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Market Analysis 26 Aug 2021

Aug 26th, 2021

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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