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Market Analysis 23 Sep 2021

Sep 23rd, 2021 No comments

Executive summary

US equities are in breakdown mode, with the top indices in confirmation with each other, which could be the start of a strong decline forecast for a long time now. Much depends on US investor euphoria and the ‘buying the dips’ pattern experienced in previous breakdown declines. This could forestall the inevitable for a time but we remain at the forefront of a serious decline.


US Treasury 10 year yield continues to move sideways despite equities breaking down and having no effect on yield, yet. This to some degree passes the acid test with Treasury values at least not increasing as equities decline. But it is still early days.

Indications still point to a weaker dollar over the next number of months although it has not started yet. This would be the logical response to lower Treasury yields which have also not started yet. Once Treasury yields start to decline it would mean higher gold, which may have already started, if silver and the gold / silver ratio are accurate indicators.

Dow

The Dow Jones is in breakdown mode in the wake of the sell divergence and a strong break through the rising channel trendline. This could be the start of a strong decline which has been forecast for a long time now. Much depends on the US equity euphoria and the ‘buying the dips’ pattern experienced in previous breakdown declines.

The Dow 3 month chart illustrates the start of freefall breakdown and the attempt at a snapback rally which may or may not hold off further declines. Support has virtually vanished.

US Treasuries

US Treasury 10 year yield continues to move sideways as it hugs the 200-Day MA (green). Whilst equities are breaking down funds flow into Treasuries are having no effect on yield, yet. This to some degree passes the acid test with Treasury values at least not increasing as equities decline. But it is still early days. Static yields still has the dollar not weakening yet although gold is starting a tepid rally.

The comparison between Treasury yield and gold illustrates sideways yield and the start of a tepid gold rally.

US Dollar

The US$ index is still rallying but the sell divergence should impact soon. The breakdown is still holding although if the key break line is penetrated it will usher in a period of dollar weakness perhaps lasting many months. This implies that Treasury yield will also have softened and boosted the gold rally.

EuroDollar

The EuroDollar is still declining but the buy divergence should impact soon. The breakout is still holding although if the key break line is penetrated it will usher in a period of Euro strength perhaps lasting many months.

South African Rand

The Rand weakens in line with dollar strength, but should begin to strengthen again as the dollar weakens in line with divergence. The slightly broader view illustrates Rand activity within the broader reducing channel of continued Rand strength that has lasted more than a year now.

Gold

Gold starts a tepid rally as Treasury yield moves sideways in limbo and the dollar is set to start weakening. Again, the 12 month gold chart is indicating very little although there is now some evidence of support from US miners.

A slightly broader view in the 2 year chart illustrates the pivot triangle that has developed with the potential of a very bullish breakout (blue) and a very bearish breakdown (red). A Treasury yield break either way will cause gold to do the opposite.

Hui : Gold Ratio

The tepid ratio advance has deteriorated into a sideways to down move leaving it in limbo and looking bearish which should retard any gold strength. The expanding triangle in the tail of the chart is slightly bullish and the GDX chart (next) is even more bullish.

GDX US Gold ETF

Declines over the past 10 weeks have developed into buy divergence and further into compound buy divergence. There is the beginning of a tepid recovery starting that should be boosted by the divergence which in turn will boost gold. Like gold itself, much depends on movement in Treasury yield and dollar value.

Silver

Silver has turned more bullish all of a sudden with the chart reverse sell divergence developing further into buy divergence. This is followed by the start of a tepid recovery which should develop more momentum under the impact of buy divergence. Also, the gold / silver ratio (next) seems to have changed direction ushering in higher metal prices.

Gold : Silver Ratio

The ratio seems to have peaked and in the process developed sell divergence which could now extend the decline that has started. If this is the start of a period of silver outperforming gold with resultant lower ratios then it will also mean higher metal prices.

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Market Analysis 16 Sep 2021

Sep 16th, 2021 No comments

Executive summary

US equities are starting to break down, with the top indices largely in confirmation with each other, which could now develop into a strong decline once the bullish pattern plays out. Much depends on all the interconnected influencing market factors which continue to impact outcomes, principally US Treasury yield, as we remain at the forefront of a serious decline. But there are many conflicting signals at the moment which continue to confuse, with a number of market segments moving sideways in limbo.

US Treasury 10 year yield continues to move sideways while options remain in limbo with the seeming potential to move either way. Treasury value and US equities are moving opposite to one another which represents an acid test failure. If this continues once equities start a more serious decline it means Treasury yield will decline more seriously with implications of lower dollar and higher gold values. But most indications are for lower gold.

Indications point to a weaker dollar over the next number of months which is a logical response to lower Treasury yields. This in turn indicates higher gold but most indications point to lower gold, especially the gold / silver ratio and silver itself.

Dow

There is little change in the Dow Jones status from last week as it continues to start a breakdown in the wake of the sell divergence. This could turn into the strong decline, once the bullish pattern plays out.

The S+P 500 is also now nudging the start of a breakdown in the wake of sell divergence which begins to confirm the Dow Jones shape. The two top US indices are therefore now in accord with one another in pointing towards the start of a serious decline phase.

US Treasuries

US Treasury 10 year yield continues to move sideways in mini-breaks up and down while options remain in limbo. The mini-break down (red circle) reflects a strengthening in Treasury value as US equities start to turn down, which represents an acid test failure with equities and bonds moving in opposite direction. If this continues once equities start a more serious decline it means Treasury yield will test the support zone more seriously with implications of lower dollar and higher gold values.

Treasury yield moving sideways in limbo reflects in gold moving sideways in limbo. Much depends on how Treasury yield responds in the next period, because this is the main driver of investment decisions.

US Dollar

The US$ index continues to weaken as sell divergence continues to impact with the breakdown through the key break line holding good. This indicates a weaker dollar over the next number of months which is a logical response to lower Treasury yields.

EuroDollar

The EuroDollar correction down appears to be complete as it starts to edge stronger with the breakout through the key break line holding good and the influence of the but divergence kicking in. If dollar weakness is next the Euro will start testing resistance again in breaking to higher highs over the next period of months, which includes an inverse head and shoulders beginning to develop.

South African Rand

The Rand weakens slightly despite slight dollar weakness, but should begin to strengthen again as the dollar continues to weaken under the influence of sell divergence.

Gold

Gold is moving sideways in limbo having reacted down from strong resistance. This is in accord with and caused by Treasury yield also moving sideways in limbo. Again, the 12 month gold chart is indicating very little with potential moves either way.

A slightly broader view in the 2 year chart illustrates the pivot triangle that has developed with the potential of a very bullish breakout (blue) and a very bearish breakdown (red). A Treasury yield break either way will cause gold to do the opposite.

Hui : Gold Ratio

The tepid ratio advance has deteriorated into a sideways to up move leaving it in limbo. The chart continues to look bearish which presupposes gold is likely to go down and not up.

GDX US Gold ETF

But the GDX chart in fact looks more bullish in the wake of buy divergence and turning up from a double bottom. Like gold itself, much depends on movement in Treasury yield and dollar value.

Silver

Silver continues to underperform gold in a continually increasing gold/silver ratio, and continues in stair stepdown mode to a potential breakdown of the bear flag. Very bearish.

Gold : Silver Ratio

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

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Market Analysis 9 Sep 2021

Sep 9th, 2021 No comments

Executive summary

The Dow Jones starts to break down but the S+P 500 remains bullish which creates non-confirmation between the top two US indices, as does Dow Theory between the Industrial and Transport Indices. The forecast strong equity decline continues to be expected any time soon, but not just yet it would appear. Much depends on all the interconnected influencing market factors which continue to impact outcomes, principally US Treasury yield. 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 continues to strengthen slightly in the face of equities which continue at elevated levels, and various options are in limbo for now. The US dollar appears to be at the end of a brief rally correction after recent weakness with more weakness to follow. Gold reacts down slightly as Treasury yield edges up, with the potential of a strong breakout either way in metals and miners depending of Treasury yields.

Dow

The Dow Jones starts to break down in the wake of sell divergence which could turn into the strong forecast decline, once the bullish pattern plays out.

But the S+P 500 remains bullish, although also with the impact of sell divergence. This therefore creates non-confirmation between the top two US indices as does Dow Theory between the Industrial and Transport Indices. The forecast strong equity decline continues to be expected any time soon, but not just yet it would appear.

US Treasuries

US Treasury 10 year yield continues to strengthen slightly after the mini-break which continues to hold, in the face of equities which continue at elevated levels. The chart appears to leave options in limbo because the semi-bullish appearance is tempered by what could be the development of a bear flag (red arrow) which will eventually lead to lower yield. This would be in perfect accord with lower dollar and higher gold.

Tepid Treasury yield strengthen nevertheless results in tepid gold declines, which maintains 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.

US Dollar

The US$ index edges higher after recent declines, but the breakdown continues to hold indicating the correction up is near completion. The compound sell divergence continues to impact and the dollar is probably soon to start testing support again. This will impact negatively on other currency values especially the Euro.

EuroDollar

The EuroDollar edges lower after recent gains, and further advances could start soon because of the buy divergence. If dollar weakness is next the Euro will start testing resistance again in breaking to higher highs over the next period of months.

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. This Rand strength is disproportionate, because it has occurred in a straight line even against recent dollar strength. If dollar weakness is next then further Rand strength will follow, reflected in breaching the key break line of the bear flag.

Gold
Pic Gold 12m

Gold reacts down from strong resistance as Treasury yield edges up, as it once again criss-crosses the 200-Day MA (green). Again, 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

US miners are advancing up into a developing bear flag reflected also in the HUI / Gold ratio. Much depends on Treasury yields and dollar values: If these move up the bear flag will trigger. But if they move down the reducing channel could become a bull flag with strong gains in both gold and miners.

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. The advance of miners up the bear flag has stalled, and may even already have breached the bottom break line. Much depends on Treasury yields and dollar values, as commented for the Hui / Gold ratio, and a break either way will be extensive.

Silver

Silver continues to underperform gold in a continually increasing gold/silver ratio, and has now developed sell divergence with negative implications.

Gold : Silver Ratio

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

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