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Market Analysis 26 Oct 2021

Oct 26th, 2021

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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