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Market Analysis 23 Nov 2021

Nov 23rd, 2021

Executive summary

US equities remain at elevated levels, but are seriously overstretched with a correction down likely soon. Further advances to higher levels are unlikely before the correction has run its course. The overall rising trend continues, and the overall shape and limits of the forecast correction remains to be seen before the bull trend continues advancing into the future. For now the market ‘roller-coaster’ continues despite camouflaging the real structural problems 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. But the short term picture looks a little bit less bullish and also the oil price continues to correct down which may be a sign of equities correcting down soon.

US Treasury 10 year yield continues sideways to up as Treasuries decline while equites remain elevated, and this could be the trigger for the start of the equity correction. Any break through resistance levels will ignite further yield increases and provide additional impetus to a corrective equity breakdown. This situation of course means a stronger dollar and weaker gold, both of which are now obliging.

The US$ is on a tear to a new high with probably more bullish dollar potential, but of course the next decline phase draws nearer, while gold and US miners are finally staring to correct down.

S+P 500

The S+P 500 remains at elevated levels, but is seriously overstretched with a correction down likely soon. Further advances to higher levels are unlikely before the correction has run its course. The overall rising channel pattern continues, and it remains to be seen whether the correction breaches the lower parameter of the channel before the bull trend continues advancing into the future.

But the short term 3 month chart indicates the creation of sell divergence as the index turns down from the top. This may trigger a sell-off correction sooner although the numbers are still hugging the 10-day MA (blue) with little other sign of a reversal.

Brent oil

The oil price continues to correct down in the wake of sell divergence and this may be a sign of a general correction down soon.

US Treasuries

US Treasury 10 year yield continues sideways to up in the wake of buy divergence, and it is probably only a matter of time before the yield has a breakout above the previous high of 8 months ago, in a strongly bullish chart pattern. US Treasuries therefore continue to decline as equities remain elevated, and this could continue to be the trigger for the start of the equity correction. Any break through resistance levels will ignite further yield increases and provide additional impetus to a corrective equity breakdown.

The Treasury yield and gold comparison chart illustrates the start of correcting back to the historic inverse correlation between the two, as gold finally starts to capitulate correctly. But gold still needs to develop into a declining channel to correlate inversely with the Treasury yield advancing channel.

US Dollar

The US$ is on a tear to a new high after the bull flag breakout of the previous week. This certainly looks like more bullish dollar potential, but of course the next decline phase draws nearer with price at the upper edge of the rising wedge and rising channel.

EuroDollar

The EuroDollar extends the breakdown from the bear flag of the previous week. This certainly looks like more bearish Euro potential, but of course the next advance phase draws nearer with price at the bottom edge of the reducing wedge and reducing channel.

South African Rand

The Rand weakens to a new extreme in the wake of dollar strength, and sets up dollar sell divergence in the process. This should assist in launching the reversal process which could see Rand strength soon.

Gold

Gold has a breakdown as counter-logic turns to true logic in the face of strengthening Treasury yields. In the process the gold price has reached an important breakdown point at the bear flag trigger which could see yet lower gold test strong support.

Hui : Gold Ratio

The breakout of the previous week turns out to be false in the wake of multiple sell divergence, as the ratio triggers the bear flag. This should yield yet lower ratio values. Strength in Treasury yields is gold bearish and US miners are in a breakdown.

GDX US Gold ETF

There is a marked breakdown in US miners in the wake of sell divergence, as gold breaks lower. GDX has reached an important breakdown point at the bear flag trigger which should see a much lower GDX in due course.

Silver

Silver has a breakdown in the wake of sell divergence and, like gold, will be drawn lower by increasing Treasury yields. Price is also at the start of an important breakdown as the bear flag starts to trigger which should see yet lower silver prices.

Gold : Silver Ratio

The ratio is still essentially moving sideways despite a momentary breakout at the triangle apex. The ratio will advance if silver leads gold lower, which could now be likely, given all the background criteria.

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