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Market Analysis 26 Aug 2021

Aug 26th, 2021 No comments

Executive summary

The Dow Jones still looks like it will continue to yet higher new highs in the short term, before the strong bearish patterns trigger severe declines after the bullish pattern plays out. Much depends on all the interconnected influencing market factors which continue to impact outcomes. We remain at the forefront of a long-term decline but many contradictory outcomes can still occur before this as the effect of numerous impacts continue to bore in and eventually collapse the structure.

US Treasury 10 year yield strengthens slightly as US equities hold at elevated levels. But there are indications that yield may in fact start weakening soon which will be in accord with a weaker dollar and gold price strength over the next period of months.

The US$ weakens slightly with indication of further weakness to come which will be caused by Treasury yield weakness. Other forex, especially the Euro will strengthen accordingly. Gold weakens slightly but will start to rally depending on the timing of any Treasury yield weakness, and miners will follow suit.

Dow

The Dow Jones break up through the key break level is holding which indicates yet higher new highs in the short term. Despite breaching this strong trigger point the even stronger bearish patterns remain in place with the compound sell divergence and rising wedges which threaten severe declines once the bullish pattern plays out.

US Dollar

The US$ index edges lower in the wake of sell divergence which could still weaken into a period of months, once the key break line breaches. This also implies that weaker US Treasury yield will be the cause and that gold will consequently strengthen over that same time period. The corollary will of course be strength in other currencies especially the Euro.

EuroDollar

The EuroDollar edges up in the wake of buy divergence which is likely to still strengthen further over a period of months, once the key break line breaches.

South African Rand

The Rand edges up in the wake of dollar sell divergence which is likely to still strengthen further over a period of months, once the key break line breaches.

US Treasuries

US Treasury 10 year yield strengthens into a mini-break in the wake of buy divergence, as US equities hold at elevated levels. This means the acid test fails because bonds and equities are moving in opposite direction. Yield strength over the last month could actually be developing into a bear flag (red arrow), in which case lower yields will follow after the flag activates. This would be in perfect accord with lower dollar and higher gold.

Treasury yield strengthens slightly and gold declines slightly, restoring the historic correlation between these two elements. Much depends on how Treasury yield responds in the next period, because this is the main driver of investment decisions.

Gold

Gold moves down slightly as Treasury yield strengthens slightly. For the rest the 12 month gold chart is indicating very little.

But the 2 year gold chart illustrates the pivot triangle that has developed with the potential of a very bullish breakout (blue) and a very bearish breakdown (red). If Treasury yield dose in fact break lower then gold will advance on the bullish diagonal above, and vice versa.

Hui : Gold Ratio

The HUI / Gold ratio turns down in sympathy with gold in a chart that continues to look bearish, and providing little else in potential future movement.

GDX US Gold ETF

But the GDX chart in fact looks bullish after turning up at a double bottom in the wake of buy divergence.

Silver

Silver continues to underperform gold in a continually increasing gold/silver ratio, but could in fact be responding up from a triple bottom.

Gold : Silver Ratio

The strong gold / silver ratio breakout continues to hold for now, indicating still lower metal prices ahead.

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Market Analysis 12 Aug 2021

Aug 13th, 2021 No comments

Executive summary

The Dow Jones breaks up through the double top at a key break level which indicates yet higher new highs in the short term, and perhaps even medium term. Despite breaching this strong trigger point the bearish patterns remain in place indicating a powerful decline phase to follow once the pattern breaks and finally tops out. Much depends on whether the bearish patterns are maintained or invalidated, because at the moment we remain at the forefront of a long-term decline as the effect of numerous impacts continue to bore in and eventually collapse the structure.

US Treasury 10 year yield starts to strengthen as US equities hold at elevated levels. This now means the acid test fails because bonds and equities are moving in the same direction. This also means that if US equities advance further Treasuries could also advance and therefore yield will weaken. This seems to be a period of acid test failure during equity strength and acid test success during equity weakness.

The US$ rallies back into indecision, whilst the earlier bearish signals continue to threaten. The earlier breakdown is invalidating, and future dollar movement depends largely on what US Treasury yield does. Gold responds to recent Treasury strength with severe breakdowns invalidating earlier bullish signals, although now enjoying a relief rally. But the situation is set for further gold weakness once all relief rally activity exhausts, and US miners are bearish in sympathy.

Dow

The Dow Jones breaks up through the double top at a key break level which indicates yet higher new highs in the short term. Despite breaching this strong trigger point the bearish patterns remain in place with the compound sell divergence and rising wedges which threaten severe declines once the bullish pattern plays out.

The Dow short term 3 months chart indicates the breakout of through the key break level to a new high. This is likely to propel the index to yet new all-time highs.

US Dollar

The US$ index rallies back into indecision, whilst the earlier sell divergence holds and continues to threaten. The earlier bear flag breakdown is invalidating, and future dollar movement depends largely on what US Treasury yield does.

EuroDollar

The EuroDollar declines back into indecision with the earlier bull flag breakout invalidating. The earlier buy divergence has extended and looks set to advance Euro value but the MACD buy signal has invalidated and consequently Euro value suffers indecision, similar to the dollar.

South African Rand

The Rand also declines back into indecision, reflecting the dollar rally back into indecision with the wedge and flag breakdowns invalidating. The reducing channel breakout is still active, after a brief invalidation, and this promises dollar strength and Rand weakness.

US Treasuries

US Treasury 10 year yield starts to strengthen in the wake of buy divergence, but also as US equities hold at elevated levels. This means the acid test fails because bonds and equities are moving in the same direction. This also means that if US equities advance further Treasuries could also advance and therefore yield will weaken. This seems to be a period of acid test failure during equity strength and acid test success during equity weakness.

Treasury yield strengthens slightly and gold declines quite markedly, restoring the historic correlation between these two elements. Much depends on how Treasury yield responds in the next period, because this is the main driver of investment decisions.

Gold

Gold responds with two severe breakdowns to recent Treasury strength. This invalidates the earlier bull flag breakout, although gold is enjoying a relief rally. But the situation is now set for further gold weakness once all the relief rallying activity exhausts. The MACD buy signal has invalidated and US miners are bearish in sympathy with gold.

Hui : Gold Ratio

The HUI / Gold ratio breakout is invalidating as US miners decline in sympathy with gold. This process has also developed sell divergence which should prompt further declines.

GDX US Gold ETF

The same can be said of GDX with identical criteria of the bull flag invalidating and development of sell divergence which should prompt further declines.

GDX Junior : GDX Ratio

The GDXJ:GDX ratio indicates Juniors leading Majors down the reducing channel which indicates more miner weakness ahead.

Silver

Silver’s earlier picture of zig-zag indecision has resolved into multiple breakdowns in sympathy with gold and Treasury yield strength. This too will enjoy some level of relief rallies, as with gold, but is now set for further silver weakness once all the relief rallying activity exhausts.

Gold : Silver Ratio

The strong gold / silver ratio breakout indicates lower metal prices ahead.

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Market Analysis 5 Aug 2021

Aug 5th, 2021 No comments

Executive summary

The Dow Jones continues in a topping pattern with a double top at a key break level which continues to hold. This now creates a strong trigger point which all indicates a powerful decline phase is about to start once the pattern breaks to release powerful pent-up negative energy which will cause havoc once the US market finally tops out, because we remain at the forefront of a long-term decline as the effect of numerous impacts continue to bore in and eventually collapse the structure.

US Treasury 10 year yield continues to remain weak as US equities continue to hold at elevated levels, which indicates the ‘acid test’ is holding with both US equities and Treasuries moving in the same upward direction. But this is not likely to persist much longer which also means added support to the gold market may very soon be at an end.

The US$ is still in decline which is likely to last a while longer, with support from the Euro in opposite mode. Gold has a positive bias at the start of a rally with some support from US miners, both of which may be short-lived because US Treasury yields may start to strengthen soon.

Dow

The Dow Jones continues in a topping pattern with a double top at a key break level which continues to hold. This now creates a strong trigger point at the head of a compound sell divergence which extends back 11 months which all indicates a powerful decline phase is about to start once the pattern breaks. Added impetus will be provided once the bearish rising wedge is breached decisively to release powerful pent-up negative energy which will cause havoc once the US market finally tops out.

The Dow short term 3 months chart indicates the approach to the key break level which will either propel the index to yet new all-time highs but a breakdown beckons which will test support levels. The latter is becoming the more likely as lagging upward momentum develops (not shown).

US Dollar

The US$ index is still in decline in the wake of the sell divergence, after the bear flag triggered. The MACD sell signal also remains active and this declining dollar mode is likely to last a while longer, with support from the Euro in opposite mode.

EuroDollar

The EuroDollar is still advancing in the wake of the buy divergence, after the bull flag triggered. The MACD buy signal also remains active and this advancing Euro mode is likely to last a while longer.

South African Rand

Rand bias has changed to strength as the dollar weakens. There are now dollar breakdowns of both the rising wedge and the bear flag which is likely to strengthen the Rand as well as weaken the dollar further. The reducing channel breakout has not quite invalidated but this now seems likely to occur.

US Treasuries

US Treasury 10 year yield continues to remain weak as US equities continue to hold at elevated levels, which indicates the ‘acid test’ is holding with both US equities and Treasuries moving in the same upward direction. But this is not likely to persist much longer with signs of buy divergences beginning to develop in Treasury yields. This also means added support to the gold market may very soon be at an end.

Whilst continued weak Treasury yields have been supporting gold, this is likely to be close to a turning point. Once yield starts to strengthen gold will start to weaken, but there is a distortion in the above combination chart which displays positive correlation for the last 3 months which is historically incorrect. This may now correct with disproportionate gold strength.

Gold

The Gold breakout from the bull flag is holding in the wake of buy divergence and continued reluctance of US Treasury yield strength. This suggests more gold strength to come, with the MACD buy signal also holding, just. Perhaps more impetus is required from US miners which thus far have been only partial.

Hui : Gold Ratio

The HUI / Gold ratio breakout is holding in the wake of the buy divergence in a chart that seems to hold more upside. But the balance of probabilities seems to indicate the rally may be terminating, despite the MACD buy signal.

GDX US Gold ETF

The same can be said of GDX with identical criteria. Maybe the miner rally remains short and sweet.

Dust US miners bear index

The Dust chart reflects a geared inverse situation of that of US miners, nearly exactly. This supports higher US miners and gold, with the breakdown very nearly starting to close the gap (green).The MACD sell signal has clarified somewhat in support of more downside, supporting higher miners.

Silver

Silver exhibits a continued mixed picture with a zig-zag chart reflecting procrastination. This is less bullish than gold which indicates a less positive picture. Will the minor break from the bull flag activate or will Treasury yield support remain dubious? The latter seems more likely, as the MACD buy signal continues to procrastinate.

Gold : Silver Ratio

The gold / silver ratio breakout has become static with even a lower close this week. But the trend is up indicating lower metal prices to come.

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Market Analysis 29 Jul 2021

Jul 29th, 2021 No comments

Executive summary

The Dow Jones continues in a topping pattern with a double top at a key break level which continues to hold. This now creates a strong trigger point which all indicates a powerful decline phase is about to start once the pattern breaks to release powerful pent-up negative energy which will cause havoc once the US market finally tops out, because we remain at the forefront of a long-term decline as the effect of numerous impacts continue to bore in and eventually collapse the structure.


US Treasury 10 year yield continues to remain weak as US equities begin to turn down. This means, once again, failure of the acid test with US bonds and equities moving in opposite direction. This also means added support to the gold market in the short term, but Treasury yield is soon to start strengthening making the current gold advance of short duration, all supported by the deteriorating US reverse repo situation which supports a strengthening yield bias and weak gold price.


The US$ has started to weaken supported by some Euro strength. Gold now has a positive bias at the start of a strengthening phase with some support from US miners, both of which may be short term and dependent on when US Treasury yields start to strengthen.

Dow

The Dow Jones continues in a topping pattern with a double top at a key break level which continues to hold. This now creates a strong trigger point at the head of a compound sell divergence which extends back 11 months which all indicates a powerful decline phase is about to start once the pattern breaks. Added impetus will be provided once the bearish rising wedge is breached decisively to release powerful pent-up negative energy which will cause havoc once the US market finally tops out.

The Dow short term 3 months chart indicates the approach to the key break level which will either propel the index to new all-time highs or a breakdown from a significant top. The former is the more likely at the moment.

US Dollar

The US$ index indecision of late has transpired into a breakdown as the bear flag triggers in the wake of sell divergence. The MACD sell signal has finally also activated as the dollar starts a decline phase.

EuroDollar

The EuroDollar chart displays the exact opposite as Euro indecision transpires into a breakout as the bull flag triggers in the wake of buy divergence. The MACD buy signal has finally also activated as the EuroDollar starts advancing.

South African Rand

Rand bias to weakness continues but this is likely to reverse to strength soon as the dollar weakens further. The breakouts region (black circle) is likely to clarify soon into rising wedge and bear flag breakdowns, as the declining channel breakout invalidates.

US Treasuries

US Treasury 10 year yield continues to remain weak as US equities begin to turn down. This means, once again, failure of the acid test with US bonds and equities moving in opposite direction. This also means added support to the gold market in the short term, but Treasury yield is soon to start strengthening making the current gold advance of short duration, all supported by the deteriorating US reverse repo situation which supports a strengthening yield bias and weak gold price.

As Treasury yields remain weak gold should turn up in response, in accord with the historical inverse correlation of the two. This also means that once yield starts to strengthen gold will start to weaken. But there is a distortion in the above combination chart which displays inverse correlation for the first 8 months and positive correlation for the last 4 months. This will of course correct with either disproportionate Treasury yield or gold strength.

Gold

The Gold breakout from the bull flag is holding in the wake of buy divergence and continued reluctance of US Treasury yield strength. This suggests more gold strength to come, although the MACD buy signal is invalidating. Perhaps more impetus is required from US miners which thus far have been reluctant.

Hui : Gold Ratio

The HUI / Gold ratio has developed buy divergence followed by a breakout from the bull flag, plus some clarification of the MACD buy signal. Thus, it would appear US miners could now be in support of a stronger gold price.

GDX US Gold ETF

The same can be said of GDX with identical criteria. Maybe this develops sufficient momentum to close the gap above (green).

Dust US miners bear index

The Dust chart reflects a geared inverse situation of that of US miners, nearly exactly. This supports higher US miners and gold, with the potential to also close the gap below (green), but the MACD sell signal has faded.

Silver

The breakdown from the bullish silver triangle (counter-productive) is holding for now, but could invalidate and break up with support for continued Treasury yield weakness. This is all of a short-term nature as for gold.

Gold : Silver Ratio

The gold / silver ratio is holding with a yet higher close. This indicates lower metal prices ahead and reinforces the view that the higher metal prices are of a short-term nature.

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Market Analysis 22 Jul 2021

Jul 22nd, 2021 No comments

Executive summary

The Dow Jones continues to develop a broad topping pattern with a prominent double top at the apex as it edges toward a key break level at 35100 which is a significant trigger point either way. Strong declines on Monday has seen a strong rally since including strong breadth. This all means it probably is going to breakout to new all-time highs once the key break level is breached, but there are powerful pent-up energies building which will cause havoc once the US market finally tops out, because we remain at the forefront of a long-term decline as the effect of numerous impacts continue to bore in and eventually collapse the structure.


US Treasury 10 year yield has perhaps started a strengthening phase prompted by the US equity rally since Monday’s decline, which means once again, failure of the acid test with US bonds and equities moving in opposite direction. This also means US markets are not ready to decline significantly with equities and bonds declining together. If this is the start of Treasury yield strengthening it also means the start of weaker gold, all supported by the deteriorating US reverse repo situation which supports a strengthening yield bias and weak gold price.


US$ indecision persists but indications now are for the start of some dollar weakness, supported by some Euro strength. Gold is looking slightly mixed with a negative bias, and if US Treasury yields are in fact starting to strengthen then gold will weaken.

Dow

The Dow Jones breakdown through the rising wedge has invalidated with a strong rally including strong breadth in all the ratios such as advance / decline and volume. It continues to develop a broad topping pattern with a prominent double top at the apex as it edges toward a key break level at 35100 which is a significant trigger point either way. The Dow Jones is probably going to breakout to new all-time highs once the key break level is breached, but the compound sell divergence formation is extending further into what now exceeds 11 months. This is developing powerful pent-up energy which will cause havoc once the US market finally tops out.

The Dow short term 3 months chart indicates the approach to the key break level which will either propel the index to new all-time highs or a breakdown from a significant top. The former is the more likely at the moment.

US Dollar

The US$ index indecision persists but it has developed sell divergence in the process of a mini-break from the expanding triangle which has nearly invalidated. The indicators are therefore suggesting a dollar weakness phase is about to start. The MACD sell signal is procrastinating and this may finally unravel into an actual sell signal. The weak phase will also trigger the bear flag lying in wait.

EuroDollar

The EuroDollar is also developing indecision as its mini-breakdown also nearly invalidates. But the indicators are suggesting a reversal up to start soon which will finally trigger the procrastinating MACD buy signal as well as creating the developing buy divergence.

South African Rand

The Rand bias is to weakness but this is likely to reverse to strength (and dollar weakness) soon. The breakouts region (black circle) is likely to clarify soon, probably with a dollar breakdown through the bear flag and rising wedge, which will again bring activity back within the overall down-sloping reducing channel formation (dollar weakness / Rand strength).

US Treasuries

US Treasury 10 year yield reversed up to invalidate the declining channel breakdown. This was prompted by the US equity rally since Monday’s decline, which means once again, failure of the acid test with US bonds and equities moving in opposite direction. This also means US markets are not ready to decline significantly with equities and bonds declining together. If this is the start of Treasury yield strengthening, as indicated by the gold cross on the chart (green square), it also means the start of weaker gold, all supported by the deteriorating US reverse repo situation which supports a strengthening yield bias and weak gold price.

As Treasury yields turn up gold should decline, in accord with the historical inverse correlation of the two. This also means that once yield starts to strengthen gold will start to weaken, and this began to happen this week.

Gold

Technically, the Gold breakout is holding for now with the bull flag activation, buy divergence, and the MACD buy signal promising yet higher values. But this is threatened by stronger Treasury yields.

Hui : Gold Ratio

The gold breakout has failed to find real support from miners. Technically, the HUI / Gold ratio has developed buy divergence and the MACD buy signal procrastinates. So, more is required before the bull flag might trigger.

GDX US Gold ETF

The GDX breakout of last week has faded but in the process has created buy divergence which probably will amount to very little. The MACD buy signal is also procrastinating.

Dust US miners bear index

The Dust chart reflects a geared inverse situation of that of US miners, nearly exactly. Faded breakdown, sell divergence, MACD sell signal procrastination.

Silver

The Silver bullish triangle has a breakdown which has nearly invalidated. But the chart now looks bearish and the main driver is US Treasury yield potentially turning to strength.

Gold : Silver Ratio

The gold / silver ratio has a breakout which has nearly invalidated. But the week closed higher at 71.41 which indicates weaker metal prices ahead.

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Market Analysis 15 Jul 2021

Jul 15th, 2021 No comments

Executive summary

The Dow Jones has increased to the previous high point achieved 3 months ago to create a prominent double top at what is now a key break level. This is a significant trigger point which could break either way. But a breakout through the double top will propel the index to high levels next. The Dow remains in a non-conformance with the S+P 500 and Nasdaq which have been achieving new highs, which is bearish, all in a US market that has reached historic levels of optimism and narrow width in negative advance / decline and negative volume ratios. This is all compatible with a rally at or near completion. On balance it appears a strong reversal decline soon is forecast, and whether this leads to a short or long term decline is still to be seen.

Whilst US Treasury 10 year yield may next strengthen the correction down continues for now, as Treasuries hold up and equities hold up. This means the acid test is holding up with bonds and equities moving in the same direction, but in rising mode. Also, it is worthy noting that current yield weakness is supporting the gold price which the historical inverse correlation of the two indicates it should do.

The US$ has consolidated over the past 4 weeks in a region of indecision that could break up or down. Present bias indicates a likely decrease in value supported by the dollar chart structure as well as that of the EuroDollar. Gold is looking positive in the short term, supported by the miners now plus US Treasury and dollar short term prospects.

Dow

The Dow Jones has increased to the previous high point achieved 3 months ago to create a prominent double top at what is now a key break level. This is a significant trigger point which could break either way. This is all compatible with a rally at or near completion. On balance it appears a strong reversal decline soon is forecast, and whether this leads to a short or long term decline is still to be seen.

The Dow short term 3 months chart indicates 2 mini-breakouts to create a significant double top in a chart structure with strong support and no resistance. A decisive breakout of the key break level will propel the index to new highs, but the double top could have the reverse effect.

US Dollar

The US$ index has consolidated price over the past 4 weeks in a region of indecision (black circle) that could break either way. But the chart structure bias indicates price in a bear flag that could likely breakdown as well as a breakdown from the overall expanding triangle. There is also a tenuous sell divergence signal emerging (not shown) as well as a sell signal in the MACD plus a buy signal in the EuroDollar (next chart), all of which are likely to trigger the vertex-based reversal into a breakdown.

EuroDollar

The EuroDollar breakdown persists but a buy divergence has developed plus a buy signal in the MACD have the indicators suggesting a Euro reversal gaining momentum into a potential bull flag breakout, and consequent lower dollar.

South African Rand

The Rand has a breakout to weakness (inner black circle) with the declining channel breakout holding whilst the rising wedge breakout has invalidated. But dollar indecision (larger black circle) has muddied the water and potential dollar weakness will reverse this trend and strengthen the Rand, to bring activity back within the overall down-sloping reducing channel formation.

US Treasuries

Whilst US Treasury 10 year yield may next strengthen the correction down continues for now, as Treasuries hold up and equities hold up. This means the acid test is holding up with bonds and equities moving in the same direction, but in rising mode. Also, it is worthy noting that current yield weakness is supporting the gold price which the historical inverse correlation of the two indicates it should do. The deteriorating US reverse repo situation will support a strengthening yield bias and weak gold price, which of course happens next (only a matter of time).

Treasury yields continue to weaken slightly and gold is starting to strengthen slightly, as it should do in accord with the historical inverse correlation of the two. This also means that once yield starts to strengthen gold will start to weaken, and this might be quite soon.

Gold

The Gold breakout is holding with yet higher prices after the bull flag activation and weak Treasury yield, plus the RSI buy divergence. Miners are also beginning to turn up in sympathy, but all of this may be short-lived despite a somewhat bullish chart formation plus a MACD buy signal.

Hui : Gold Ratio

The gold breakout is starting to find support from the miners and the ratio has developed a buy divergence which should increase in the next period, as it is already starting to do. The MACD has turned up from the bottom of the range and created a buy signal.

GDX US Gold ETF

The GDX breakout is starting to build momentum in sympathy with gold after the bull flag activation. There is also a tenuous buy divergence signal (not shown) plus the MACD buy signal. The chart formation is bullish and it might be that the vacant gap will be closed a little higher up.

Dust US miners bear index

The Dust breakdown is starting to build momentum in sympathy with the positive miners charts. There is also a tenuous sell divergence signal (not shown) plus the MACD sell signal. The chart formation is bearish and it might be that the vacant gap will be closed a little lower down up.

Silver

The strong Silver chart formation in a major bullish triangle has gone dormant momentarily, and any potential breakout has been delayed. However, this is all supportive of gold and the miners and is likely to activate shortly, impacted by the dollar indecision and weak Treasury yield direction.

Gold : Silver Ratio

The gold / silver ratio continues to move sideways as it has done for 6 months and a breakout or breakdown is required before we can make constructive projections.

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Market Analysis 8 Jul 2021

Jul 8th, 2021 No comments

Executive summary

Here is a reminder of some overall market influences before we get into the detail of this week’s post. For now, loose monetary and fiscal policies will continue to fuel asset and credit bubbles, propelling a slow-motion train wreck, as the bull market continues unabated. But in the meantime, the same loose policies that are feeding asset bubbles will continue to drive consumer price inflation, creating the conditions for stagflation whenever the next negative supply shocks arrive. Making matters worse, central banks have effectively lost their independence, because they have been given little choice but to monetize massive fiscal deficits to forestall a debt crisis. But the US Federal Reserve’s daily reverse repurchase agreements are surging to all-time highs which actually means that liquidity is being drained from the financial system and QE is suffering a slow and painful death. But it also means the ‘taper’ has already begun and world markets are really unaware of this or just ignoring it.

A reverse repurchase agreement occurs when an institution offloads cash to the Fed in exchange for a Treasury security on a short term basis, and with US financial institutions currently flooded with excess liquidity, they are moving cash to the Fed at an alarming rate in excess of $500bn pm. So with US QE running at about $120bn per month and daily reverse repos far in excess of that, you get the reverse of QE which is ‘taper’.

We are all aware of what ‘taper’ does to markets, so while we might continue to get higher prices, strong declines should follow at some stage. For instance this post indicates a bullish stance for gold and miners, but strong declines will follow soon after that.

The Dow Jones continues to hold the topping pattern with conflicting signs of further new highs and a strong reversal decline forecast soon, given the general level of investor euphoria against the parlous condition of the financial and monetary system described above.

Much depends on US Treasury yield behaviour which drives dollar value and much else and at the moment yield breakdowns intensify as Treasuries hold up and at the same time equities hold up. Also, it is worthy noting that current yield weakness is supporting the gold price which the historical inverse correlation of the two indicates it should do.

The strong US$ rally persists into a region of indecision which needs to break either way. The indicators suggest a breakdown is likely which continued weak US Treasury yields support, although a bearish EuroDollar indicates the opposite.

Gold and miners have breakouts supported by weaker Treasury yields, but this may be short-lived.

Dow

The Dow Jones continues to hold the topping pattern – just. The sell divergence and rising wedge breakdown is still active but there is a key break level very close which, if breached, will lead to yet new highs. A strong reversal decline soon is forecast, whether this leads to continued new highs or not thereafter.

The Dow short term 3 months chart indicates the key break level at 34860 which if breached will lead to yet higher new highs.

US Dollar

The strong US$ index rally persists into a region of indecision (black circle). This is in a vertex-based reversal which needs to either breakout the expanding triangle or breakdown the bear flag. The indicators suggest a breakdown is likely from positions at the top of range with a MACD sell signal soon to be created. Continued weak US Treasury yields support this, although a bearish EuroDollar (next chart) does not.

EuroDollar

The EuroDollar breakdown indicates yet lower Euro values and higher dollar values but the indicators suggest the opposite.

South African Rand

Rand weakness has turned to indecision but the indicators suggest Rand strength next with dollar weakness. Activity remains largely within the overall down-sloping reducing channel formation indicating further dollar slippage, until that is finally breached on the upside.

US Treasuries

US Treasury 10 year yield breakdowns intensify as Treasuries hold up and equities hold up. This means the acid test is holding up with bonds and equities moving in the same direction, but in rising mode. Also, it is worthy noting that current yield weakness is supporting the gold price which the historical inverse correlation of the two indicates it should do. The deteriorating US reverse repo situation will support a strengthening yield bias and weak gold price, which of course happens next (only a matter of time).

Treasury yields continue to weaken and gold is starting to strengthen, as it should do in accord with the historical inverse correlation of the two. This also means that once yield starts to strengthen gold will start to weaken, and this might be quite soon.

Gold

Gold has a breakout as the bull flag activates, supported by weakening Treasury yields. Most miners are also beginning to breakout in sympathy, but all of this may be short-lived despite a somewhat bullish chart formation plus a MACD buy signal.

Hui : Gold Ratio

The gold breakout is not fully supported by miners yet as this ratio does not have a breakout. This, despite a somewhat bullish chart formation and a MACD buy signal.

GDX US Gold ETF

GDX has a breakout in sympathy with gold as the bull flag activates. The chart formation is bullish and there is a MACD buy signal. Also, it might be that the vacant gap will be closed a little higher up.

Dust US miners bear index

Dust has a breakdown from the bear flag, reflecting the breakout in US miners. Also, the chart looks bearish including the MACD sell signal, and it might be that the vacant gap will be closed a little further down.

Silver

The strong Silver chart formation in a major bullish triangle has gone dormant momentarily, and any potential breakout has been delayed. However, this is all supportive of gold and the miners and is likely to activate shortly, impacted similarly to weaker Treasury yields.

Gold : Silver Ratio

The gold / silver ratio has moved sideways for 6 months and a breakout or breakdown is required before we can make constructive projections.

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Market Analysis 1 Jul 2021

Jul 1st, 2021 No comments

Executive summary

The Dow Jones continues to develop a topping pattern with the likelihood of a break lower soon, but there is still the nagging potential for yet further new highs before any serious declines occur.
US Treasury yield breakdowns continue to hold, as Treasury values continue to hold up together with equities. This means the acid test holds up as bonds and equities move in the same direction, but in rising mode. Also, while yields continue to hesitate before strengthening, this will induce dollar weakness and gold strength which the historical inverse correlation of the two indicates it should do.
The dollar rally persists but potential towards a downwards reversal is building which once triggered will reduce dollar value. If some US Treasury yield and dollar weakness continues this could trigger some gold strength which is consistent with the technical signals in both gold and US miners charts, especially in the silver chart.

Dow

The Dow Jones continues to develop a topping pattern in the wake of the sell divergence and rising wedge breakdown, despite recent strength. The likelihood of a break lower continues to develop, but there is still the nagging potential for yet further new highs before any serious declines occur.

The Dow short term 3 months chart looks stronger after the breakdown invalidation as the breakback rises back above the 50-day MA (red). The chart is still in the wake of the sell divergence which assists in building pressure in developing towards the next break lower.

US Dollar

The strong dollar rally persists after the reducing wedge breakout but potential towards a downwards reversal is building. Price has reached the upper limit of the downward sloping expanding triangle all within a potential bear flag formation which once triggered will reduce dollar value. This situation is reflected nearly exactly by the Euro chart in the opposite direction.

EuroDollar

The strong EuroDollar decline persists after the rising wedge breakdown but potential towards an upwards reversal is building. Price has reached the bottom limit of the upward sloping expanding triangle all within a potential bull flag formation which once triggered will add strength to the Euro.

South African Rand

The chart shows signs of ending Rand weakness as dollar reverse sell divergence develops. This occurs within the overall reducing channel formation indicating further dollar slippage, until that is finally breached on the upside with Rand weakness thereafter.

US Treasuries

US Treasury 10 year yield breakdowns continue to hold, as Treasury values continue to hold up together with equities. This means the acid test holds up as bonds and equities move in the same direction, but in rising mode. Also, while yields continue to hesitate before strengthening, which the Gold Cross (green square) indicates they should strengthen, this will induce dollar weakness and gold strength: Aside from the effects of the deteriorating US reverse repo situation which will induce the opposite.

Treasury yields have not started to strengthen yet and this may add some strength to the gold price, which the historical inverse correlation of the two indicates it should do. This also means of course that if yield is about to strengthen then gold is about to weaken further.

Gold

If some US Treasury yield and dollar weakness continues this could trigger the gold chart into strength. This is consistent with the inverse H&S pattern developing as well as the bull flag in the tail of the chart. The window of opportunity is in a price range from 1750 – 1800 and break below or above these levels could be make or break for short term gold.

Hui : Gold Ratio

The HUI / Gold ratio also reflects this window of opportunity with the developing inverse H&S pattern and a combined bullish reducing wedge / bull flag in the tail of the chart. This suggests the miners decline may have terminated in sympathy with gold.

GDX US Gold ETF

The exact same is evident in the GDX chart plus a gap in the bull flag which at some point will be closed.

Dust US miners bear index

The Dust chart is similar to the GDX chart in the opposite direction, and any decline now to close the gap is consistent with a miners breakout to higher levels.

Silver

Silver is set for a bullish breakout which is supportive of gold and miners breakouts. The major bullish triangle which has developed over the past year is set to breakout strongly. Silver, like gold, also derives potential strength from US Treasury yields that are failing to strengthen.

Gold : Silver Ratio

The gold / silver ratio closed slightly lower which supports higher metal prices, but the ratio has essentially only moved sideways for the past 6 months. It needs to breakout or breakdown to provide more meaningful data for more constructive projections.

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Market Analysis 24 Jun 2021

Jun 24th, 2021 No comments

Executive summary

The Dow Jones continues to develop a topping pattern which is beginning to indicate breakdowns which could extend declines. But there is still the nagging potential for yet another new high before any serious declines occur, although the index is likely to decline further first.
US Treasury yield breakdowns continue to hold, as Treasuries rally slightly against the US equity breakdowns. This means the acid test is failing at the moment with bonds and equities moving opposite to one another. Also, it is worthy noting that current yield lethargy is not supporting the gold price which the historical inverse correlation of the two indicates it should do.
The US$ rally has ended with a slight turndown in the vicinity of resistance at the 200-day moving average. Price is however positioned to move up or down with direction as yet undecided.
The rally in gold has ended with further price declines likely with no support from miners, but there are some slight indications that a retracement rally could start soon.

Dow

The Dow Jones continues to develop a topping pattern in the wake of the sell divergence as it also breaks down through the rising wedge. But there is still the nagging potential for yet another new high before any serious declines occur, although the index is likely to decline further first.

The Dow short term 3 months chart looks more bearish in highlighting the breakdowns, as well as curtailing the breakback at the 50-Day moving average.

US Dollar

The US$ index rally from the reducing wedge breakout has turned softer in the vicinity of resistance at the 200-day MA (green). Price is now in the middle of the expanding triangle with future direction in the balance which could go either up or down. This situation is reflected nearly exactly by the Euro chart in the opposite direction.

EuroDollar

The EuroDollar chart continues to reflect the exact opposite of the dollar chart with declines from the breakdown in the rising wedge pattern turning up slightly in the vicinity of support at the 200-day MA (green). Price is now in the middle of the expanding triangle with future direction in the balance which could go either up or down.

South African Rand

Rand weakness from the dollar breakout ends as dollar sell divergence develops and the Rand starts to strengthen. This occurs within the overall downsloping channel formation indicating further dollar slippage, until that is finally breached.

US Treasuries

US Treasury 10 year yield breakdowns continue to hold, as Treasuries rally slightly against the US equity breakdowns. This means the acid test is failing at the moment with bonds and equities moving opposite to one another. Also, it is worthy noting that current yield lethargy is not supporting the gold price which the historical inverse correlation of the two indicates it should do. The deteriorating US reverse repo situation will support a strengthening yield bias (as does the Gold Cross (green square)), and it could be that yield may have bottomed.

Treasury yields have not started to strengthen yet and yet the gold price has started to weaken, meaning that yield and gold are moving in the same direction which is contra to the historical inverse correlation of the two. This also means that either yield is about to strengthen or gold is about to strengthen.

Gold

The rally in gold has ended with a breakdown and a 7% overall drop in price. This has activated the bear flag which could cause further price declines. Additionally, the gold price is not supported by US miners nor by US treasury yield.

Hui : Gold Ratio

The HUI / Gold ratio is weaker than the gold price itself and has declined by 13% including a breakdown through the rising channel. The chart indicates further price declines.

GDX US Gold ETF

GDX is similar to the HUI / Gold ratio, although not quite as bearish with a 9% price decline. It also includes activating the bear flag with further price declines to come.

GDX Junior : GDX Ratio

The GDXJ:GDX ratio breakout is holding, although with some weakness in the tail. This indicates the junior miners are stronger than the major miners which could herald a retracement rally in gold.


The XAU US Gold and Silver Miners Index and the NUGT US Miners Bull Index are both reflecting the identical same patterns as the other metals and miners.


Dust US miners bear index

Dust has a breakout from the bull flag, reflecting the breakdown in US miners. Can this be maintained? Because the chart has developed a sell divergence which could herald the start of a turnaround which would reflect retracement rallies in the miners.

Silver

Silver is stronger than gold and the chart indicates it may derive some strength from the expanding triangle. This would strengthen chances for a start in any gold retracement rally. It is also impacted similarly to gold and will rise if Treasury yields decline, although that now seems unlikely.

Gold : Silver Ratio

The gold / silver ratio breakout is holding and the closing is again slightly higher. This indicates continued metal price declines ahead, although the chart is essentially really only moving sideways at the moment and therefore is largely still relatively neutral. We need to see move chart development to make constructive projections.

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Market Analysis 10 Jun 2021

Jun 10th, 2021 No comments

Executive summary

US equities are beset with lethargy at elevated levels while weakening very slightly, as a prelude to further weakening before yet potential new highs. Threatening sell divergence and rising wedge patterns remain in place.
US Treasury yields are weakening slightly as they take up some of the equity lethargy, with the dollar poised to weaken further to a potential new low. If the Treasury yield decline extends much this will encourage the gold rally to increase and perhaps ignite miners to follow suit. The deteriorating US reverse repo situation will eventually support strengthening Treasury yields and dollar, with weaker equities and lower gold price.

Dow

The Dow Jones weakens slightly at elevated levels while the threatening sell divergence and rising wedge patterns remain in place. But there is still the nagging potential for yet another new high before any serious declines occur, although the index is likely to decline further first.

The Dow short term 3 months chart continues to look bearish with further likely declines to test support towards the 50-Day MA (red), before any further increases to a potential new high.

US Dollar

The US$ index downtrend continues while US equities continue at elevated levels, but the expanding triangle and reducing wedge are bullish patterns. This suggests the dollar is likely to rally strongly later, but probably only after declining to a potential new low first. The set of bearish candles (red circle) will encourage this, and the deteriorating US reverse repo situation will support the dollar rally after that.

EuroDollar

The EuroDollar chart continues to reflect the exact opposite of the dollar chart with a continued uptrend. By contrast the Euro is likely to achieve a new high before the inevitable weakening phase starts which will be supported by the expanding triangle and rising wedge patterns.

South African Rand

The Rand continues to strengthen against the dollar downtrend, and the continued dollar RSI buy divergence has been destroyed in that process, although the MACD buy divergence remains evident. The continued dollar weakness ensures further Rand strength but a Rand weakness cycle will start soon because it’s strength has been disproportionate compared to other currencies such as the Aussie dollar and British pound for example.

US Treasuries

US Treasury 10 year yield has a breakdown which probably will ensure further countertrend yield weakness before the strength cycle continues. This mild Treasury price strength is occurring at a time of mild US equity lethargy, and will all be reversed once equities resume an advance to yet another new high. This countertrend window of yield decline will encourage gold to extent its rally. The deteriorating US reverse repo situation will support a strengthening bias (as does the Gold Cross (green square)).

If Treasury yields continue to weaken slightly this will extend the gold rally, due to the inverse correlation between the two.

Gold

The rally in gold has become indecisive, and could break either way dependent mainly on Treasury yield movement. Gold is not being supported by US miners and this could force the gold price lower, as does the continuing silver non-confirmation and the deteriorating US repo situation. Gold needs to breakout or risk activating the bear flag.

Hui : Gold Ratio

The HUI / Gold ratio is weaker than the gold price itself and is also indecisive as to breakout or breakdown. The ratio also needs to breakout or risk activating the bear flag.

GDX US Gold ETF

GDX is similar to the HUI / Gold ratio, although not quite as bearish. It is also indecisive as to breakout or breakdown, and also needs to breakout or risk activating the bear flag.

GDX Junior : GDX Ratio

The GDXJ:GDX ratio breakout is holding, indicating junior miners are stronger than major miners. This also indicates strength ahead, and is the one indication (amongst all others) doing so.


The XAU US Gold and Silver Miners Index and the NUGT US Miners Bull Index are both reflecting the identical same patterns as the other metals and miners.


Silver

Silver still exhibits non-confirmation with gold, which is bearish precious metals. It is also impacted similarly to gold and will rise if Treasury yields decline.

Gold : Silver Ratio

The gold / silver ratio breakout is holding (declines ahead) but is largely still relatively neutral. We need to see move chart development to make constructive projections.

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