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Archive for Jan, 2022

Market Analysis 25 Jan 2022

Jan 25th, 2022 No comments

Executive summary

US equities decline sharply in more than doubling the declines since the peak in the market, including finally triggering certain technical sell signals. Peculiarly though, certain other markets continue undeterred, such as oil and gold, and it might be that although structural and endemic problems in the market remain camouflaged they may well remain so longer in delaying the final cataclysmic break point until later, perhaps even into 2023.


US Treasury 10 year yield holds the major breakout level and continues to be the precursor towards higher yields and the trend towards higher interest rates. Treasury yields represent a strong rising trend setup which are likely to ignite further yield increases as the period of higher interest rates gathers momentum, and this will have an inevitable effect on the full gambit of all markets including oil and gold.


The dollar still looks like a breakout to higher levels as certain chart patterns play out which could mean one more new high followed by a weakening phase, which is consistent with signals from competing currencies notably the Euro. It could also mean gold will weaken first followed by strength during the dollar weakening phase.

S+P 500

The S+P 500 breakdown through the rising channel formation signals major decline prospects as the sell divergence kicks in, propelling prices much lower. This, in the past week, more than doubles declines since the peak in the market, including finally penetrating the 200-Day MA (green).

Brent Oil

The oil price has surprisingly held at elevated levels in a major dichotomy with financial markets.

US Treasuries

US Treasury 10 year yield holds the major breakout level and continues to be the precursor towards higher yields and the trend towards higher interest rates. Although Treasury values are advancing as US equities decline, and if equities decline further and even much further then this could have the effect of reducing Treasury yields, until the mould ruptures and both equities and bonds decline together. But Treasury yields represent a strong rising trend setup which are likely to ignite further yield increases as the period of higher interest rates gathers momentum, and this will have an inevitable effect on the full gambit of all markets such as oil and gold which at the moment seem to be drifting sideways to up.

The Treasury yield and gold comparison chart illustrates yield rising and gold up to sideways, which maintains the breakdown of the correct historic inverse correlation of these two elements. The yield rise is striking while the Gold decline is nowhere evident as yet. At some point the correct historic inverse correlation logic will reassert itself and become evident. Until that happens markets will remain ‘artificial’ in continuing to camouflage the endemic problems brought about by central bank mismanagement.

US Dollar

The dollar still looks like a breakout to higher levels as the reverse buy divergence exerts influence. Reverse buy divergence typically could mean one more new high followed by a weakening phase, and this is consistent with signals from competing currencies notably the Euro. It could also mean gold will weaken first followed by strength during the dollar weakening phase.

EuroDollar

The Euro is a virtual opposite to the dollar and still looks like a breakdown to lower levels as a new reverse sell divergence develops. Reverse sell divergence typically could mean one more new low followed by a strengthening phase.

South African Rand

The Rand is set to weaken in a breakout to a new high in the Dollar Rand chart as the reverse buy divergence exerts influence. As with the dollar index, reverse divergence could mean one more new high before dollar weakness sets in to Rand strength thereafter.

Gold

Gold edges up through strong resistance (dark blue), but is still in an area of decision as it approaches the triangle apex. However, it is not supported by US miners which could drag gold lower, and other strong impact factors are also influencing gold lower such as Treasury yield strength, a strengthening dollar, and silver which is leading gold lower.

Hui : Gold Ratio

The HUI – gold ratio declines sharply within the bear flag with a tentative breakdown, as it intensifies the negative bias. This indicates lower gold ahead.

GDX US Gold ETF

Like the HUIgold ratio, GDX also declines sharply within the bear flag as it intensifies the negative bias. This also indicates lower gold ahead.

Silver

Silver maintains its negative bias as it drifts sideways to down. Price drops sharply in the latter part of the week as siver starts to lead gold lower.

Gold : Silver Ratio

The gold:silver ratio ratchets up 4.5% from the low during the week as silver begins to lead gold lower. This indicates lower metal prices to come.

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Market Analysis 18 Jan 2022

Jan 18th, 2022 No comments

Executive summary

US equities are still in correction mode down in the wake of supporting market signals, but continue nevertheless to maintain a slight upward bias. Most of the parameters are in place for the decline to continue but as long as the upward bias is maintained so too does the bull trend. The structural and endemic problems in the market remain camouflaged which will probably delay the cataclysmic break point until later, perhaps even into 2023.


US Treasury 10 year yield holds the breakout of last week which represents the precursor towards higher yields and the trend towards higher interest rates. This is likely to ignite further yield increases as the period of higher interest rates gathers momentum, with inevitable effects on the full gambit of all markets which at the moment seem to be drifting sideways in limbo.


The dollar still looks like a breakout to higher levels as certain chart patterns play out which could mean one more new high followed by a weakening phase, which is consistent with signals from competing currencies notably the Euro. It could also mean gold will weaken first followed by strength during the dollar weakening phase.

S+P 500

The S+P 500 is still in correction mode down in the wake of sell divergence, but it continues to hold above the bottom of the rising channel. Most of the parameters are in place for the decline to continue but as long as the rising channel remains in place so too does the bull trend which incidentally continues to move ahead well above the 200-day MA (green) which becomes the next defensive line to be breached.

The short term 3 month chart not only illustrates the decline from the sell divergence but also continued maintenance of the bullish shape in the chart of higher highs and higher lows. This might therefore represent a continuation of the bull trend in further delaying any more serious decline until later.

US Treasuries

US Treasury 10 year yield holds the breakout of last week which represents the precursor towards higher yields and the trend towards higher interest rates. Higher yield means that Treasury values are declining as US equities continue to correct down. This strong rising trend setup will ignite further yield increases as the period of higher interest rates gathers momentum, with inevitable effects on the full gambit of all markets which at the moment seem to be drifting sideways in limbo.

The Treasury yield and gold comparison chart illustrates yield rising and gold sideways, which maintains the breakdown of the correct historic inverse correlation of these two elements. The yield rise is striking while the Gold decline is stodgy, and the yield rising channel is obvious whilst the gold channel is nowhere near a declining channel yet. At some point the correct historic inverse correlation logic will reassert itself and become evident. Until that happens markets will remain ‘artificial’ in continuing to camouflage the endemic problems brought about by central bank mismanagement.

US Dollar

The dollar still looks like a breakout to higher levels as a new reverse buy divergence develops. Reverse buy divergence typically could mean one more new high followed by a weakening phase, and this is consistent with signals from competing currencies notably the Euro. It could also mean gold will weaken first followed by strength during the dollar weakening phase.

EuroDollar

The Euro is a virtual opposite to the dollar and still looks like a breakdown to lower levels as a new reverse sell divergence develops. Reverse sell divergence typically could mean one more new low followed by a strengthening phase.

South African Rand

The Rand is set to weaken in a breakout to a new high in the Dollar Rand chart as a new reverse buy divergence develops. As with the dollar, reverse divergence could mean one more new high before dollar weakness sets in to Rand strength thereafter.

Gold

Gold continues to edge toward decision time as it continues sideways towards the triangle apex. It seems to be hemmed in by a band of strong resistance (dark blue) and in accordance with dollar analysis is likely to breakdown first before recovering in a strength phase while the dollar weakens. Key break levels are there and they are evident on the chart at the red and blue markers. There is little support from US miners at the moment as they too move sideways.

Hui : Gold Ratio

The HUI – gold ratio continues to zig-zag sideways although with a negative bias, reflecting gold’s sideways indecision.

GDX US Gold ETF

Like the HUIgold ratio, GDX also continues to zig-zag sideways also with a negative bias, reflecting gold’s sideways indecision.

Silver

Silver maintains its negative bias as it drifts sideways to down. The earlier breakdowns are holding but silver is not leading gold at the moment, and seems to be in limbo as most markets are.

Gold : Silver Ratio

The gold:silver ratio breakouts hold as the ratio moves sideways in limbo. The ratio closed slightly lower which reflects market sentiments at the moment.

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Market Analysis 11 Jan 2022

Jan 11th, 2022 No comments

Executive summary

US equities correct down and most of the parameters are in place for the decline to continue. But there are chart indications also that indicate that if certain parameters are not breached then the bull trend will continue for now. The structural and endemic problems in the market remain camouflaged which will probably delay the cataclysmic break point until later, perhaps even into 2023.

US Treasury 10 year yield has a powerful breakout through the major high of Mar 2021 which now resembles a strong rising trend setup which will ignite further yield increases as the period of higher interest rates gathers momentum. This should provide additional impetus to an equity breakdown, stronger dollar, and gold weakness.

The dollar still looks like a breakout to higher levels as certain chart patterns play out. But dollar increases of 7.5% already plus further increases will move closer to an inevitable reversal and the onset of a dollar weakness phase. Gold is set to decline in the short term followed by gold strength once the dollar weakens.

S+P 500

The S+P 500 corrects down as the sell divergence bites, but the decline remains within the confines of the rising channel as it resists breaching the bottom support line. Most of the parameters are in place for the decline to continue but as long as the rising channel remains in place so too does the bull trend which incidentally continues to move ahead above the 200-day MA (green) which becomes the next defensive line to be breached.

The short term 3 month chart not only illustrates the decline from the sell divergence but also the ending bullish Hammer candle which is supportive of a price reversal up. The chart in correcting down might therefore also be the start of a reversal up and a continuation of the bull trend.

US Treasuries

US Treasury 10 year yield has a powerful breakout through the major high of Mar 2021 which now resembles a strong rising trend setup which will ignite further yield increases as the period of higher interest rates gathers momentum. This should provide additional impetus to an equity breakdown, stronger dollar, and gold weakness.

The Treasury yield and gold comparison chart illustrates yield rising and gold declining, in accordance with the correct historic inverse correlation of these two elements. Although the yield rise is striking while the Gold decline is stodgy, and the yield rising channel is obvious whilst the gold channel is nowhere near a declining channel yet. At some point the correct historic inverse correlation logic will reassert itself and become evident. Until that happens markets will remain ‘artificial’ in continuing to camouflage the endemic problems brought about by central bank mismanagement.

US Dollar

The dollar still looks like a breakout to higher levels as the 18 month ‘Cup and Handle’ plays out, including a number of inverted H&S as well. But the dollar increases since Jun 2021 already amount to 7.5% and further increases move closer to an inevitable reversal and the onset of a dollar weakness phase.

EuroDollar

The Euro is a virtual opposite to the dollar still looks like a breakdown to lower levels as the inverted ‘Cup and Handle’ plays out, including a number of H&S as well. But declines over the past year are already close to 8% and further decreases move closer to an inevitable reversal and the onset of a Euro strength phase.

South African Rand

The Rand is strengthening against the dollar into a developing dollar bull flag which is set to weaken the Rand as the ‘Çup and Handle’ reactivates, also including a number inverted H&S. This is of course all very dollar dependent.

Gold

Gold edges toward decision time as it moves consistently sideways towards the triangle apex. Both the support and resistance zones have been effective over the past 6 months and a break either way is probable soon. Key break levels are there and they are evident on the chart at the red and blue markers. There is little supporting evidence from US miners at the moment as to the break direction, but US Treasury yields and the dollar point towards gold weakness in the short term followed by gold strength once the dollar weakens.

Hui : Gold Ratio

The HUI – gold ratio continues to zig-zag sideways although with a negative bias, reflecting gold’s sideways indecision.

GDX US Gold ETF

Like the HUIgold ratio, GDX also continues to zig-zag sideways although with a negative bias, reflecting gold’s sideways indecision.

Silver

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

Gold : Silver Ratio

The gold:silver ratio breakouts are valid as the ratio closes higher again at 80.08 to maintain its upward bias. Ratio increases reflect metal price declines as silver continues to lead gold lower. The chart is building to a powerful rising trend setup that looks likely to another breakout and yet lower metal prices.

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Market Analysis 4 Jan 2022

Jan 4th, 2022 No comments

Executive summary

US equities hold at elevated levels in forming a rising trend setup that should yield new highs, as the bull trend continues to power ahead. This now registers a 30% gain in the last 12 months supported by continued euphoric investor sentiment in setting new historic levels that defy reason in virtually every respect. Obviously corrective downturns will occur and another sell divergence has developed in the chart which will assist in powering the next such correction. The rising channel extends out into the future and this could be a good guide as to the severity of corrections that may or may not breakdown below the supporting trendline. The structural and endemic problems in the market remain camouflaged which will probably delay the cataclysmic break point until later, perhaps even into 2023.


US Treasury 10 year yield extends the breakout in spiking up as the Treasury value reduces in line with the equity advance. Resistance could be tested next and any break through will be very bullish because it could then test the previous high of 9 months ago, which if successful, will be particularly bullish in igniting further yield increases providing additional impetus to an equity breakdown, stronger dollar, and gold weakness.


The dollar still looks like a breakout to higher levels, although perhaps with more dollar weakness first. This is supported by fundamental economic comparison between the EU (very weak) and the US (very strong). This is also consistent with a completed countertrend rally in gold price, which should also now start declining.

S+P 500

The S+P 500 holds at elevated levels as it forms a rising trend setup that should yield new highs, as the bull trend continues to power ahead. This now registers a 30% gain in the last 12 months supported by continued euphoric investor sentiment in setting new historic levels that defy reason in virtually every respect. Obviously corrective downturns will occur and another sell divergence has developed in the chart which will assist in powering the next such correction. The rising channel extends out into the future and this could be a good guide as to the severity of corrections that may or may not breakdown below the supporting trendline.

The short term 3 month chart illustrates the powerful rising trend setup, sell divergence, and rising channel in more detail.

US Treasuries

US Treasury 10 year yield extends the breakout from the reducing wedge in spiking up as the Treasury value reduces in line with the equity advance. Resistance could be tested next and any break through will be very bullish because it could then test the previous high of 9 months ago, which if successful, will be particularly bullish in igniting further yield increases providing additional impetus to an equity breakdown, stronger dollar, and gold weakness.

The Treasury yield and gold comparison chart illustrates yield rising and gold declining, in accordance with the correct historic inverse correlation of these two elements. But movement is tiny and Gold is still nowhere near a declining channel against the upward sloping yield channel. At some point the correct historic inverse correlation logic will reassert itself and become evident. Until that happens markets will remain ‘artificial’ in continuing to camouflage the endemic problems brought about by central bank mismanagement.

US Dollar

The dollar still looks like a breakout to higher levels as the 18 month ‘Cup and Handle’ plays out, after triggering in Nov 2021. It may of course only play out after more dollar weakness first. There are also numerous inverted H&S patterns in support of the Cup and Handle, and dollar strength is further 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

The US dollar index is made up of 58% Euro and 42% other currencies, and therefore the Euro is a virtual opposite and still looks like a breakdown to lower levels as the ‘Cup and Handle’ plays out. It may also of course only play out after more Euro strength first, and is further driven by fundamental economic comparison between the EU (very weak) and the US (very strong).

South African Rand

The Rand weakened this week against a stronger dollar 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

The Gold chart illustrates an interesting setup in that gold looks like it is repeating what it did exactly a year ago. At both year ends, then and now, there was a small-volume rally into year end followed by a 14% decline into 1st quarter 2021. This was also experienced in the oscillators and US miners, which makes gold now look bearish. Expect a gold decline into 1st quarter 2022, as this is also consistent with rising US Treasury yields and US dollar.

Hui : Gold Ratio

The HUI – gold ratio is zig-zagging sideways but blipped down from the top of the ending rising wedge. If the ratio follows gold it is likely to spike down in 1st quarter 2022 as it did in 1st quarter 2021.

GDX US Gold ETF

Like the HUIgold ratio, GDX also blipped down from the top of the ending rising wedge and if it too follows gold (as it must if the HuiGold ratio does) it is likely to spike down in 1st quarter 2022 as it did in 1st quarter 2021.

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. The ending rising wedge is starting to break down.

Gold : Silver Ratio

The ratio has a 2nd breakout as it closes higher with silver leading gold lower, ever closer to the peak just over 82. A higher ratio reflects metal price declines, and the chart is building to a powerful rising trend setup that looks likely to another breakout.

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