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Market Analysis 20 Dec 2021

Dec 21st, 2021 No comments

Executive summary

US equity decline gathers momentum and is set to continue declining, after a probable interim reaction up. The technical patterns are still intact though and until these are breached on the downside the elevated levels will be maintained by continued euphoric investor sentiment in a bull trend that will continue advancing into the future. The structural and endemic problems in the market remain camouflaged which will probably delay the cataclysmic break point until later, perhaps even much later.

US Treasury 10 year yield maintains a minor slow weakening as it essentially moves sideways in chart that remains bullish. It is likely to break above the previous high of 9 months ago which will ignite further yield increases providing additional impetus to an equity breakdown, including gold weakness. At the moment Treasury values therefore advance slightly as US equities decline.

The earlier forecast to the start of a probable dollar weakness phase is rapidly being replaced by a continued strength phase powered by the bullish signals. This is supported fundamentally by comparing the economically weaker EU against the US, and is also consistent with a completed countertrend rally in gold which should now start declining. This is supported by continued weak US miners plus a now stronger dollar forecast.

S+P 500

The S+P 500 decline gathers momentum and is set to continue declining, after a probable interim reaction up. The rising channel pattern is still intact though and until this is breached on the downside the elevated levels will be maintained by continued euphoric investor sentiment in a bull trend that will continue advancing into the future.

The short term 3 month chart illustrates the pressure build-up in a triple top with higher volume in the current decline compared with the previous (middle top). Technically price is still only straddling the 50-day MA (red) with the 200-day MA (green) another 5% lower down at 4331.

Brent oil

Oil continues to mimic US equities except that price has declined further and penetrated the 200-Day MA (green), as it too gathers decline momentum.

US Treasuries

US Treasury 10 year yield maintains a slow weakening as it fashions a zig-zag pattern in the reducing wedge formation. This remains bullish though and is likely to break to the upside in due course. Any breakout above the previous high of 9 months ago will be particularly bullish in igniting further yield increases providing additional impetus to an equity breakdown, including gold weakness. At the moment Treasury values therefore advance slightly as US equities decline.

The Treasury yield and gold comparison chart illustrates yield and gold essentially moving sideways as a continued contra-indication of the historic inverse correlation of these two elements moving in opposite directions. Gold is still nowhere near a declining channel against the yield upward slanting expanding wedge. At some point logic will reassert itself in a rising yield channel and declining gold channel. Until that happens markets will remain ‘artificial’ in continuing to camouflage the endemic problems brought about by central bank mismanagement.

US Dollar

The earlier forecast to the start of a probable US$ weakness phase is rapidly being replaced by a continued strength phase in a continued rising channel powered by the bullish cap and handle formation which triggered in late Nov 2021, plus numerous H&S formations. This is supported by fundamental economic comparison between the EU (very weak) and the US (very strong). The RSI oscillator in the chart has moved down from overbought levels which should assist any dollar breakout. This is also consistent with a completed countertrend rally in gold price, which should also now start declining.

EuroDollar

Likewise, the earlier forecast to the start of a probable EuroDollar strength phase is rapidly being replaced by a continued weakness phase in a continued reducing channel powered by the bearish inverted cap and handle formation which triggered in Oct/Nov 2021, plus numerous inverted H&S formations. This is also of course supported by fundamental economic comparison between the EU (very weak) and the US (very strong). The RSI oscillator in the chart has moved up from oversold levels which should assist any EuroDollar breakdown.

South African Rand

Likewise, the earlier forecast to the start of a probable Rand strength phase is rapidly being replaced by a continued weakness phase in a continued dollar rising channel powered by the bullish cap and handle formation which triggered in late Nov 2021, plus numerous H&S formations. This is of course all very dollar dependent.

Gold

Gold ‘blipped’ up momentarily before reacting down from the region of strong resistance (black circle). It is now in an area of decision to either breakout or breakdown. But, continued weak US miners plus a now stronger dollar forecast is likely to push gold into further declines, give or take any short term counter moves.

Hui : Gold Ratio

The HUI – gold ratio is still in decline mode in the wake of multiple sell divergence and bear flag activation. More weakness is likely to follow because of this which in turn promises yet lower gold.

GDX US Gold ETF

Like the HUIgold ratio, the GDX is in decline mode in the wake of sell divergence and bear flag activation, with more weakness likely to follow, which in turn promises yet lower gold.

Silver

Silver still in decline mode in the wake of sell divergence and bear flag activation. It continues to lead gold lower which is bearish, and this should produce yet lower precious metal and miner prices.

Gold : Silver Ratio

The ratio breakout extends to yet a higher close, just short of the previous high at about 81.5, because silver is leading gold lower. A higher ratio indicates yet lower metal prices to come.

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Market Analysis 13 Dec 2021

Dec 14th, 2021 No comments

Executive summary

US equities are poised for potential declines having virtually fully recovered the earlier decline off the peak. It continues to hold at elevated levels despite negative support characteristics in continued euphoric investor sentiment with narrow breadth in negative advance/decline ratios. But this has already prevailed for a long time now and the bull trend could continue advancing into the future. The structural and endemic problems in the market remain camouflaged which will probably delay the cataclysmic break point until later, perhaps even much later.

US Treasury 10 year yield starts to weaken again as it continues to maintain the upward bias. But the chart remains bullish and it is only a matter of time before a breakout above the previous high of 9 months ago. Any breakout through resistance levels will ignite further yield increases and provide additional impetus to a corrective equity breakdown including gold weakness.

The US$ declines from the recent peak ever so slowly, which is delaying the probable start of a weakness phase. This would be consistent with a countertrend rally in the gold price, although precious metal miners are poised to decline further which is bearish gold.

S+P 500

The S+P 500 is poised for potential declines having virtually fully recovered the earlier decline off the peak. It continues to hold at elevated levels despite negative support characteristics in continued euphoric investor sentiment with narrow breadth in negative advance/decline ratios. But this has already prevailed for a long time now and whilst the rising channel pattern is not breached on the downside the bull trend will continue advancing into the future.

Brent oil

Even the oil price continues to mimic US equities although recovery from initial declines has seemingly stalled. The oil market is therefore less bullish than US equities, as it continues in the rising channel formation for now.

US Treasuries

US Treasury 10 year yield starts to weaken again as it fashions a zig-zag pattern in a reducing wedge. But the chart remains bullish in maintaining the upward bias, and it is only a matter of time before a breakout above the previous high of 9 months ago. US Treasuries therefore now start to advance again with US equity strength. Any breakout through resistance levels will ignite further yield increases and provide additional impetus to a corrective equity breakdown including gold weakness.

The Treasury yield and gold comparison chart illustrates gold rising slightly to match the slight Treasury yield decline, to maintain the logic of the inverse correlation between the two. But the overall view is still that of rising yield and rising gold which still represents a breakdown of that logic, which will at some point reassert itself in a rising yield channel and declining gold channel. Until that happens markets will remain ‘artificial’ in continuing to camouflage the endemic problems brought about by central bank mismanagement.

US Dollar

The US$ declines from the recent peak ever so slowly, which is delaying the probable start of a weakness phase. In spite of this the MACD creates a sell signal from a more overbought level than it did in Apr 2021 which prompted at that stage a 4.25% decline in the dollar. This would be consistent with a countertrend rally in the gold price, and align with the Euro buy divergence.

EuroDollar

The EuroDollar advances up from the bottom ever so slowly, which delays the probable start of a strength phase in the wake of buy divergence. In spite of this, similar to the dollar, the MACD creates a buy signal from a more oversold level than it did in Apr 2021 which prompted at that stage a 4.75% advance in the Euro. This also would be compatible with a potential countertrend rally in the gold price.

South African Rand

The Rand strengthens ever so slowly from extreme weakness in the wake of the dollar peaking. This is nevertheless a probable start to a strengthening phase against the dollar, although very dollar dependent.

Gold

The gold breakdown from the bear flag has stalled, and could now correct up towards the region of strong resistance in the $1820-1840 range. But technically everything indicates more weakness boosted by weak US miners, stronger Treasury yield, and silver leading gold lower.

Hui : Gold Ratio

The HUI – gold ratio is in decline mode in the wake of multiple sell divergence and bear flag activation. More weakness is likely to follow because of this which in turn promises yet lower gold.

GDX US Gold ETF

Like the HUIgold ratio, the GDX is in decline mode in the wake of sell divergence and bear flag activation, with more weakness likely to follow, which in turn promises yet lower gold.

Silver

Silver leads gold lower which is bearish, and is in decline mode in the wake of sell divergence and bear flag activation which should produce yet lower precious metal and miner prices.

Gold : Silver Ratio

The ratio breakout extends to yet a higher close, just short of the previous high at about 81.5, because silver is leading gold lower. A higher ratio indicates yet lower metal prices to come.

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Market Analysis 6 Dec 2021

Dec 7th, 2021 No comments

Executive summary

US equities are in decline with a correction in progress in an overheated market, which could intensify from here. But the extent of the decline remains to be seen, before the bull trend continues advancing into the future. For now the structural and endemic problems in the market remain camouflaged which will probably delay the cataclysmic break point until later, perhaps even much later.


US Treasury 10 year yield starts to strengthen again as it continues to maintain the upward bias. The uptrend remains in place in a chart structure that remains bullish, and it is only a matter of time before a breakout above the previous high of 9 months ago. US Treasuries therefore now start to decline again with US equity weakness. Any breakout will ignite further yield increases and provide additional impetus to a corrective equity breakdown including gold weakness.
The US$ recovers partially in its decline down from the top, which delays the probable start of a weakness phase. Dollar weakness now is consistent with a countertrend rally in gold, although precious metals and miners are poised to decline further.


So, markets are somewhat contradictory at the moment with shrouded and unexpected outcomes.

S+P 500

The S+P 500 is in decline and it looks like it could intensify from here. But the overall rising channel pattern still continues for now, 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.

A closer view of the S+P 500 in the 3 month chart illustrates a slight recovery in the decline from the top in the wake of the sell divergence. The correction down should continue to lower levels, but the extent of the decline still remains to be seen.

Brent oil

Even the oil price continues to mimic US equities with a slight recovery visible in the decline, as it continues in the rising channel formation for now.

US Treasuries

US Treasury 10 year yield starts to strengthen again as it straddles the 200-day MA (green), continuing to maintain the upward bias. The uptrend remains in place in a chart structure that remains bullish, and it is only a matter of time before a breakout above the previous high of 9 months ago. US Treasuries therefore now start to decline again with US equity weakness. Any breakout through resistance levels will ignite further yield increases and provide additional impetus to a corrective equity breakdown including gold weakness.

The Treasury yield and gold comparison chart illustrates gold only declining slightly against yield starting to strengthen again. Historically they move in opposite directions and the yield upward bias is not as yet balanced by a declining gold bias which at best still has a rising channel. While the forecast is for rising yields it presupposes declining gold, if the historic inverse correlation is to be restored.

US Dollar

The US$ recovers partially in its decline down from the top, which delays the probable start of a weakness phase. In spite of this the MACD creates a sell signal from a more overbought level than it did in Apr 2021 which prompted at that stage a 4.25% decline in the dollar. This would be consistent with a countertrend rally in the gold price, and align with the Euro buy divergence.

EuroDollar

The EuroDollar declines partially in its advance up from the bottom, which delays the probable start of a strength phase. In spite of this, similar to the dollar, the MACD creates a buy signal from a more oversold level than it did in Apr 2021 which prompted at that stage a 4.75% advance in the Euro. This also would be compatible with a countertrend rally in the gold price, and align with the Euro buy divergence.

South African Rand

The Rand stalls in correcting slightly against the dollar from extreme weakness, in the wake of the dollar peaking. This is nevertheless a probable start to a strengthening phase against the dollar, although very dollar dependent.

Gold

The gold breakdown from the bear flag has stalled, and could now correct up towards the region of strong resistance in the $1820-1840 range. But technically everything indicates more weakness boosted by weak US miners, stronger Treasury yield, and silver leading gold lower.

Hui : Gold Ratio

The HUI – gold ratio is in decline mode in the wake of multiple sell divergence and bear flag activation. More weakness is likely to follow because of this which in turn promises yet lower gold.

GDX US Gold ETF

Like the HUIgold ratio, the GDX is in decline mode in the wake of sell divergence and bear flag activation, with more weakness likely to follow, which in turn promises yet lower gold.

Silver

Silver leads gold lower which is bearish, and is in decline mode in the wake of sell divergence and bear flag activation which should produce yet lower precious metal and miner prices.

Gold : Silver Ratio

The ratio breakout extends to yet a higher close, just short of the previous high at about 81.5, because silver is leading gold lower. A higher ratio indicates yet lower metal prices to come.

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