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Market Analysis 26 Oct 2021

Oct 26th, 2021 No comments

Executive summary

US equities breakout to a new high which is likely to advance further as the bull market trend extends. Although a serious correction down can be expected soon before further real advances continue thereafter. The whole US equity picture consequently changes from an ominous top and potential collapse to a more measured advance into the future as the ‘roller-coaster’ continues. This, despite camouflaging the real problem which will emerge when we reach a cataclysmic break point with a broken international monetary system and artificially low interest rates in a world awash with exponential debt.

US Treasury 10 year yield continues to stair-step up with Treasuries continuing to decline as US equities advance. This is the chart pattern that can be expected to hold over the foreseeable future although a correction can be expected soon. Higher yield may influence dollar value to start advancing again and gold to start declining.

The dollar continues to decline slightly but support could be developing and if US equities do in fact correct down seriously this will have the effect of reversing dollar weakness. Gold is advancing but this is contrary to increases in Treasury yields and therefore subject to potential correction, although most other chart indicators point to further increases in gold.

S+P 500

The S+P 500 has a breakout to a new high and is likely to advance further in the wake of the buy divergence. This extends the bull market trend further as the overall rising channel pattern continues. But a serious correction down can be expected soon before further real advances continue thereafter in a more measured advance into the future.

US Treasuries

US Treasury 10 year yield continues to stair-step up with Treasuries continuing to decline as US equities advance. Yield continues to advance as it holds above the 10-day moving average (blue) which is quite steep and therefore a correction can be expected soon. But this is the chart pattern that can be expected to hold over the foreseeable future. Higher yield may also influence dollar value to start advancing again and gold to start declining.

The comparison between Treasury yield and gold illustrates the inverse correlation of old between the two which at the moment reflects a positive correlation which cannot last.

US Dollar

The US$ continues to decline in the wake of sell divergence as it approaches the bottom limit of the rising channel. Support could be developing and if US equities do in fact correct down seriously this will have the effect of a stronger dollar.

EuroDollar

The EuroDollar continues to advance in the wake of the buy divergence but is reaching a region of breaking either way (black circle). Resistance is becoming stronger as value approaches the triangle apex.

South African Rand

The dollar / Rand continues sideways in a zig-zag pattern as it continues to negotiate within the reducing channel. Value is still at the confluence of the MAs with a break either way looming.

Gold

Gold has a breakout from the expanding triangle and for now this is holding. This is contrary to steady increases in Treasury yields as price again approaches the level of strong resistance at about $1840. A bear flag is also developing which could trigger, but most other chart indicators (eg. US$, gold/silver ratio, US miners, etc.) still point to further increases in gold.

Hui : Gold Ratio

The strong rally in the ratio is close to completion in the wake of buy divergence turning back into reverse sell divergence, plus the development of a bear flag which could trigger soon. For now though the breakout is holding.

GDX US Gold ETF

The GDX chart is similar with the strong rally close to completion in the wake of sell divergence, plus the development of a bear flag which could trigger soon. For now though the breakout is holding.

Silver

Silver’s rally is likely close to completion under the influence of sell divergence, but for now the breakout still holds as it continues to develop the bear flag, but most other chart indicators (eg. US$, gold/silver ratio, US miners, etc.) still point to further increases in silver.

Gold : Silver Ratio

The breakdown continues to hold as it declines further which hints at higher metal prices to come.

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Market Analysis 19 Oct 2021

Oct 19th, 2021 No comments

Executive summary

US equities continue to advance and have all but recovered the initial decline from the peak. It is beginning to look like the continuation of the bull trend is likely, and not yet the start of a collapse. Despite all this, another whipsaw decline could be expected before more clarity can be achieved as to eventual outcomes.

US Treasury 10 year yield could be levelling off and developing into some measure of indecisiveness. This has US equities in recovery which is usually accompanied by softer Treasury value and higher yields, which is not happening. Also, it would appear the dollar is starting a weakening phase which is usually the result of lower Treasury yield which has also not started to happen yet, so the markets are certainly at crossroads right now. Consequently, gold looks to be indecisive and could go up or down. US miners are looking bearish whilst the gold / silver ratio has a breakdown which indicates higher metal prices to come. A real concoction of mixed indicators with some commentators forecasting gold higher and some lower.

S+P 500

The S+P 500 continues to advance and has all but recovered the initial decline in the wake of the sell divergence. It is beginning to look like the continuation of the bull trend is likely. In fact buy divergence has now emerged to support higher prices. The market inconsistencies are still there, suggesting the market will again rise to new highs. These include mainly oil (and some other commodities) and Bitcoin for example. You cannot have bull market conditions in a bear market collapse.

The S+P 500 3 month chart illustrates the recovery in more detail, including a new breakout and invalidation of the original breakdown. Despite all this, another whipsaw decline could be expected before more clarity can be achieved as to eventual outcomes.

US Treasuries

US Treasury 10 year yield could be levelling off after 2 breakouts as it holds above the 10-day moving average (blue). The Treasury yield indecisiveness has US equities in recovery which is usually accompanied by softer Treasury value and higher yields, which is not happening. Also, higher equities usually result in a lower dollar which has seemingly now started to happen. Lower dollar values are the result of lower Treasury yield which has also not started to happen yet, so the markets are certainly at crossroads right now.

The comparison between Treasury yield and gold illustrates the inverse correlation between the two which at the moment reflects a sideways move with both Treasuries and gold exhibiting some measure of indecisiveness.

US Dollar

The US$ is turning down as Treasuries start levelling off and equities in recovery. The chart indicates newly created sell divergence which presupposes the start of a weakening phase, and this is equally reflected in the Euro chart (next). This at the same time presupposes a weakening Treasury yield and stronger equities, as well as stronger gold.

EuroDollar

The EuroDollar is starting to turn up in the wake of buy divergence as the dollar starts to turn down. This is also supported by some other currencies, as noted in the USDzar chart next.

South African Rand

The dollar / Rand is moving sideways to down in line with dollar sell divergence, but continues in a zig-zag sideways pattern with a breakdown as the dollar starts to turn down. A breakdown through the converged MAs is in progress.

Gold

Gold is indecisive in line with Treasury yield starting to level off and dollar starting to weaken, plus the gold/silver ratio breaking down to indicate higher metal prices ahead. But US miners are looking bearish: A real concoction of mixed indicators with some commentators forecasting gold higher and some lower.

Hui : Gold Ratio

The strong rally in the ratio should now have ended in the wake of buy divergence turning back into reverse sell divergence. This aligns with a likely weaker gold price.

GDX US Gold ETF

The recent breakout and rally in US miners has topped and reversed down into double reverse sell divergence which should reduce prices and assist in pushing gold lower.

Silver

Silver’s stair step decline is likely to continue under the influence of sell divergence. But, a breakdown and lower gold / silver ratio suggests higher metal prices to come, plus the influence of a weaker dollar.

Gold : Silver Ratio

There is a breakdown of the strong up trend in the ratio which hints at higher metal prices, especially if the breakdown is decisive.

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Market Analysis 12 Oct 2021

Oct 12th, 2021 No comments

Executive summary

US equities continue in breakdown mode and look precarious which could be the start of a collapse. Or will ‘buy the dips’ win. There are also a number of contradictory market signals that suggest the market will again rise to new highs. These include mainly oil (and some other commodities) and Bitcoin for example. You cannot have bull market conditions in a bear market collapse.

US Treasury 10 year yield continues to breakout as Treasuries decline with the equity market looking precarious. Further yield increases look likely which will weaken gold, but could continue to support the dollar which is set to weaken if other forex is considered. So, some degree of dichotomy is set to emerge.

The US$ is still strong in line with rising US Treasury yields, although the next trend is likely down despite the US Fed need to keep the dollar strong to counter rising inflation. Gold declines in line with Treasury yield strength, and this looks set to continue.

S+P 500

The S+P 500 continues in negative mode as it holds the breakdown in the wake of sell divergence. This looks precarious and could be the start of a collapse, or will ‘buy the dips’ win. There are also a number of contradictory market signals that suggest the market will again rise to new highs. These include mainly oil (and some other commodities) and Bitcoin for example. You cannot have bull market conditions in a bear market collapse.

US Treasuries

US Treasury 10 year yield continues to breakout as Treasuries decline with the equity market looking precarious. The chart indicates further yield increases as it breaks up through the moving averages which changes the sideways mode to up. US equity declines are therefore matched by Treasury declines as they continue to move in the same direction which has triggered the stronger dollar. The recent reversal up in gold and miners is sure to now turn weaker as yield strengthens.

The comparison between Treasury yield and gold illustrates the inverse correlation between the two which will weaken the gold market if yields continue to rise.

US Dollar

The US$ is still strong in line with rising US Treasury yields. The next trend is likely down despite the US Fed need to keep the dollar strong to counter rising inflation. The dollar is now overbought and could be reaching the start of a decline phase soon, because some other currencies are beginning to signal buy divergences (such as Euro and ZAR) which will weaken the dollar.

EuroDollar

The EuroDollar is still weak and oversold and is now signalling buy divergence which should soon see the key break line tested. There are a numberof other currencies in this position such as the Swiss Franc, Jap yen, and ZAR.

South African Rand

The dollar / Rand is moving sideways to down in line with dollar sell divergence, but continues in a zig-zag sideways pattern with a potential breakdown in progress. This promises a stronger Rand and weaker dollar, but is seemingly prevented from breaking down by the converging 50-day (red) and 200-day (green) moving averages.

Gold

Gold declines in line with Treasury yield and dollar strength, and looks precarious for further declines especially with a prominent bearish candle. Continued US Treasury yield strength should add impetus to gold weakness.

Brent Crude Oil

This 20 year long term view of the oil price begs the question: Is oil about to breakout? Because, if it does you cannot have equities in a bear market collapse. Perhaps the oil gauge is something to watch carefully.

Hui : Gold Ratio

The recent reversal up in the ratio is due to weaken again in the wake of reverse sell divergence which developed in the rise. This aligns with a likely weaker gold price.

GDX US Gold ETF

The recent reversal up in US miners could be complete with gold likely to weaken in line with US Treasury yield strength. The chart illustrates that the weakening may already have started at the upper limit of the reducing channel.

Silver

The recent reversal up in silver could have topped out in line with US Treasury yield strength. Perhaps the entire precious metals group is due for further declines as the gold / silver ratio (next chart) continues in a strong up trend.

Gold : Silver Ratio

The ratio continues in a strong up trend despite closing lower, and this portends yet lower metal prices.

Bitcoin

Bitcoin is set to rise to new high in a strong 12 month chart which includes a sell divergence at its all-time high (above $65000) and a buy divergence in Jun 2021 (below $30000). If this plays out in this way it becomes the other strong contradictory market signal along with oil. Because, you cannot have equities in a bear market collapse while Bitcoin goes to a new high. Perhaps Bitcoin is something to watch carefully too.

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