Archive

Author Archive

Market Analysis 9 Jul 2020

Jul 9th, 2020 No comments

Executive summary

The bear market continues to unfold as the Dow Jones began primary leg 3 down on 8 Jun 2020 from the end of primary leg 2 up. But movement is sluggish however, with little more than a 1000 point spread in sideways drift mode for about a month now. This has the knock-on effect of retarding movement in values of other elements of the market, such as the dollar, gold, US Treasuries, commodities, and much else such as deflation, inflation, interest rates, etc. The long term view of the Dow Jones Ind Ave remains the same however, and Primary wave 3 is likely to decline from 27 000 to 7 000 in a 5 wave impulsive decline with the first wave taking price down to the region of 15 000.

Rather than to describe movement of each element in the summary, it seems more appropriate on this occasion to describe the structure of the whole market in terms of inflection points over a 5 year period, as envisaged by the writer knowing that forecasts can be very wrong.
Global developments can be structured into ‘building blocks’ that can be defined in a particular way, and divided into segments separated by 4 clear inflection points. Only the Dow Jones, Gold, US$ index, and the US Treasury 10 year yield have been used in this structure, to the exclusion of everything else.

Inflection point 1 in Feb 2020: Top of the US equity market with the Dow at 29 500;

Inflection point 2 in Jun 2020: Dow at start of Primary wave 3 down at 27 700, Gold at $1 800, US$ index at 96;

Inflection point 3 in May 2021: Dow at end of Primary wave 3 down at 10 000, the bottom of the Gold market at $900, US$ index up at 105-110 at the start of confidence collapse in Fiat currencies, US Treasury 10 year yield at zero before long term advance towards normalising interest rates;

Inflection point 4 sometime in 2024: Global reset of the international monetary system, gold between $5 000 – $10 000, Dow close to 1 000, US$ index at 65 or below, US Treasury 10 year at 5% to normalise interest rates;

US Dollar
Pic US$ 30Y

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which has already exceeded the previous high at the start of 2017. This dynamic will continue for now with dollar strength into continued equity collapse, as we enter a new phase until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.
This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The artificially prompted excessive over-valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.
Pic US$ 5y

The dollar continues to strengthen into the rally which started in early 2018, but with strong weakness in the tail. This is now switching back into rally mode at inflection point 2 as dollar demand increases with US equities now beginning the next major decline phase. This is supported by a grouping of bullish candles (black circle) as the dollar prepares to move up in a strengthening phase. Increasing dollar demand will eventually collapse after the second inflection point, as confidence in fiat currencies collapse into a period of serious inflation followed by hyperinflation thereafter.

The 12 month chart reveals the end of dollar weakness in a breakout from the bull flag, completing the temporary decline. A strong dollar rally is likely to start from this region as this is the first inflection point at the resumption of US equity declines into the next major leg down. However, US equities are moving lower very sluggishly which might retard dollar strength and even prompt dollar weakness first.

The 3 month chart illustrates dollar progress after the bull flag breakout. Although a strong rally is forecast from this region the dollar needs to penetrate the key neckline at $97.80 first, and timing depends on the energy or sluggishness of US equity declines.

EuroDollar

The Eurodollar chart is similar to the dollar index chart, except in the opposite direction (including a breakdown through the MACD), and sluggish US equity declines could similarly cause EuroDollar strength before the ultimate weakness prompted by penetration below the neckline at 1.1165.tom. Nevertheless a strong decline is eventually likely from this region in response to corresponding dollar strength.

US Treasuries

The benchmark 10 year US Treasury yield continues to develop a fragile support base which looks more likely to break down into the support zone than to display some mild bullish formations as the building process develops. Because the sell divergence is likely to assist in reducing yield further, even towards zero. But US equities are resuming declines in the next major leg down which begins to present as the acid test to evaluate treasury performance. Because in the face of serious equity declines with resultant money flows from equities back into treasuries plus US Fed interventions, this will all have the effect of reducing yields.

However, in spite of this, real interest rate expectations are for increasing rates as deflation sets in, which will reverse US Treasury yields at inflection point 3 from lower to higher as the US bond market starts to collapse in line with equities.

Short term US Treasury yields are holding in a narrow range, pending US equity behaviour. At this stage it indicates limited US Fed interference, but as equity declines gather momentum so too should yield decline. It is possible the Fed will nevertheless not manipulate yield below zero.

Gold

Gold has reached the 2012 high as the long term 10 year chart presents as twin peaks in a massive double top which has severe bearish implications, once activated. Price has now probably topped at the end of a 5 year bear market rally, which is likely to move into protracted declines perhaps lasting years.

The next real gold bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the gold bear market as we reach inflection point 3 at the start of currency collapse between the end of deflation and the start of serious inflation, probably around May 2021.

Gold has a breakout to a marginal new high, but in the process has strengthened the incumbent sell divergence. The behaviour of the gold price is also linked to general equity behaviour, in that once equity declines gather momentum it will lead to deflation which will envelop gold into declines. The gold cycle is probably now due to start weakening, due to the virtually uninterrupted advance from Oct 2018 as well as sharp volume declines during 2020. Confirmation of a top will include penetration of the key support level at $1674.

Once a top is confirmed, the 2020 consolidation could respond similarly to the aftermath of the 2016 and 2018 consolidations. These declined quickly after breakdowns to well below the 200-Day MA (blue), and a similar drop now could witness a gold price decline of $200-$300 into the 1st decline target region between $1450-$1550, sometime during Jul-Sep 2020.

The gold breakout to a new high in the broadening top consolidation, also presents as a secondary sell divergence. This is probably the top of the cycle which will be confirmed by penetrating the key support line at $1674 which will start the next decline phase.

The 3-month chart illustrates the multi-breakout run to a new high, with still no confirmation of a top in evidence yet.

Brent Crude Oil

Oil advances above recent consolidation to a new 4 month high, due partly to marginal fundamental improvements and partly due to the sluggish resumption of US equity declines. Fundamentals in the oil market have improved slightly but remain abysmal with economic activity still at anaemic levels, and equity market declines will impact negatively on the oil price as it did before during the collapse in Feb/Mar.

South African Rand

The US$ / Rand flag breakout is positive the dollar and negative the Rand, but momentum is reducing. The trigger remains penetration of the resistance neckline at $17.50 which is delayed slightly. As a consequence the MACD breakout is moving towards a breakback which is close to happening.

HUI / Gold Ratio

The HUI /Gold ratio breakout has propelled price up to a double top high, as miners’ gains accelerate against gold gains. Momentum is up, but key breaklines need to be breached before any certainty is possible.

HUI Gold Bugs Index

The HUI itself has a virtually identical chart pattern, except more positive. US miners’ gains have accelerated through multi-breakouts to a new high. But any confirmed reversal will start testing key supports, and if gold has topped out then miners will be under increased pressure to maintain price levels. Further weakness will gather momentum in closing the gap, breaching key support, and finally testing the previous low at 142 during Mar 2020.


This situation applies also to all US miners, and GDX, GDXJ, and XAU are all positioned in likewise charts subject to testing previous lows after the gold rally terminates.


Dust US Miners Bear Index

Dust has broken down through the double bottom and intensified the long term buy divergence. Activation of the divergence will also be a breakout of the reducing wedge, and the whole configuration suggests a top in US miners is very close. Being a US miners bear index it responds in geared opposition to metals and miners movement.

Silver

Long term silver continues to trend lower, despite the recent strong rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, which is now again starting to outperform silver after more than 3 months. As with gold, there is still no confirmation that the top is in, although it has probably now topped out. The next silver bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the silver bear market as we reach inflection point 3 at the start of currency collapse between the end of deflation and the start of serious inflation, sometime during the first half of 2021.

The strong silver rally fails to break to a new high as rally energy dissipates in a developing bear flag. In not achieving a new high silver continues the non-confirmation with gold which is a traditional trend change signal, indicating lower prices ahead. As with gold though, there are still no confirmations that the top is in.

Silver penetrates the quadruple top, marginally, but without achieving a long term high. Lack of follow-through energy continues to prevent a new high and continues to perpetuate the non-confirmation with gold with bearish implications. The key support levels remain at $17.00 and $14.50, to confirm the top is in and eliminate any further bullish potential.

Silver has a breakout to a new short term high, but in the process creates a new sell divergence. This should supply the energy for lower prices from here. A key breakline is at $17.00 in the near exact position of the 200-Day MA (green), and penetration of this level will confirm silver’s top and eliminate any further upside potential.

The silver miners chart is similar to the gold miner charts in breaking up to a new high. But in the process it has created a sell divergence which could assist in reducing price levels. A confirmed reversal will start testing key supports and finally testing the previous low at 16 during Mar 2020.

Gold : Silver Ratio

The gold / silver ratio closed lower at 95.02 in celebrating the late surge in metal prices over the last 10 trading days. But it seems the bottom is in to be followed by higher ratios and lower metal prices. If the ratio now starts to advance, this means silver will decline faster than gold, and vice versa.

General Equities

The bear market continues to unfold as the Dow Jones began primary leg 3 down on 8 Jun 2020 from the end of primary leg 2 up. This was characterised by a rare island reversal to confirm the top, as it also was at the final top of the market in Feb 2020. The strong sell divergence signal is in place and active and this will provide added decline energy to gain momentum. Movement is sluggish however, with little more than a 1000 point spread in sideways drift mode for about a month now.

The long term view of the Dow Jones Ind Ave remains the same. Primary wave 3 is likely to decline from 27 000 to 7 000 in a 5 wave impulsive decline with the first wave taking price down to the region of 15 500.

Categories: Uncategorized Tags:

Market Analysis 2 Jul 2020

Jul 2nd, 2020 No comments

Executive summary

The bear market continues to unfold as the Dow Jones began primary leg 3 down on 8 Jun 2020 from the end of primary leg 2 up. This was characterised by a rare island reversal to confirm the top as well as a strong sell divergence signal which will provide added decline energy to gain momentum.

Decline progress is not rapid however, as investor sentiment remains euphoric with few actually believing this to be a bear market at all. This has the knock-on effect of retarding movement in values of other elements of the market, such as the dollar, gold, US Treasuries, commodities, and much else such as deflation, inflation, interest rates, etc. The long term view of the Dow Jones Ind Ave remains the same however, and Primary wave 3 is likely to decline from 27 000 to 7 000 in a 5 wave impulsive decline with the first wave taking price down to the region of 15 500.

The US$ is again starting to strengthen into the rally which started in early 2018. After recent weakness it is now switching back into rally mode at the first of 2 inflection points as dollar demand increases with US equities now beginning the next major decline phase, albeit still hesitantly. Increasing dollar demand will eventually collapse after the second inflection point, as confidence in fiat currencies collapse into a period of serious inflation followed by hyperinflation thereafter.

The benchmark 10 year US Treasury yield continues to develop a fragile support base which might start to display some mild bullish formations as the building process develops. But US equities are resuming declines in the next major leg down which begins to present as the acid test to evaluate treasury performance. Because in the face of serious equity declines with resultant money flows from equities back into treasuries plus US Fed support, this will all have the effect of reducing yields. However, in spite of this, real interest rate expectations are for increasing rates as deflation sets in, which will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities.

Gold has reached the 2012 high which now presents as twin peaks in a massive double top which has severe bearish implications, once activated. Price has now probably topped at the end of a 5 year bear market rally, which is likely to move into protracted declines perhaps lasting years. The next real gold bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the gold bear market as we reach inflection point 2 at the start of currency collapse between the end of deflation and the start of serious inflation, sometime during 2021.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which has already exceeded the previous high at the start of 2017. This dynamic will continue for now with dollar strength into continued equity collapse, as we enter a new phase until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The artificially prompted excessive over-valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar continues to strengthen into the rally which started in early 2018, but with strong weakness in the tail. This is now switching back into rally mode at the first of 2 inflection points as dollar demand increases with US equities now beginning the next major decline phase. This is supported by a grouping of bullish candles (black circle) as the dollar prepares to move up in a strengthening phase. Increasing dollar demand will eventually collapse after the second inflection point, as confidence in fiat currencies collapse into a period of serious inflation followed by hyperinflation thereafter.

The 12 month chart reveals the end of dollar weakness in a breakout from the bull flag, completing the temporary decline. A strong dollar rally is likely to start from this region as this is the first inflection point at the resumption of US equity declines into the next major leg down. However, US equities are moving lower very sluggishly which might retard dollar strength and even prompt dollar weakness first.

The 3 month chart illustrates dollar progress after the bull flag breakout. Although a strong rally is forecast from this region the dollar needs to penetrate the key neckline at $97.80 first, and timing depends on the energy or sluggishness of US equity declines.

EuroDollar

The Eurodollar chart is similar to the dollar index chart, except in the opposite direction (including a breakdown through the MACD), and sluggish US equity declines could similarly cause EuroDollar strength before the ultimate weakness prompted by penetration below the neckline at 1.1165.tom. Nevertheless a strong decline is eventually likely from this region in response to corresponding dollar strength.

US Treasuries

The benchmark 10 year US Treasury yield continues to develop a fragile support base which might start to display some mild bullish formations as the building process develops. But US equities are resuming declines in the next major leg down which begins to present as the acid test to evaluate treasury performance. Because in the face of serious equity declines with resultant money flows from equities back into treasuries plus US Fed interventions, this will all have the effect of reducing yields.

However, in spite of this, real interest rate expectations are for increasing rates as deflation sets in, which will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities.

Short term US Treasury yields are holding in a narrow range, although declining slightly from 0.17% to 0.14% over 3 weeks. This indicates limited US Fed interference at the moment, despite the start of (sluggish) equity weakness which nobody believes yet. This is a good indicator of US Fed action once equity declines accelerate.

Gold

Gold has reached the 2012 high as the long term 10 year chart presents as twin peaks in a massive double top which has severe bearish implications, once activated. Price has now probably topped at the end of a 5 year bear market rally, which is likely to move into protracted declines perhaps lasting years.

The next real gold bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the gold bear market as we reach inflection point 2 at the start of currency collapse between the end of deflation and the start of serious inflation, sometime during 2021.

The 5 year weekly chart highlights the marginal new high in a sideways consolidation, as well as the massive drop in volume as the gold price peaked. This all indicates lower prices ahead after confirmation of the gold top.

The 2020 consolidation could respond similarly to the aftermath of the 2016 and 2018 consolidations. These declined quickly after breakdowns to well below the 200-Day MA (blue), and a similar drop now could witness a gold price decline of $200-$300 into the 1st decline target region between $1450-$1550, sometime during Jul-Sep 2020.

Gold has a breakout to a new high in the broadening top consolidation, which also presents as a sell divergence. This is probably the top of the cycle which will be confirmed by penetrating the key support line at $1674 which will start the next decline phase.

Gold turns down from the peak and sequential break lines leading down to final confirmation of a top at $1674 are situated at $1754 and $1706.

Brent Crude Oil

Oil is consolidating above the breakout, but the chart has a negative bias and US equities are starting to weaken. Fundamentals in the oil market have improved slightly but remain abysmal with economic activity still at anaemic levels, and equity market declines will impact negatively on the oil price as it did before during the collapse in Feb/Mar.

The gold / oil ratio has a breakout from the declining channel with the ratio turning up as it approached the 200-Day MA (green). This signals lower oil prices ahead.

South African Rand

The US$ / Rand has a breakout from the flag which is positive the dollar and negative the Rand. This indicates Rand declines ahead, but only after penetration of the resistance neckline at $17.50. This is amplified by a MACD breakout also and the Rand is likely to test the resistance zone next.

HUI / Gold Ratio

The HUI /Gold ratio has a breakout in a weakening top pattern with strength in the tail. The ratio indicates US Miners gains accelerating against gold gains, but the pattern has not achieved a new high. Key breaklines need to be breached before any certainty is possible.

HUI Gold Bugs Index

The HUI itself has a virtually identical chart pattern, also with a breakout of the reducing wedge and also without a new high. If gold has topped out then miners will be under increased pressure to maintain price levels. Further weakness will gather momentum in closing the gap, breaching key support, and finally testing the previous low at 142 during Mar 2020.


This situation applies also to all US miners, and GDX, GDXJ, and XAU are all positioned in likewise charts subject to testing previous lows after the gold rally terminates.


Dust US Miners Bear Index

The Dust breakout gains have lost momentum in the bottom consolidation, and have in fact created a double bottom with further bearish implications, if activated. However, the long term buy divergence is still active and the chart will gather positive momentum again as the gold price falters. Being a US miners bear index it responds in the opposite direction to metals and miners price movement.

Silver

Long term silver continues to trend lower, despite the recent strong rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, which is now again starting to outperform silver after more than 3 months. As with gold, there is still no confirmation that the top is in, although it has probably now topped out.

The next silver bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the silver bear market as we reach inflection point 2 at the start of currency collapse between the end of deflation and the start of serious inflation, sometime during 2021.

The strong silver rally fails to break to a new high as rally energy dissipates in a developing bear flag. In not achieving a new high silver continues the non-confirmation with gold which is a traditional trend change signal, indicating lower prices ahead. As with gold though, there are still no confirmations that the top is in.

The late rally has created a quadruple top which has held intact, with no break up to a new high. Lack of follow-through energy continues to prevent a new high and continues to perpetuate the non-confirmation with gold with bearish implications. The key support level remains at $14.50, to confirm the top is in and eliminate any further bullish potential.

Silver is in a broadening top pattern with the neckline in the vicinity of the 200-Day MA (green) and initial support level at $17.00. To confirm silver’s top, price needs to break through $17.00 and finally $14.50 to eliminate any further upside potential.

The silver miners chart is similar to the gold miner charts in failing to break up to a new high. The top pattern is a triple top which has held intact, in the wake of the bear flag breakdown. Any sustained weakness will gather momentum in closing the gap, breaching key support, and finally testing the previous low at 16 during Mar 2020.

Gold : Silver Ratio

The gold / silver ratio closed lower at 97.70 as it nevertheless builds momentum after the confirming bottom. Gold is now again leading silver to higher ratio levels which is negative for metal prices.

General Equities

The bear market continues to unfold as the Dow Jones begins primary leg 3 down on 8 Jun 2020 from the end of primary leg 2 up. This was characterised by a rare island reversal to confirm the top, as it also was at the final top of the market in Feb 2020. The strong sell divergence signal is in place and active and this will provide added decline energy to gain momentum.
The long term view of the Dow Jones Ind Ave remains the same. Primary wave 3 is likely to decline from 27 000 to 7 000 in a 5 wave impulsive decline with the first wave taking price down to the region of 15 500.

Categories: Uncategorized Tags:

Market Analysis 25 June 2020

Jun 25th, 2020 No comments

Executive summary

The bear market continues to unfold as the Dow Jones began primary leg 3 down on 8 Jun 2020 from the end of primary leg 2 up. This was characterised by a rare island reversal to confirm the top, as it also was at the final top of the market in Feb 2020. The strong sell divergence signal is in place and active and this will provide added decline energy to gain momentum.

The long term view of the Dow Jones Ind Ave remains the same. Primary wave 3 is likely to decline from 27 000 to 7 000 in a 5 wave impulsive decline with the first wave taking price down to the region of 15 500.

The US$ is again starting to strengthen into the rally which started in early 2018. After recent weakness it is now switching back into rally mode at the first of 2 inflection points as dollar demand increases with US equities now beginning the next major decline phase. Increasing dollar demand will eventually collapse after the second inflection point, as confidence in fiat currencies collapse into a period of serious inflation followed by hyperinflation thereafter.

The benchmark 10 year US Treasury yield continues to develop a fragile support base which might start to display some mild bullish formations as the building process develops. But US equities are resuming declines in the next major leg down which begins to present as the acid test to evaluate treasury performance. Because in the face of serious equity declines with resultant money flows from equities back into treasuries plus US Fed support, this will all have the effect of reducing yields. However, in spite of this, real interest rate expectations are for increasing rates as deflation sets in, which will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities.

Gold has a marginal breakout to just short of $1800 which could prove to be the end of the bear market rally. The recent price surge has been driven by declining volumes, typical of rally termination behaviour. Silver has failed to follow suit. The next real precious metals bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the bear market as we reach inflection point 2 at the start of currency collapse between the end of deflation and the start of serious inflation, sometime during the first half of 2021.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which has already exceeded the previous high at the start of 2017. This dynamic will continue for now with dollar strength into continued equity collapse, as we enter a new phase until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The artificially prompted excessive over-valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar continues to strengthen into the rally which started in early 2018, but with strong weakness in the tail. This is now switching back into rally mode at the first of 2 inflection points as dollar demand increases with US equities now beginning the next major decline phase. Increasing dollar demand will eventually collapse after the second inflection point, as confidence in fiat currencies collapse into a period of serious inflation followed by hyperinflation thereafter.

The 12 month chart reveals the end of dollar weakness in a breakout from the bull flag, completing the temporary decline. A strong dollar rally is likely to start from this region as this is the first inflection point at the resumption of US equity declines into the next major leg down. Corresponding weakness in other currencies will be evident, such as the Euro and the Rand.

The 3 month chart illustrates the bull flag breakout in more detail, plus a breakout in the MACD oscillator at the bottom.

EuroDollar

The Eurodollar has a break down from the bear flag after completing its temporary rally, plus a break down in the MACD oscillator at the bottom. A strong decline is likely from this region in response to imminent dollar strength.

US Treasuries

The benchmark 10 year US Treasury yield continues to develop a fragile support base which might start to display some mild bullish formations as the building process develops. But US equities are resuming declines in the next major leg down which begins to present as the acid test to evaluate treasury performance. Because in the face of serious equity declines with resultant money flows from equities back into treasuries plus US Fed support, this will all have the effect of reducing yields.

However, in spite of this, real interest rate expectations are for increasing rates as deflation sets in, which will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities.

Short term US Treasury yields are holding in a narrow range, although declining slightly form 0.17% to 0.15% this week. This indicates limited US Fed interference at the moment, despite the start of equity weakness which nobody believes yet. This is a good indicator of US Fed action once equity declines accelerate.

Gold

Gold is reaching the 2012 high as the long term 10 year chart presents as a massive ‘cup & handle’ formation which has severe bearish implications. Price may still edge up further to reach $1800 which could prove to be the end of the bear market rally. The recent price surge has been driven by declining volumes, typical of rally termination behaviour.


The next real gold bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the gold bear market as we reach inflection point 2 at the start of currency collapse between the end of deflation and the start of serious inflation, sometime during the first half of 2021.

The 5 year weekly chart highlights the marginal new high in a sideways consolidation, as well as the massive drop in volume as the gold price peaked. This all indicates lower prices ahead, but the gold top is not confirmed yet nor has the weaker trend started.

A consolidation is building at the moment which could respond similarly to the responses after the 2016 and 2018 consolidations. These declined quickly after breakdowns to well below the 200-Day MA (blue), and a similar drop now could witness a gold price decline of $200-$300.

Gold continues sideways in a top channel consolidation, including a small breakout to a new high, which presents as a new sell divergence (particularly noticeable in the MACD at the bottom). The sideways consolidation does increasingly resemble a top pattern with the key neckline support level at $1674.

The sideways consolidation in a top channel has a breakout to a new high just short of $1800. This may prove to be the top of the rally but there is still no confirmation of a top. Any successful breakdown will need to penetrate the pattern neckline support level at $1674.

Brent Crude Oil

Oil is starting to consolidate above the breakout, but the chart has a negative bias and US equities are starting to weaken. Fundamentals in the oil market have improved slightly but remain abysmal with economic activity still at anaemic levels, and equity market declines will impact negatively on the oil price as it did before.

The gold / oil ratio has a breakout from the declining channel with the ratio turning up as it approached the 200-Day MA (green). This signals lower oil prices ahead.

South African Rand

The US$ / Rand has a breakout from the flag which is positive the dollar and negative the Rand. This indicates the Rand strength phase has completed and now faces declines against a forecast stronger dollar. This is amplified by a MACD breakout also and the Rand is likely to test the resistance zone next.

HUI / Gold Ratio

The HUI /Gold ratio is in a weakening top pattern in the wake of the bear flag breakout, as US miners lead gold lower. But key breaklines need to be breached before any certainty is possible.

HUI Gold Bugs Index

The HUI itself has a virtually identical chart pattern and we must await any potential certainty. The overall expanding triangle does present as a threatening ‘Jaws of Death’ and further weakness will gather momentum in closing the gap, breaching key support, and finally testing the previous low at 142.


This situation applies also to all US miners, and GDX, GDXJ, and XAU are all positioned in likewise charts subject to testing previous lows after the gold rally terminates.


Dust US Miners Bear Index

The Dust breakout gains are losing momentum in the bottom consolidation, due to the late surge in the gold price. The long term buy divergence is still active and the chart will gather positive momentum again if the gold price falters. Being a US miners bear index it responds in the opposite direction to metals and miners price movement.

Silver

Long term silver continues to trend lower, despite the recent strong rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, which is now again starting to outperform silver after more than 3 months. As with gold, there is still no confirmation that the top is in. Silver may yet go marginally higher first, but the next silver bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the silver bear market as we reach the inflection point between the end of deflation and the start of inflation.

The next real silver bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the silver bear market as we reach inflection point 2 at the start of currency collapse between the end of deflation and the start of serious inflation, sometime during the first half of 2021.

The strong silver rally fails to break to a new high as rally energy dissipates in a developing bear flag. In not achieving a new high silver continues the non-confirmation with gold which is a traditional trend change signal, indicating lower prices ahead. As with gold though, there are still no confirmations that the top is in.

In turning down from a triple top, silver has a breakdown from the rising channel pattern as the consolidation turns into a broadening top pattern. Lack of follow-through energy continues to prevent a new high and continues to perpetuate the non-confirmation with gold with bearish implications. The key support level remains at $14.50, to confirm the top is in and eliminate any further bullish potential.

Silver is in a broadening top pattern with the neckline in the vicinity of the 200-Day MA (green), which has been virtually horizontal for 3 months now. Despite not breaking up to a new high the silver chart does have a positive bias with the potential of a breakout at any time. Any bullish potential will be eliminated with penetration down through the key support level at $14.50.

The silver miners chart is similar to the gold miner charts. It is also in a broadening consolidation in the wake of the bear flag breakdown. The overall expanding triangle does present as a threatening ‘Jaws of Death’ and further weakness will gather momentum in closing the gap, breaching key support, and finally testing the previous low at 16.

Gold : Silver Ratio

The gold / silver ratio closed higher at 100.46 as it gains momentum after the confirming bottom. Gold is now again leading silver to higher ratio levels which is negative for metal prices.

General Equities

The bear market continues to unfold as the Dow Jones begins primary leg 3 down on 8 Jun 2020 from the end of primary leg 2 up. This was characterised by a rare island reversal to confirm the top, as it also was at the final top of the market in Feb 2020. The strong sell divergence signal is in place and active and this will provide added decline energy to gain momentum.
The long term view of the Dow Jones Ind Ave remains the same. Primary wave 3 is likely to decline from 27 000 to 7 000 in a 5 wave impulsive decline with the first wave taking price down to the region of 15 500.

Categories: Uncategorized Tags:

Market Analysis 18 June 2020

Jun 18th, 2020 No comments

Executive summary

US Fed chairman Jerome Powell testified in yesterday’s Capitol Hill briefing that they would ‘backstop’ everything: Meaning the market is not allowed to collapse. In spite of that, the bear market continues to unfold as the Dow Jones begins primary leg 3 down. The end of primary leg 2 up presented as a rare island reversal as did the top of the market in Feb 2020, both confirming bearish tops. The strong sell divergence signal is in place and active and this will provide added decline energy to gain momentum.

The long term view of the Dow Jones Ind Ave remains the same. Primary wave 3 is likely to decline from 27 000 to 7 000 in a 5 wave impulsive decline with the first wave taking price down to the region of 15 500.

The US$ is now switching back into rally mode as dollar demand increases with US equities now beginning the next major decline phase. We define this as the first of 2 inflection points. Increasing dollar demand will eventually collapse along with all currencies after the second inflection point when confidence in fiat currencies collapses into a period of serious inflation and hyperinflation thereafter.

The benchmark 10 year US Treasury yield continues to build a fragile support base which might start to display some mild bullish formations as the building process develops. But US equities are resuming declines in the next major leg down, and this therefore begins to present as the acid test to evaluate treasury performance in the face of serious equity declines with resultant money flows from equities back into treasuries plus US Fed support, which both have the effect of reducing yields.

Precious metals are moving sideways in top channels and have yet to confirm tops, with potential to still move higher before topping out. But gold charts have sell divergences in place and the Gold/Silver ratio appears to have bottomed which supports lower metal prices ahead. US miners look slightly more bearish and could be leading the metals lower.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which has already exceeded the previous high at the start of 2017. This will corrupt the dynamic with dollar strength into continued equity collapse, as we enter a new phase until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The excessive over-valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar continues to strengthen into the rally which started in early 2018, but with strong weakness in the tail. This is now switching back into rally mode at the first of 2 inflection points as dollar demand increases with US equities now beginning the next major decline phase. Increasing dollar demand will eventually collapse after the second inflection point, as confidence in fiat currencies collapse into a period of serious inflation and hyperinflation thereafter.

The 12 month chart reveals the end of dollar weakness in a breakout from the bull flag, completing the temporary decline. A strong dollar rally is likely to start from this region as this is the first inflection point at the resumption of US equity declines into the next major leg down. Corresponding weakness in other currencies will be evident, such as the Euro and the Rand.

The 3 month chart illustrates the bull flag breakout in more detail, plus a breakout in the MACD oscillator at the bottom.

EuroDollar

The Eurodollar has a break down from the bear flag after completing its temporary rally, plus a break down in the MACD oscillator at the bottom. A strong decline is likely from this region in response to imminent dollar strength.

US Treasuries

The benchmark 10 year US Treasury yield strengthens slightly as it continues to build a fragile support base. This support base might start to display some mild bullish formations as the building process develops, but US equities are resuming declines in the next major leg down. This therefore begins to present as the acid test to evaluate treasury performance in the face of serious equity declines with resultant money flows from equities back into treasuries plus US Fed support, which both have the effect of reducing yields.

However, in spite of this, real interest rate expectations are for increasing rates as deflation sets in, which will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities.

Short term US Treasury yields are holding in a narrow range at 0.17%, which indicates limited US Fed interference at the moment, despite the current equity weakness. This is a good indicator of US Fed action once equity declines accelerate.

Gold

Long term gold still has an active sell divergence in place which should lead to declines from here, although there is still no confirmation that the top is in. Gold may yet go marginally higher first, but the next gold bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the gold bear market as we reach inflection point 2 between the end of deflation and the start of inflation.

The 5 year weekly chart highlights the sell divergence in more detail, as well as the massive drop in volume as the gold price peaked. This all indicates lower prices ahead, but the gold top is not confirmed yet nor has the weaker trend started.

A consolidation is building at the moment which could respond similarly to the responses after the 2016 and 2018 consolidations. These declined quickly after breakdowns to well below the 200-Day MA (blue), and a similar drop now could witness a gold price decline of $200-$300.

Gold continues sideways in a top channel, in the wake of sell divergence and a breakout from the rising wedge. The sideways consolidation does increasingly resemble a top pattern with the key neckline level at $1674.

The sideways move in the top channel appears to be supported by the 50-Day MA (red). First level break lines are supplied by the reducing triangle (black lines) and final break lines by resistance and support. The key neckline support is at $1674, and any break below this level will trigger further declines.

Brent Crude Oil

Oil is starting to consolidate above the breakout, but the equity market is starting to weaken and this will impact negatively on the oil price. Fundamentals in the oil market have improved slightly but remain abysmal with economic activity still at anaemic levels.

The gold / oil ratio has a breakout from the declining channel with the ratio turning up as it approached the 200-Day MA (green). This signals lower oil prices ahead.

South African Rand

The US$Rand has a breakout from the flag which is positive the dollar and negative the Rand. This indicates the Rand strength phase has completed and now faces declines against a forecast stronger dollar. This is amplified by a MACD breakout also and the Rand is likely to test the resistance zone next.

HUI / Gold Ratio

The HUI /Gold ratio is in a broadening top pattern in the wake of the bear flag breakout. This presupposes US miners are leading gold lower, but key breaklines need to be breached before any certainty is possible.

HUI Gold Bugs Index

The HUI itself has a virtually identical chart pattern and we must await any potential certainty. The overall expanding triangle does present as a threatening ‘Jaws of Death’ and further weakness will gather momentum in closing the gap, breaching key support, and finally testing the previous low at 142.


This situation applies also to all US miners, and GDX, GDXJ, and XAU are all positioned in likewise charts subject to testing previous lows.


Dust US Miners Bear Index

The Dust breakout is in the very early stage of slowly gaining momentum in a bullish consolidation, with a key trigger level at $35. The long term buy divergence is active and will provide positive energy to increase price in the next period. Being a US miners bear index it promises lower metals and miners prices ahead as it responds in the opposite direction to the miners themselves.

Silver

Long term silver continues to trend lower, despite the recent strong rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, which is now again starting to outperform silver after more than 3 months. As with gold, there is still no confirmation that the top is in. Silver may yet go marginally higher first, but the next silver bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the silver bear market as we reach the inflection point between the end of deflation and the start of inflation.

The strong silver rally fails to break to a new high as rally energy dissipates in a developing bear flag. In not achieving a new high silver continues the non-confirmation with gold which is a traditional trend change signal, indicating lower prices ahead. As with gold though, there are still no confirmations that the top is in.

In turning down from a triple top, silver has a breakout from the rising channel pattern as the consolidation turns into a recognisable H&S formation. Lack of follow-through energy continues to prevent a new high and continues to perpetuate the non-confirmation with gold with bearish connotations. The key support level remains at $14.50.

Silver has a break down from the rising channel as it develops a topping pattern into a H&S formation, above the support of the 200-Day MA (green). Despite not breaking up to a new high silver does still have a positive short term chart, and any weakness will need to decline through $14.50 to reverse the up trend to a down trend and eliminate further bullish potential.

The silver miners chart is similar to the gold miners charts. It is also in a broadening consolidation in the wake of the bear flag breakdown. The overall expanding triangle does present as a threatening ‘Jaws of Death’ and further weakness will gather momentum in closing the gap, breaching key support, and finally testing the previous low at 16.

Gold : Silver Ratio

The gold / silver ratio closed higher at 97.64 as it gains momentum after the confirming bottom. Gold is now again starting to lead silver to higher ratio levels which is negative for metal prices.

General Equities

The bear market continues to unfold as the Dow Jones begins primary leg 3 down. The end of primary leg 2 up presented as a rare island reversal as did the top of the market in Feb 2020, both confirming bearish tops. The strong sell divergence signal is in place and active and this will provide added decline energy to gain momentum.

The long term view of the Dow Jones Ind Ave remains the same. Primary wave 3 is likely to decline from 27 000 to 7 000 in a 5 wave impulsive decline with the first wave taking price down to the region of 15 500.

Categories: Uncategorized Tags:

Market Analysis 11 June 2020

Jun 11th, 2020 No comments

Executive summary

The bear market continues to unfold with the Dow Jones primary leg 1 down complete and the primary leg 2 up probably also complete with today’s declines. The earlier push to higher prices was driven by extreme euphoria as indicated by various sentiment indicators as well as numerous US media reports of an ‘insane’ scramble by everyone to get invested, or lose out: Typical of the end of a primary wave 2 in a bear market. This can only end badly.

The long term view of the Dow Jones Ind Ave remains the same. Primary wave 3 is likely to decline from 27 000 to 7 000 in a 5 wave impulsive decline with the first wave taking price down to the region of 15 500.

The US$ has been weakening in line with US equities making gains in completing the corrective wave up. Resumption of equity declines will see the dollar into a strong rally as demand ratchets up. Similarly, other currencies will be affected inversely, opposite to the dollar. The benchmark 10 year US Treasury yield weakens slightly as it continues to build a fragile support base. This is due to US equity weakness with resultant money flows back into treasuries and presumably some ‘easing’ from the US Fed. The acid test remains treasury performance in the face of serious equity declines plus increased US Fed ‘meddling’ which both have the effect of reducing yields.

Precious metals and miners are moving sideways in top channels which could break either way. Gold charts have sell divergences in place and the Gold/Silver ratio appears to have bottomed which supports lower metal prices ahead. US miners have bear flag breakdowns which have not activated yet. So on balance, indications are more bearish than bullish at this stage.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which has already exceeded the previous high at the start of 2017. This will corrupt the dynamic with dollar strength into continued equity collapse, as we enter a new phase until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The excessive over valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar continues to strengthen into the rally which started in early 2018, but with strong weakness in the tail. This will switch back into rally mode at the first of 2 inflection points as dollar demand increases after the start of US equity declines into the next major leg down. Increasing dollar demand will be met by decreasing confidence in fiat currencies after the second inflection point at the end of the coming deflationary period and the onset of serious inflation.

The 12 month chart reveals dollar weakness after the triangle break which is now near to completion. A strong dollar rally is likely to start from this region at the first inflection after the start of US equity declines into the next major leg down. Corresponding weakness in other currencies will be evident, such as the Euro and the Rand.

The 3 month chart illustrates the triangle breakdown in more detail, and the dollar decline which has run its course. A strong rally and bear flag breakout will start from this region which will reciprocally respond to equity declines as the Dow Jones starts the next major leg down in the bear market.

EuroDollar

The Eurodollar breakout nears completion and should start declining from this region in response to imminent dollar strength. The visual trigger will be a bear flag breakdown.

US Treasuries

The benchmark 10 year US Treasury yield weakens slightly as it continues to build a fragile support base. This is due to US equity weakness with resultant money flows back into treasuries and presumably some ‘easing’ from the US Fed. The acid test remains treasury performance in the face of serious equity declines plus increased US Fed ‘meddling’ which both have the effect of reducing yields.

However, in spite of this, real interest rate expectations are for increasing rates as deflation sets in, which will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities, and dollar value eventually resumes a weakening phase as confidence in currencies finally start collapsing.

Short term US Treasury yields are holding in a narrow range at 0.17%, which indicates limited US Fed interference despite the current equity weakness. This is a good indicator of US Fed action once equity declines accelerate.

Gold

Long term gold still has an active sell divergence in place which should lead to declines from here, although there is still no confirmation that the top is in. Gold may yet go marginally higher first, but the next gold bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the gold bear market as we reach the inflection point between the end of deflation and the start of inflation.

The 5 year weekly chart highlights the sell divergence in more detail, as well as the massive drop in volume as the gold price peaked. This all indicates lower prices ahead, which have not started yet. Market response to technical signals vary from immediate to days, weeks, or even months later.

A consolidation is building at the moment which could respond similarly to the responses after the 2016 and 2018 consolidations. These declined quickly after breakdowns to well below the 200-Day MA (blue), and a similar drop now could witness a gold price decline of $200-$300.

Gold continues sideways in a top channel, in the wake of sell divergence and a breakout from the rising wedge (black circle). The oscillators are neutral but the closing candle is bearish (red circle).

The sideways move in the top channel appears to be supported by the 50-Day MA (red), and the bearish closing candle (red circle) is prominent.

Brent Crude Oil

Oil is starting to consolidate above the breakout, but equities are weakening and both oscillators are at the top of their range. Fundamentals in the oil market have improved slightly but remain abysmal with economic activity still at anaemic levels.

The gold / oil ratio continues to normalise towards the support zone as it drops down further towards the 200-Day MA (green). The chart still indicates lower gold prices to come.

South African Rand

The Rand breakout is close to completion and we could have a bear flag breakout any time soon. Rand strength is temporary with the dollar also set to rally soon.

HUI / Gold Ratio

The HUI /Gold ratio is in a broadening consolidation in the wake of the bear flag breakdown, although the pattern resembles a top formation. There is strength in the tail and price has risen above the key trendline to test resistance.

HUI Gold Bugs Index

The HUI itself has a similar chart to the HUI / Gold ratio and is also in a broadening consolidation in the wake of the bear flag breakdown. The pattern also resembles a top formation. There is strength in the tail which is testing resistance.


This situation also applies to all US miners, and GDX, GDXJ, and XAU are all positioned in likewise charts subject to testing resistance.


Dust US Miners Bear Index

The Dust breakout is in the very early stage although losing some momentum in a sideways consolidation. The long term buy divergence is active and will provide positive energy to increase price in the next period. Being a US miners bear index it promises lower metals and miners prices ahead as it responds in the opposite direction to the miners themselves.

Silver

Long term silver continues to trend lower, despite the recent strong rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, which is now again starting to outperform silver after 3 months. As with gold, there is still no confirmation that the top is in. Silver may yet go marginally higher first, but the next silver bull market will only start after further declines to new lows during a period of deflation. These lows will finally signal an end to the silver bear market as we reach the inflection point between the end of deflation and the start of inflation.

The strong silver rally fails to break to a new high as rally energy dissipates in a developing bear flag. In not achieving a new high silver continues the non-confirmation with gold which is a traditional trend change signal, indicating lower prices ahead. As with gold though, there are still no confirmations that the top is in.

Silver turns down from a triple top after rallying from the triangle breakout. There has been insufficient energy to break to a new high. There is still no confirmation of a top although it appears that lower silver prices lie ahead, with a key support level at $14.50.

Silver continues in the rising channel but appears to be developing a topping pattern complete with bearish closing candle (circle). It needs to decline first below $17.20 and finally $14.50 to reverse the up trend to a down trend, and eliminate further bullish potential.

The silver miners chart is similar to the gold miners charts. It is also in a broadening consolidation in the wake of the bear flag breakdown. The pattern also resembles a top formation, and there is strength in the tail which is testing resistance.

Gold : Silver Ratio

The gold / silver ratio closed higher at 96.69 and has a breakout from the reducing wedge in forming a new bottom, after some 3 months since the high in mid-March. Gold is now again leading silver to higher ratio levels which is negative for metal prices.

General Equities

The bear market continues to unfold with the Dow Jones primary leg 1 down complete and the primary leg 2 up probably also complete with today’s declines. The earlier push to higher prices was driven by extreme euphoria as indicated by various sentiment indicators as well as numerous US media reports of an ‘insane’ scramble by everyone to get invested, or lose out: Typical of the end of a primary wave 2 in a bear market. This can only end badly.
The Dow Jones Industrial Average is also sporting a strong sell divergence signal with the index price now declining as these words are written. Confirmation of the end of primary wave 2 up and the start of primary wave 3 down will be achieved with penetration down through level 25 743 (penultimate high in wave 2).
The long term view of the Dow Jones Ind Ave remains the same. Primary wave 3 is likely to decline from 27 000 to 7 000 in a 5 wave impulsive decline with the first wave taking price down to the region of 15 500.

Categories: Uncategorized Tags:

Market Analysis 4 June 2020

Jun 4th, 2020 No comments

Executive summary

Animal spirits continue to drive share prices based on hideous fundamentals, and any further increases will remain short-lived. The world is scrambling to answer how the market can stay afloat even while the global economy is in shambles.

The bear market continues to unfold with the next major decline to start very soon. The long term view from the 2008 Global Financial Crisis remains the same in terms of where we are in the collapse, and where we are going. Declines since the final top of the market have now completed the first primary waves down and up, with the next primary wave down about to start. Third waves are the longest and strongest and this wave will likely drop the Dow down from 26000 to the region of 7000. That drop will be a 5 wave impulsive decline with the first wave taking price down to the region of 15 500 which will engulf and eliminate all the extreme investor euphoria of the moment.

The US$ has been weakening with equities making gains in completing the corrective wave up. Resumption of equity declines will see the dollar into a strong rally as demand ratchets up. Similarly, other currencies will be affected inversely, opposite to the dollar. The benchmark 10 year US Treasury yield continues to consolidate as it builds a fragile support base, which is broadening slowly and could soon develop mild bullish signals, but the acid test will be once equities decline.

Precious metals are moving sideways whilst miners are leading the metals in starting to decline. Miners are indicating breaks through bear flags in charts that have dangerous ‘Jaws of Death’ formations in place.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which has already exceeded the previous high at the start of 2017. This will corrupt the dynamic with dollar strength into continued equity collapse, as we enter a new phase until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The excessive over valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar is strengthening as the rally from 2018 extends, but with weakness in the tail which is more obvious in the short term charts. US equities are about to start the next major leg down and this will increase dollar demand into a strong rally as the equity bear market unfolds further. This will lead towards an inflection point of increasing dollar demand to be met by decreasing confidence in fiat currencies and the eventual collapse of the global monetary system.

The 12 month chart reveals dollar weakness after the triangle break which is now near to completion. A strong dollar rally is likely to start from this region and extend to new highs above the March peak. Much depends on the exact timing of the resumption of equity declines because this will increase dollar demand in the next period. Corresponding weakness in other currencies will be evident, such as the Euro and the Rand.

The 3 month chart illustrates the triangle breakdown in more detail, and the dollar decline which has probably run its course. A strong rally will start from this region which will reciprocally respond to equity declines as the Dow Jones starts the next major leg down in the bear market.

EuroDollar

The Eurodollar breakout nears completion and should start declining from this region in response to imminent dollar strength.

US Treasuries

The benchmark 10 year US Treasury yield continues to consolidate as it builds a fragile support base with mild strength in the tail. Any further bullish signals will be put to the acid test once equities resume serious declines, which will certainly be met with increased US Fed bond purchasing to supposedly arrest declines and stabilise markets. Such Fed ‘meddling’ has the effect of reducing rates and Treasury yields.

There is a clear link between US Treasury performance and US equities, in that if equities collapse then US Treasuries increase (lower yield) as investors move currency from equities to bonds and the US Fed ramps up QE. The net effect is an attempt to inflate asset values which increases bond values and extends the bond bull market. In spite of this, real interest rate expectations are for increasing rates as deflation sets in, which will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities, and dollar value eventually resumes a weakening phase as confidence in currencies finally start collapsing.

Short term US Treasury yields are holding in a narrow range at 0.16%, prior to the start of any equity declines. This 3 month rate is the one that guides the US Fed into rate decisions, and the chart indicates no potential for any rate cut at the moment.

Gold

Long term gold still has an active sell divergence in place which should lead to declines from here, aided now by the absence of some short term buy signals that were there recently. The next gold bull market will drive price many times higher, but only after further declines to new lows during a period of deflation. These lows will finally signal an end to the gold bear market as we reach the inflection point between the end of deflation and the start of inflation.

The 5 year weekly chart highlights the sell divergence in more detail, as well as the massive drop in volume as the gold price peaked. This all indicates lower prices ahead, which have not started yet. Market response to technical signals vary from immediate to days, weeks, or even months later.

A consolidation is building at the moment which could respond similarly to the responses after the 2016 and 2018 consolidations. These declined quickly after breakdowns to well below the 200-Day MA (blue), and a similar drop now could witness a gold price decline of $200-$300.

Gold weakens in the sideways top channel in the wake of the bearish sell divergence which still lacks energy either way. The chart appearance is of a potential price break down, but there is still no confirmation of a break either way.

In moving sideways in the top channel Gold has weakened to support at the 50-Day MA (red). There is a confluence of rising trendlines and the 50-Day MA in the circle, and this needs to be penetrated before any further weakness.

Brent Crude Oil

Oil has a breakout above the consolidation zone, in line with equity gains in the late stage of primary wave 2 up and prior to any hint of resuming declines. Fundamentals in the oil market remain abysmal with economic activity at anaemic levels, and the various implications need to still work through the system before real directional signals can be meaningful.

The gold / oil ratio starts to normalise towards the support zone as it drops down further towards the 200-Day MA (green). The chart still indicates lower gold prices to come.

South African Rand

The Rand breakout is close to completion with gains equivalent to the height of the triangle. Rand strength is temporary with the dollar set for a strong rally soon.

HUI / Gold Ratio

The HUI /Gold ratio bear flag breakdown gathers momentum as price declines below a key trendline towards the support zone. Miners are leading the gold price down and the chart has a threatening ‘Jaws of Death’ appearance which could be dangerous with potentially severe declines in the next period.

HUI Gold Bugs Index

The HUI itself has a similar chart to the HUI / Gold ratio with a bear flag breakdown indicating further declines in the miners. Miners are leading the gold price down and the chart also has a threatening ‘Jaws of Death’ appearance which could be dangerous. If (or when) the gap is closed the key level of 185 will be tested, and breaching that level will test the March low at 142.

This situation also applies to all US miners, and GDX, GDXJ, and XAU are all positioned in likewise charts subject to lower penetrations which will trigger further declines to test the March lows.

Dust US Miners Bear Index

The Dust breakout is in the very early stage and is starting to gain momentum, in the wake of long term buy divergence and noticeable volume increases. Being a US miners bear index and valuable indicator as well, this means lower metals and miners prices ahead as it responds in the opposite direction to the miners themselves.

Silver

Long term silver continues to trend lower, despite the recent strong rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, despite silver outperforming gold, on average, for the last 22 trading days. This is potentially countertrend and will not last much longer. As with gold, the next silver bull market will drive price many times higher, but only after further declines to yet lower lows first. These lows will finally signal an end to the silver bear market as we reach the inflection point between the end of deflation and the start of inflation.

The strong silver rally fails to break to a new high as rally energy dissipates in a developing bear flag. In not achieving a new high silver continues the non-confirmation with gold which is a traditional trend change signal, indicating lower prices ahead. As with gold though, there are still no confirmations that the top is in.

Silver turns down from a triple top after rallying from the triangle breakout. There has been insufficient energy to break to a new high. There is still no confirmation of a top although it appears that lower silver prices lie ahead, with a key support level at $14.50.

Silver repeats the small topping process of last week, which could still go higher. It needs to decline below $14.50 to confirm reversal of the up trend and eliminate further bullish potential.

Silver miners breakdown from the bear flag last week was threatened with invalidation this week. But the price increase failed to penetrate and turned down again this week to validate the break. Therefore the ‘Jaws of Death’ still threatens and could be dangerous. If (or when) the gap is closed the key level of 23 will be tested, and breaching that level will test the March low at 16.

Gold : Silver Ratio

The gold / silver ratio closed lower at 94.93 although the pennant break appears exhausted. Gold leads silver lower this week again but signs of a bottom and turnaround in the ratio are evident in the circle. Lower precious metal prices ahead would result in the ratio increasing back up above 100 and that would confirm resumption of lower metal prices, or vice versa.

General Equities

The bear market continues to unfold with the Dow Jones primary leg 1 down complete and the primary leg 2 up nearly complete. The primary leg 3 down is about to start, and this will engulf the extreme investor euphoria that is typical of a bear market primary leg 2. The Dow Jones Industrial Average is also sporting a strong sell divergence signal with the index price now reaching strong resistance at the 200-Day moving average (green).

Animal spirits continue to drive share prices based on hideous fundamentals, and any further increases will remain short-lived. The world is scrambling to answer how the market can stay afloat even while the global economy is in shambles.

The long term view of the Dow Jones Ind Ave remains the same. A very basic Elliott Wave count from the 2008 Global Financial Crisis illustrates where we are in the collapse, and where we are going. Declines since the final top of the market at 5 (circle) have now completed primary waves 1 and 2 and primary wave 3 is about to start. 3rd Waves are the longest and strongest and this wave will likely drop the Dow down from 26000 to the region of 7000. That drop will be a 5 wave impulsive decline with the first wave taking price down to the region of 15 500.

Categories: Uncategorized Tags:

Market Analysis 28 May 2020

May 28th, 2020 No comments

Executive summary

The bear market continues to unfold with the Dow Jones primary leg 1 down complete and the primary leg 2 up nearly complete, with primary leg 3 down about to start. This will engulf the extreme investor euphoria that is typical of a bear market primary leg 2.

There are tremendous pressures evident in the financial system. The US Fed’s balance sheet recently expanded by an unprecedented $3 trillion, and during the same period the US stock market has added $3 trillion in primary wave 2 up since its low point in March. Animal spirits are driving share prices based on hideous fundamentals.
 
The world is scrambling to answer how the market can stay afloat even while the global economy is in shambles. The central issue is the sharp and persistent divergence between the real economy and the stock market. A bidding war on Wall Street is happening once again, while on Main Street the unemployment rate is 14.7% and that number will be much worse when the next data set is released, considering almost 40 million people have applied for unemployment since the start of this crisis.

The US$ has been in sideways mode as the Dow Jones completes primary leg 2 up, which may lead to further weakness until primary leg 3 down actually resumes the decline phase. The Dow Jones decline phase will increase dollar demand into a strong rally as the equity bear market unfolds further. The benchmark 10 year US Treasury yield continues to consolidate as it builds a fragile support base, which is broadening slowly and could soon develop mild bullish signals.

Precious metals have turned from mild buy signals last week to mild sell signals this week, with US miners leading the metals down with breaks through bear flags in charts that have dangerous ‘Jaws of Death’ formations in place.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which has already exceeded the previous high at the start of 2017. This will corrupt the dynamic with dollar strength into continued equity collapse, as we enter a new phase until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The excessive over valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar is strengthening as the rally from 2018 extends. US equities are about to start the next major leg down and this will increase dollar demand into a strong rally as the equity bear market unfolds further. This will lead towards an inflection point of increasing dollar demand to be met by decreasing confidence in fiat currencies and the eventual collapse of the global monetary system.

The shorter term 12 month chart reveals the dollar again weakening as it extends sideways with a breakdown through the triangle. The dollar is likely to continue weakening marginally before the start of a strong rally, which depends largely on the exact timing of the resumption of US equity declines. The dollar usually strengthens in line with equity collapse, and this is also supported by EuroDollar performance in opposite direction to dollar performance.

The short term 3 month chart illustrates the triangle breakdown in more detail. This is likely to still weaken slightly before a strong rally into equity declines, as the Dow Jones starts the next major leg down in the bear market.

EuroDollar

The Eurodollar, as the virtual opposite of the US dollar index, is in clear weakening mode but with mini-rallies in the tail including a mini-breakout which should strengthen further before declines resume. This to a degree gives credence to dollar strength ahead, as the EuroDollar is behaving technically nearly exactly opposite.

US Treasuries

The benchmark 10 year US Treasury yield continues to consolidate as it builds a fragile support base. The support base is broadening slowly and could soon develop mild bullish signals, as US equities continue to unfold into the 2nd primary wave up. The acid test is US Treasury behaviour once equities resume declines, which will certainly be met with increased US Fed bond purchasing to supposedly arrest declines and stabilise markets.

There is a clear link between US Treasury performance and US equities, in that if equities collapse then US Treasuries increase (lower yield) as investors move currency from equities to bonds and the US Fed ramps up QE. The net effect is an attempt to inflate asset values which increases bond values and extends the bond bull market. In spite of this, real interest rate expectations are for increasing rates as deflation sets in, which will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities, and dollar value eventually resumes a weakening phase as confidence in currencies finally start collapsing.

Short term US Treasury yields are holding in a narrow range at 0.15%, prior to the start of any equity declines. This 3 month rate is the one that guides the US Fed into rate decisions, and the chart indicates no potential for any rate cut at the moment.

Gold

Long term gold still has an active sell divergence in place which should lead to declines from here, aided now by the absence of some short term buy signals that were there a week ago. The next gold bull market will drive price many times higher, but only after further declines to new lows during a period of deflation. These lows will finally signal an end to the gold bear market as we reach the inflection point between the end of deflation and the start of inflation.

The 5 year weekly chart highlights the sell divergence in more detail, as well as the massive drop in volume as the gold price peaked. This all indicates lower prices ahead, which have not started yet. Market response to technical signals vary from immediate to days, weeks, or even months later.

A consolidation is building at the moment which could respond similarly to the responses after the 2016 and 2018 consolidations. These declined quickly to well below the 200-Day MA (blue), and a similar drop now could witness a gold price decline of $200-$300.

The 12 month chart illustrates the twin breakouts to two rising wedges, as gold drifts sideways in the wake of the bearish sell divergence. The chart has the appearance of a potential price break down with both oscillators drifting down.

Gold is moving sideways in the narrow top channel, bracketing the 10-Day MA (blue). Breaks up or down could occur, but it seems likely that any trigger will have to come from the miners and not the metals themselves.

Brent Crude Oil

Oil has moved up to the top of the consolidation zone, in line with equities still unfolding in the late stage of primary wave 2 up and prior to any hint of resuming declines. Fundamentals in the oil market remain bearish with economic activity at such anaemic levels, and the various implications need to still work through the system before real directional signals can be meaningful.

The gold / oil ratio starts to normalise towards the support zone as it drops down further through the 50-Day MA (red) towards the 200-Day MA (green). The chart still indicates lower gold prices to come.

South African Rand

Twin breakouts from the triangle and rising wedge indicate continued Rand strength. Prospects of dollar weakness are limited and Rand strength can therefore only be temporary.

HUI / Gold Ratio

There is a bear flag breakdown indicating further declines in the ratio. Miners are leading the gold price down and the chart has a threatening ‘Jaws of Death’ appearance which could be dangerous with a potentially severe decline in the next period.

HUI Gold Bugs Index

The HUI itself has a similar chart to the HUIGold ratio with a bear flag breakdown indicating further declines in the miners. Miners are leading the gold price down and the chart also has a threatening ‘Jaws of Death’ appearance which could be dangerous. If (or when) the gap is closed the key level of 185 will be tested, and breaching that level will test the March low at 142.

This situation also applies to all US miners, and GDX, GDXJ, and XAU are all positioned in likewise charts subject to lower penetrations which will trigger further declines to test the March lows.

Dust US Miners Bear Index

There is a breakout in the Dust chart that has been 11 months long in the making. The reducing wedge and the long term buy divergence has broken up (double circle), promising higher Dust prices. A breakout in Dust means lower metals and miners ahead, a US miners bear index which responds in the opposite direction to the miners themselves. It is also geared and is a valuable indicator as well as being a valuable investment vehicle as well.

Silver

Long term silver continues to trend lower, despite the recent strong rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, despite silver outperforming gold for the last 17 consecutive trading days. This is potentially countertrend and will not last long. As with gold, the next silver bull market will drive price many times higher, but only after further declines to yet lower lows first. These lows will finally signal an end to the silver bear market as we reach the inflection point between the end of deflation and the start of inflation.

The strong silver rally from the sideways consolidation of the last number of weeks has stopped short of the previous high as the rally energy dissipates in a developing bear flag. In not achieving a new high silver continues the non-confirmation with gold. The gold/silver ratio has actually declined to below 100 in the silver rally but is forecast to reverse towards higher levels once the dollar starts to rally.

The silver triangle breakout and continued rally has topped into a consolidation below resistance as rally energy dissipates. Lower silver prices lie ahead and a key support level remains at $14.50.

The triangle breakout has exhausted into a consolidation with the extended peak roughly equal to the height of the base. There may still be higher prices but failing that a key support level remains at $14.50 below which all bullish potential will be lost.

The silver miners chart is similar the HUI index with a bear flag breakdown indicating further declines in the miners. Miners are leading the silver price down (as with gold) and the chart also has a threatening ‘Jaws of Death’ appearance which could be dangerous. If (or when) the gap is closed the key level of 23 will be tested, and breaching that level will test the March low at 16.

Gold : Silver Ratio

The gold / silver ratio closed slightly up with a bullish closing candle being the first sign of reversal in 10 weeks. It is early days, but it could be that the earlier pennant break to the downside has exhausted and the ratio is showing signs of a bottom and potential turnaround. The next week or two is crucial, and if this is indeed a bottom then metals are likely to have topped, and vice versa.

General Equities

The bear market continues to unfold with the Dow Jones primary leg 1 down complete and the primary leg 2 up nearly complete. The primary leg 3 down is about to start, and this will engulf the extreme investor euphoria that is typical of a bear market primary leg 2. The Dow Jones Industrial Average is also sporting a strong sell divergence signal and all the gaps below 27000 have now been closed.

There are tremendous pressures evident in the financial system. The US Fed’s balance sheet recently expanded by an unprecedented $3 trillion, and during the same period the US stock market has added $3 trillion in primary wave 2 up since its low point in March. Animal spirits are driving share prices based on hideous fundamentals.
 
The world is scrambling to answer how the market can stay afloat even while the global economy is in shambles. The central issue is the sharp and persistent divergence between the real economy and the stock market. A bidding war on Wall Street is happening once again, while on Main Street the unemployment rate is 14.7% and that number will be much worse when the next data set is released, considering almost 40 million people have applied for unemployment since the start of this crisis.

This chart reflects the Dow Jones Ind Ave performance from the 2008 Global Financial Crisis, and illustrates very basic Elliott Wave counts indicating where we are in the collapse. Declines since the final top of the market at 5 (circle) have now completed primary waves 1 and 2 and primary wave 3 is about to start. 3rd Waves are the longest and strongest and this wave will likely drop the Dow down from 25000 to the region of 15000.

Categories: Uncategorized Tags:

Market Analysis 21 May 2020

May 21st, 2020 No comments

Executive summary

The bear market continues to unfold with the Dow Jones primary legs 1 down and 2 up virtually complete, primary leg 3 down is about to start. Fundamentally, world economies have imploded and are contracting at a record rate, debt levels are massive, companies are facing closure, and unemployment statistics are horrific. It is at this time that pundits are heralding the continuation of the bull market while the global monetary system is broken and negative economic intensity gathers momentum. In primary leg 3 down the Dow Jones will likely drop the Dow down from 25000 to the region of 15000.

The US$ has been in sideways mode as the Dow Jones completes primary leg 2 up, which may lead to further weakness until primary leg 3 down actually resumes the decline phase. The Dow Jones decline phase will increase dollar demand into a strong rally as the equity bear market unfolds further. The benchmark 10 year US Treasury yield continues to consolidate as it builds a fragile support base, which is broadening slowly and could soon develop mild bullish signals.

The triangle breakout in gold, which might propel prices to a new high, has a weak follow through which indicates that price may now fail to break higher. Silver has had a strong rally, as has US gold and silver miners, but the charts are now indicating weakness to follow.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which has already exceeded the previous high at the start of 2017. This will corrupt the dynamic with dollar strength into continued equity collapse, as we enter a new phase until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The excessive over valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar is strengthening as the rally from 2018 extends. US equities are about to start the next major leg down and this will increase dollar demand into a strong rally as the equity bear market unfolds further. This will lead towards an inflection point of increasing dollar demand to be met by decreasing confidence in fiat currencies and the eventual collapse of the global monetary system.

The shorter term 12 month chart reveals the dollar again weakening as it extends sideways into the reducing triangle pattern. This presents as a pivotal moment as the triangle pattern moves closer to the apex and potential breakout. Much depends on the exact timing of the resumption of US equity declines, and there may well be further dollar weakness if these equity declines are unduly delayed. This is also reflected equally in the opposite direction in EuroDollar performance.

The short term 3 month chart illustrates the sideways movement within the triangle in more detail, with the dollar weakening slightly at the triangle apex. A bullish breakout is forecast if US equity declines resume soon, and vice versa. But as the Dow Jones starts the next major leg down in the bear market, so too will the dollar turn up in a strong medium term rally.

EuroDollar

The Eurodollar, as the virtual opposite of the US dollar index, is in clear weakening mode but with mini-rallies in the tail. as it continues to trend lower. This to a degree gives credence to dollar strength ahead, as the EuroDollar is behaving technically nearly exactly opposite.

US Treasuries

The benchmark 10 year US Treasury yield continues to consolidate as it builds a fragile support base. The support base is broadening slowly and could soon develop mild bullish signals, as it is inconceivable that the US bond bull market can co-exist alongside a collapsing equity market, despite the vast (and ludicrous) US Fed bond purchasing program to supposedly stabilise financial markets.

There is a clear link between US Treasury performance and US equities, in that if equities collapse then US Treasuries increase (lower yield) as investors move currency from equities to bonds in search of safe haven (and vice versa). Also, as equities collapse so too does the US Fed ramp up QE in attempting to stem losses and keep the financial and monetary system from collapsing. The net effect is an attempt to inflate asset values which increases bond values and extends the bond bull market. In spite of this, real interest rate expectations are for increasing rates as deflation sets in, which will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities, and dollar value eventually resumes a weakening phase as confidence in currencies finally collapse.

Short term US Treasury yields are holding in a narrow range at 0.12%. The 3 month yield is subject to the same influences as the benchmark 10 year, except that it is more directly responsive to US Fed activity because the bond purchasing program (QE) includes mainly short term Treasuries. The acid test will occur once equities actually resume significant declines in the bear market and the US Fed increases bond purchases massively in response. This 3 month rate is the one that guides the US Fed into rate decisions, and the chart indicates no potential for any rate cut at the moment.

Gold

Long term gold still has an active sell divergence in place which should lead to declines from here, although some short term signals suggest gold may yet go higher first before real declines start. The next gold bull market will drive price many times higher, but only after further declines to new lows first during a period of deflation. These lows will finally signal an end to the gold bear market in a world of approaching currency, monetary and economic collapse.

The 5 year weekly chart highlights the sell divergence in more detail, as well as the massive drop in volume as the gold price peaked. This all indicates lower prices ahead, which have not started yet. Market response to technical signals vary from immediate to days, weeks, or even months later.

A consolidation is building at the moment which could respond similarly to the responses after the 2016 and 2018 consolidations. These declined quickly to well below the 200-Day MA (blue), and a similar drop now could witness a gold price decline of $200-$300.

The 12 month chart illustrates the triangle breakout, in the wake of sell divergence, which could propel gold to a new high. The follow through has been weak though and price may now fail to break higher.

Gold has broken down through the rising wedge in the wake of the sell divergence and up into a triangle breakout. Price is only hovering after the breakout with no additional indication of increasing much from here. Final voiding of the triangle pattern needs gold to decline below $1664.

Brent Crude Oil

Oil has been consolidating in a zone around $30 and has now moved up to close at the top of the zone. This seems to be in line with US equities in the late stage of the countertrend rally, which presupposes oil declines after equities resume declines. The fundamentals in the oil market remain bearish with economic activity at such anaemic levels, and the various implications need to still work through the system before real directional signals can be meaningful.

The gold / oil ratio starts to normalise towards the support zone as it drops down further through the 50-Day MA (red) towards the 200-Day MA (green). The chart still indicates lower gold prices to come.

South African Rand

Breakout from the triangle indicates dollar weakness and Rand strength. This can only be temporary as the dollar is set to rally soon.

HUI / Gold Ratio

The US miners rally since mid-March has exceeded by far the rallies in other components of the precious metals complex. HUI (US miners) is leading gold higher in an expanding triangle pattern which could be dangerous, as it resembles the normally bearish ‘Jaws of Death’ pattern which could plummet strongly in the next period.

HUI Gold Bugs Index

The HUI itself has a similar chart to the HUIGold ratio, and is holding to higher levels in leading the other components in the precious metals complex. The rally has been substantial but in an overall pattern that is extremely bearish. There is a gap lower down below 220 and gaps are usually closed later on.

This situation also applies to all US miners, and GDX, GDXJ, and XAU are all positioned in likewise charts subject to lower penetrations which will trigger further declines to test the March lows.

Dust US Miners Bear Index

The Dust chart is a US miners bear index which responds in the opposite direction to the miners themselves. It is also geared and is a valuable indicator as well as being a valuable investment vehicle as well.

The chart illustrates a strong long term buy divergence plus a reducing wedge both of which look set to break up any time soon. Once this occurs, US miners will decline to lower levels.

Silver

Long term silver continues to trend lower, despite the recent strong rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, despite silver outperfporming gold for the last 12 consecutive trading days. This is potentially countertrend and will not last long. As with gold, the next silver bull market will drive price many times higher, but only after further declines to yet lower lows first. These lows will finally signal an end to the precious metals bear market in a world of approaching currency, monetary and economic collapse.

Silver has a strong breakout from the sideways consolidation of the last number of weeks which has propelled price up towards resistance. It has also not achieved a new high in continued non-confirmation with gold. The gold/silver ratio has actually declined to below 100 in the silver rally but is forecast to reverse towards higher levels once the dollar starts to rally.

Silver has a strong 9 week rally which ramped up dramatically after the triangle breakout. Price moved up to $18 toward stronger resistance. Lower silver prices lie ahead and a key support level remains at $14.50.

The triangle breakout has propelled Silver to $18 at the culmination of a strong 9 week rally. There may still be higher prices but failing that a key support level remains at $14.50 below which all bullish potential will be lost.

Silver miners advanced 133% in a powerful 10 week rally which ramped up after the breakout in the final week. As with US gold miners, the chart is in a dangerous expanding triangle pattern with severely bearish implications if the silver price declines.

Gold : Silver Ratio

The gold / silver ratio closed down by 11% for the week, as the pennant break to the downside extended further to close below 100 at 97.17 for the first time since mid-March. The overall chart indication still continues to present an upward bias of increasing ratio trend, but this was ruptured this week by the massive silver rally. Silver underperformance will return and this will be continued until the eventual inflection point at the start of the next real precious metals bull market.

General Equities

The bear market continues to unfold with the Dow Jones primary leg 1 down complete and the primary leg 2 up nearly complete. The primary leg 3 down is about to start, and this will engulf the extreme investor euphoria that is typical of a bear market primary leg 2. The Dow Jones Industrial Average is also sporting a strong sell divergence signal.

Fundamentally, world economies have imploded and are contracting at a record rate, debt levels are massive, companies are facing closure, and unemployment statistics are horrific. It is at this time that pundits are heralding the continuation of the bull market while the global monetary system is broken and negative economic intensity gathers momentum.

This chart reflects the Dow Jones Ind Ave performance from the 2008 Global Financial Crisis, and illustrates very basic Elliott Wave counts indicating where we are in the collapse. Declines since the final top of the market at 5 have now completed primary waves 1 and 2 and primary wave 3 is about to start. 3rd Waves are the longest and strongest and this wave will likely drop the Dow down from 25000 to the region of 15000.

Categories: Uncategorized Tags:

Market Analysis 14 May 2020

May 14th, 2020 No comments

Executive summary

The bear market continues to unfold, as the 2nd major leg down is underway. The Dow Jones Industrial Average is displaying a strong sell divergence signal which will propel prices much lower as negative economic intensity gathers momentum.

The dollar is strengthening again as the rally from 2018 extends, despite a recent 8 week period of lethargy. US equity declines are again increasing dollar demand into a forecast strong rally as the bear market unfolds further. This will lead towards an inflection point of increasing dollar demand to be met by decreasing confidence in fiat currencies and the eventual collapse of the global monetary system.

The benchmark 10 year US Treasury yield remains low in a fragile support area as the result of the vast (and ludicrous) US Fed bond purchasing program to supposedly stabilise financial markets. However, it remains inconceivable that the US bond bull market can co-exist alongside a collapsing equity market. In spite of this, real interest rate expectations are for increasing rates as deflation sets in, which will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities, and dollar value eventually resumes a weakening phase as confidence in currencies finally collapse.

Lower gold and silver prices lie ahead but could possibly break up to new highs first, before becoming enveloped in the equity collapse which will devour all in its path. Although the technical signals are there, market reaction is proving to be slow probably because of increasing turmoil in the global monetary system as well as elevated fear levels due to covid-19 economic destruction.

The global monetary system is collapsing and the world is moving into a period towards currency collapse which argues strongly in favour of gold and gold-related investments. Therefore, the period ahead needs to be navigated very carefully between preparation and action. Government deficits are huge and increasing rapidly in response to lockdown economies, which will all promote deflation (witness the oil collapse) with inflation thereafter followed by hyperinflation as currencies collapse.

This will present as a matrix evolving towards an inflection point with potential profit in strong currencies before and gold investments after.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which has already exceeded the previous high at the start of 2017. This will corrupt the dynamic with dollar strength into continued equity collapse, as we enter a new phase until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The excessive over valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar is strengthening as the rally from 2018 extends. US equities have started the next major leg down and this is increasing dollar demand into a strong rally as the bear market unfolds further. This will lead towards an inflection point of increasing dollar demand to be met by decreasing confidence in fiat currencies and the eventual collapse of the global monetary system.

The shorter term 12 month chart reveals the dollar strengthening in sideways mode as it moves back above the February 2020 high. This presents as a pivotal moment as the triangle pattern moves closer to the apex and potential breakout. Further validation is provided by competing currencies such as the Euro as it weakens towards a steeper decline.

The short term 3 month chart illustrates the sideways movement in more detail, with the dollar strengthening slightly at the triangle apex. A bullish breakout is forecast as the Dow Jones starts the next major leg down in the bear market.

EuroDollar

The Eurodollar, as the virtual opposite of the US dollar index, is in clear weakening mode as it continues to trend lower. This to a degree gives credence to dollar strength ahead, as the EuroDollar is behaving technically nearly exactly opposite.

US Treasuries

The benchmark 10 year US Treasury yield declines in the fragile support area as US equities start the next major leg down in the bear market. The support base is broadening slowly and could soon develop mild bullish signals, as it is inconceivable that the US bond bull market can co-exist alongside a collapsing equity market, despite the vast (and ludicrous) US Fed bond purchasing program to supposedly stabilise financial markets.

In spite of this, real interest rate expectations are for increasing rates as deflation sets in, which will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities, and dollar value eventually resumes a weakening phase as confidence in currencies finally collapse.

Short term US Treasury yields are holding in a narrow range at 0.13%. The 3 month yield is subject to the same influences as the benchmark 10 year, except that it is more directly responsive to US Fed activity because the bond purchasing program (QE) includes mainly short term Treasuries. The acid test will occur once equities actually resume significant declines in the bear market and the US Fed increases bond purchases massively in response. This 3 month rate is the one that guides the US Fed into rate decisions, and the chart indicates no potential for any rate cut at the moment.

Gold

Long term gold still has an active sell divergence in place which should lead to declines from here, although some short term signals suggest gold may yet go higher first before real declines start. The next gold bull market will drive price many times higher, but only after further declines to new lows first during a period of deflation. These lows will finally signal an end to the gold bear market in a world of approaching currency, monetary and economic collapse.

The 5 year weekly chart highlights the sell divergence in more detail, as well as the massive drop in volume as the gold price peaked. This all indicates lower prices ahead, which have not started yet. Market response to technical signals vary from immediate to days, weeks, or months later.

The 12 month chart illustrates a sideways consolidation that is forming into a triangle pattern, in the wake of sell divergence and rising wedge break. Lower gold prices lie ahead but the triangle pattern could first break up and propel price to a new high at about $1800. Although the technical signals are there, market reaction is proving to be slow probably because of building turmoil in the global monetary system as well as elevated fear levels due to covid-19 economic destruction.

Gold has broken down through the rising wedge in the wake of the sell divergence, but prices are drifting sideways towards a triangle apex. Gold needs to decline through $1664 to void the triangular pattern which could otherwise propel price to a new high at about $1800.

Brent Crude Oil

Oil is consolidating in a zone around $30 as it reacts to the recent sharp declines. But the fundamentals in the oil market remain bearish with economic activity at such anaemic levels, and the various implications need to still work through the system before real directional signals can be meaningful.

The gold / oil ratio, which equals the number barrels of oil that 1oz of gold will purchase, drops down through the rising channel as it starts to normalise towards the support zone. At these levels it still indicates much lower gold prices to come.

South African Rand

Breakout from the bear flag indicates Rand strength, but a breakout up from the pennant formation indicates Rand weakness. The chart implications are therefore somewhat mixed, probably as the result of a dollar that has meandered sideways for the past 6 weeks. The dollar is forecast to now start strengthening markedly and this will leave the Rand weaker.

HUI / Gold Ratio

The ratio has a breakout through the bear flag which could soon test support. The chart reflects weaker US miners against a less-weak gold price, and the miners could be leading gold lower, as has happened before.

HUI Gold Bugs Index

The HUI itself has a similar chart to the HUIGold ratio, and has broken down from the bear flag in exercising the start of reversal potential to perhaps test support soon. Penetrating 185 still applies and this will trigger further declines to test the March low at 142.5.

This applies to all US miners, and GDX, GDXJ, and XAU are all subject to lower penetrations which will trigger further declines to test the March lows.

Dust US Miners Bear Index

The Dust chart is a US miners bear index which responds in the opposite direction to the miners themselves. It is also geared and is a valuable indicator as well as being a valuable investment vehicle as well.

The chart illustrates a strong long term buy divergence plus a reducing wedge both of which have now broken up, which should lead to higher prices ahead. But, importantly, this amplifies lower metals and miners prices (not higher), being an inverse bear index.

Silver

Long term silver continues to trend lower, despite the recent rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, as silver leads the price declines. As with gold, the next silver bull market will drive price many times higher, but only after further declines to yet lower lows first. These lows will finally signal an end to the precious metals bear market in a world of approaching currency, monetary and economic collapse.

The 5 year silver chart is in a sideways consolidation which is poised to either move up or down. The most notable behaviour in silver is its major non-confirmation with and underperformance of gold, still with a gold/silver ratio well above 100. This ratio is forecast to reach even higher levels, especially with a strong dollar rally expected in the next period.

This all indicates lower prices ahead, in spite of a current mild rally in the silver price.

The 12 month chart illustrates a sideways consolidation that is forming into a triangle pattern, in the wake of a breakout from the rising channel. Lower silver prices lie ahead but the triangle pattern could first break up and propel price to a new high above $19. A key support level remains at $14.50 and penetrating below this level will void any bullish potential in the triangle, and if will lead to much lower prices to test the March low, as with the miners.

Silver has drifted sideways into a triangle pattern in the wake of the sell divergence, and now has the potential to break up to a new high. But any penetration down through the key level at $14.50 will void the bullish triangle potential.

Silver miners have a breakout through the bear flag and could test support soon. Penetration down through the key level at 23 will propel price significantly to test the March low at $16. This latter seems more likely, given all the impact factors.

Gold : Silver Ratio

The gold / silver ratio closed lower at 109.53, after breaking down from the triangle pattern which promises lower ratios and therefore higher short term metal prices. However, the chart still continues to present an upward bias overall which is negative for medium term metal prices. The continued era of significant silver underperformance seems ensured until the inflection point at the start of the next real precious metals bull market.

General Equities
The bear market continues to unfold, as the 2nd major leg down is now underway.

The Dow Jones Industrial Average has completed the first major corrective leg up and the next (and 2nd) major leg down is underway. At the same time a strong reverse sell divergence signal has become evident, and this will propel prices much lower as negative economic intensity gathers momentum.

This chart reflects the Dow Jones Ind Ave performance from the 2008 Global Financial Crisis, and illustrates very basic Elliott Wave counts indicating where we are in the collapse. Declines since the final top of the market at 5 have now completed the 1-2 correction up in a 5 wave leg down that is next to drop severely in wave 3 down. 3rd Waves are the longest and strongest and this wave 3 is likely to decline towards a level in the region of 15 000.

Categories: Uncategorized Tags:

Market Analysis 7 May 2020

May 7th, 2020 No comments

Executive summary

The bear market is in its initial stages, and is likely to mature into a decade-long collapse. The Dow Jones Industrial Average has completed the first major leg down and the first major correction up, and the second major leg down is commencing. A strong sell divergence signal has occurred in the chart which will propel prices lower. This bear market will be severe and long-lasting, and global human activity will be massively impacted as negative economic intensity gathers momentum.

Investors are still clamouring to buy gold and gold shares, but the precious metal remains in a bear market, soon to start the next major decline as it becomes enveloped in the equity collapse which will eventually devour all in its path. Similarly, the major countertrend move up in gold from the Dec 2015 low is very close to completion, if not already complete. South African gold shares are in ‘Jaws of death’ patterns with price at the upper diagonal, with potentially dire consequences as the metal starts a major decline. This is more pronounced in silver which continues a major non-confirmation with gold; traditional behaviour at major trend changes.

At the same time, the global monetary system is collapsing and the world is moving into a period towards currency collapse which argues strongly in favour of gold and gold-related investments. Therefore, the period ahead needs to be navigated very carefully between preparation and action. Government deficits are huge and increasing rapidly in response to lockdown economies, which will all promote deflation (witness the oil collapse) with inflation thereafter followed by hyperinflation as currencies collapse.

So, the pathway ahead consists of collapsing assets on the one hand and appreciating assets on the other, such as the US$ which attracts money flows (as the international reserve currency) at times of fear. This will present as a matrix evolving towards an inflection point with potential profit in strong currencies before and gold investments after.

The markets overall are beginning to finally move, albeit tentatively. The Dow Jones is in the early stage of the 2nd major leg down, the dollar has started to resume gains, US Treasury yields are off the bottom in beginning to build a consolidated base for later gains, and gold has started declining slowly.

US Dollar

The US$ is in long term decline but has been in a rally since 2008 with a recent strong rally since 2018 to a new high which has already exceeded the previous high at the start of 2017. This will corrupt the dynamic with dollar strength into continued equity collapse, as we enter a new phase until a more meaningful loss of confidence in the present international monetary system changes it back to long term dollar weakness.

This applies also to US Treasuries and therefore the US bond market, as interest rates and the dollar are closely linked. The excessive over valuation of the US bond market will lead eventually to the collapse of both the bond market and the dollar.

The dollar is trending up as demand increases with equities completing the current upward correction as the bear market readies for the next major leg down.

The shorter term 12 month chart reveals the dollar moving sideways but strengthening in the tail as it moves back above the Feb 2020 high. This presents as a pivotal moment as the dollar starts to strengthen, which is also indicated by other currencies opposite to the dollar such as the Euro.

The short term 3 month chart illustrates the sideways movement in more detail, with the dollar strengthening slightly in the tail. This all coincides exactly with the Dow Jones behaviour, except in the opposite direction. This means it is likely to start a serious rally as the Dow Jones starts the next major leg down in the bear market.

EuroDollar

The Eurodollar, as the virtual opposite of the US dollar index, is in clear weakening mode, as it continues to trend lower. This to a degree gives credence to dollar strength ahead, as the EuroDollar is behaving technically nearly exactly opposite.

US Treasuries

The benchmark 10 year US Treasury yield begins to create a support base as it turns up slightly. It is now set to build on this base as the US bond market drops down from its peak. But the real test is about to occur as US equities start the next major leg down in the bear market and the US Fed ratchets up the already ludicrous amounts of currency pumped into the market in their massive QE initiative, which has the effect of reducing interest rates.

In spite of this, real interest rate expectations are for increasing rates as deflation starts to kick in eventually, before inflation and hyper-inflation starts in the phase that will follow. All that will reverse US Treasury yields from lower to higher as the US bond market starts to collapse in line with equities, and dollar value eventually resumes a weakening phase as confidence in currencies decline.

Short term US Treasury yields are holding in a narrow range at 0.10%. The 3 month yield is subject to the same influences as the benchmark 10 year, except that it is more directly responsive to US Fed activity because the bond purchasing program (QE) includes mainly short term Treasuries. The acid test will occur once equities actually resume significant declines in the bear market and the US Fed increases bond purchases massively in response. This 3 month rate is the one that guides the US Fed into rate decisions, and the chart indicates no rate cut yet.

Gold

Long term gold still has an active sell divergence in place which should lead to declines from here, and prices are beginning to decline although still very slowly. The next gold bull market will drive price many times higher, but only after further declines to new lows first. These lows will finally signal an end to the gold bear market in a world of approaching currency, monetary and economic collapse.

The 5 year weekly chart highlights the sell divergence in more detail, as well as the massive drop in volume as the gold price peaked. This all indicates lower prices ahead, which are already beginning to decline slowly. Market response to technical signals vary from immediate to days, weeks, or months later.

The 12 month chart illustrates a shorter term and additional sell divergence which, together with culmination of the rising wedge and rising channel patterns playing out, is starting to propel gold to lower levels. Although the technical signals are there, market reaction is proving to be slow.
Pic Gold 3m

Gold has broken down through the rising wedge in the wake of the sell divergence, and prices are beginning to roll over, although slowly.

Brent Crude Oil

Oil is consolidating in a zone around $30 as it reacts to the recent sharp declines. But the fundamentals in the oil market remain bearish with economic activity at such anaemic levels, and the various implications need to still work through the system before real directional signals can be meaningful.

The gold / oil ratio, which equals the number barrels of oil that 1oz of gold will purchase, drops down through the rising channel as it starts to normalise towards the support zone. At these levels it still indicates much lower gold prices to come.

South African Rand

Breakout from the bear flag indicates Rand strength, but formation of the pennant indicates Rand weakness. The chart implications are therefore somewhat mixed, probably as the result of a dollar that has meandered sideways for the past 6 weeks. The dollar is forecast to now start strengthening markedly and this will leave the Rand weaker.

HUI / Gold Ratio

The ratio increased to a mild new high which may prove to be false, with forecast lower gold prices ahead. This is a danger signal with euphoric investors still clamouring to buy gold shares in the face of potentially lower gold prices.

HUI Gold Bugs Index

The HUI itself has a similar chart to the HUIGold ratio, but has broken to a higher new high and still includes a gap lower down. Price reversed down off the peak and the chart has reversal potential. Penetrating 185 still applies and this will trigger further declines to test the March low at 142.5.

This applies to all US miners and GDX, GDXJ, and XAU are all subject to lower penetrations which will trigger further declines to test the March lows.

Dust US Miners Bear Index

The Dust chart is a US miners bear index which responds in the opposite direction to the miners themselves. It is also geared and is a valuable indicator as well as being a valuable investment vehicle as well.

The chart illustrates a strong long term buy divergence plus a reducing wedge which should beak up soon, both leading to higher prices ahead. But, importantly, this amplifies lower metals and miners prices (not higher), being an inverse bear index.

Silver

Long term silver continues to trend lower, despite the recent rally. The chart has a negative bias and the trend continues down in a continued major non-confirmation with gold, as silver leads the price declines. As with gold, the next silver bull market will drive price many times higher, but only after further declines to yet lower lows first. These lows will finally signal an end to the precious metals bear market in a world of approaching currency, monetary and economic collapse.

The most notable behaviour in silver is its major non-confirmation with gold which is historically typical at major trend changes. The recent rally has silver underperforming gold and this should lead to lower prices. A pennant pattern has formed and this indicates yet lower prices once the apex breaks, and a key pivotal level remains the previous major low point at $13.60 which has already been breached once.

Silver prices are rolling over after the break through the rising channel and 2 key levels await below represented by the red lines. Penetration of these key levels will lead to much lower prices to test the March low, as with the miners.

The 3-month chart illustrates the silver price rolling over with the potential to penetrate the 2 key levels which will drop price down to test the March low, as with the miners.

Silver miners are poised to break up or down. Breakout to a new high will advance price, but a break down through $22.90 will drop price significantly to test the March low at $16. This latter seems more likely, given all the impact factors.

Gold : Silver Ratio

The gold / silver ratio closed higher at 112.46 in a chart that continues to present an upward bias which is negative for metal prices. The chart bias is positive which promises yet higher ratios, and yet lower metal prices. But the ratio has moved sideways for 6 weeks and should break up soon, as all this indicates a continued era with substantial silver underperformance which remains negative for metal prices.

General Equities
The bear market continues to unfold, but is in the very early stages of development.

The Dow Jones Industrial Average has completed the first major leg down and the first major correction up, and the second major leg down is commencing. At the same time a reverse sell divergence signal has occurred which will propel prices lower. This bear market will be severe and long-lasting, and global human activity will be massively impacted as negative economic intensity gathers momentum.

This chart reflects the Dow Jones Ind Ave performance from the 2008 Global Financial Crisis, and illustrates very basic Elliott Wave counts indicating where we are in the collapse. Declines since the final top of the market at 5 have now completed the 1-2 correction up in a 5 wave leg down that is next to drop severely in wave 3 down. 3rd Waves are the longest and strongest and this wave 3 is likely to decline towards a level in the region of 15 000.

Categories: Uncategorized Tags: