latter is becoming the more likely as lagging upward momentum develops (not shown).

US Dollar

The US$ index is still in decline in the wake of the sell divergence, after the bear flag triggered. The MACD sell signal also remains active and this declining dollar mode is likely to last a while longer, with support from the Euro in opposite mode.

EuroDollar

The EuroDollar is still advancing in the wake of the buy divergence, after the bull flag triggered. The MACD buy signal also remains active and this advancing Euro mode is likely to last a while longer.

South African Rand

Rand bias has changed to strength as the dollar weakens. There are now dollar breakdowns of both the rising wedge and the bear flag which is likely to strengthen the Rand as well as weaken the dollar further. The reducing channel breakout has not quite invalidated but this now seems likely to occur.

US Treasuries

US Treasury 10 year yield continues to remain weak as US equities continue to hold at elevated levels, which indicates the ‘acid test’ is holding with both US equities and Treasuries moving in the same upward direction. But this is not likely to persist much longer with signs of buy divergences beginning to develop in Treasury yields. This also means added support to the gold market may very soon be at an end.

Whilst continued weak Treasury yields have been supporting gold, this is likely to be close to a turning point. Once yield starts to strengthen gold will start to weaken, but there is a distortion in the above combination chart which displays positive correlation for the last 3 months which is historically incorrect. This may now correct with disproportionate 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, with the MACD buy signal also holding, just. Perhaps more impetus is required from US miners which thus far have been only partial.

Hui : Gold Ratio

The HUI / Gold ratio breakout is holding in the wake of the buy divergence in a chart that seems to hold more upside. But the balance of probabilities seems to indicate the rally may be terminating, despite the MACD buy signal.

GDX US Gold ETF

The same can be said of GDX with identical criteria. Maybe the miner rally remains short and sweet.

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 breakdown very nearly starting to close the gap (green).The MACD sell signal has clarified somewhat in support of more downside, supporting higher miners.

Silver

Silver exhibits a continued mixed picture with a zig-zag chart reflecting procrastination. This is less bullish than gold which indicates a less positive picture. Will the minor break from the bull flag activate or will Treasury yield support remain dubious? The latter seems more likely, as the MACD buy signal continues to procrastinate.

Gold : Silver Ratio

The gold / silver ratio breakout has become static with even a lower close this week. But the trend is up indicating lower metal prices to come.

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