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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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Market Analysis 3 Jun 2021

Jun 3rd, 2021 No comments

Executive summary

US equities continue at elevated levels while threatening sell divergence and rising wedge patterns remain. But there is still the nagging potential for yet another new high before any serious declines occur, and both of these are likely given all the other factors impacting markets.
At the moment it may be that the liquidity fright in the US banking system in Dec 2015 may be happening again, and we need to consider that before evaluating US interest rates, the dollar, and gold. US Treasury 10 year yield is moving sideways could move either way in the short term which will add some volatility to markets, but the deteriorating US reverse repo situation will support a strengthening bias.


The dollar downtrend continues although it is likely to rally strongly later, but probably only after declining to a potential new low first. The deteriorating US reverse repo situation will support the dollar rally after that. The gold breakout is holding although not supported strongly by the various US miner charts. It continues to be threatened by Treasury yield strength and the silver non-confirmation.

Dow

The Dow Jones continues at elevated levels while the threatening sell divergence and rising wedge patterns remain. But there is still the nagging potential for yet another new high before any serious declines occur, and both of these are likely given all the other factors impacting markets.

The Dow short term 3 months chart however continues to look more bearish with the breakdown from the short term rising wedge still holding good, in the wake of the sell divergence and appearance of a set of bearish ending candles. This has the potential to drop the index to the top of the support zone before any further increases to a possible new high.

US Reverse Repo situation
As a precursor to evaluating the dollar and gold it is perhaps a good idea to revisit the US reverse repo situation which shook markets in Dec 2015. At that time the US Federal Reserve started tapering asset purchases because of the liquidity fright it created in the banking system, and it appears this is happening again.

In Dec 2015 the level of overnight reverse repurchase agreements in securities sold reached $475bn (green) and it has now exceeded that level at $485bn. Tapering after Dec 2015 caused the effective Federal funds rate to increase from just above zero to nearly 2.5% (red). Tapering and rate increases are dollar friendly and hostile towards gold. Tapering did eventually reverse and the funds rate did eventually decline back to nearly zero, but in the short term this situation is likely to boost the dollar and reduce the gold price.

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. A set of bearish candles have emerged as ending candles to encourage this, and the deteriorating US reverse repo situation will support the dollar rally after that.

EuroDollar

The EuroDollar chart reflects the exact opposite of the dollar chart with a continued uptrend and a set of bullish ending candles to support further gains. 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.

US Treasuries

US Treasury 10 year yield continues sideways as US equities remain elevated. The chart looks indecisive and could move either way in the short term which will add some volatility to markets, but the deteriorating US reverse repo situation will support a strengthening bias (as does the Gold Cross (green square)). Progress in the ACID test still needs to be monitored.

If Treasury yields continue to weaken slightly this will extend the gold rally, due to the inverse correlation between the two. But of course the reverse is also true.

Gold

The gold breakout is holding although not supported strongly by the various US miner charts. It continues to be threatened by Treasury yield strength and the silver non-confirmation. Any breakdown from the rising wedge will move towards activation of the potential bear flag. Weakening in US Treasury yields will extend the gold rally, which is possible, and the deteriorating US reverse repo situation will depress the gold price. An increase in US equities will catapult the Bitcoin price which will assist gold weakness.


Money is being pumped into world monetary systems at unprecedented pace, even with equities well beyond all-time highs. The world has been in a catastrophic pandemic for more than a year and economic systems have been hit hard. And yet gold, the monarch of safe havens, has not managed to go above 2011 highs, let alone soar above. The gold market is simply not ready yet without declining significantly first.
South African Rand

The Rand continues to strengthen despite the continued dollar buy divergence. In fact the continued dollar weakness has destroyed the RSI divergence (MACD divergence is still evident), and there is further Rand strength ahead because of further dollar weakness.

Hui : Gold Ratio

The HUI / Gold ratio breakouts are weakening with the wedge breakout invalidated. The chart is not decisive like the gold chart itself.

GDX US Gold ETF

The GDX breakouts are stronger but also weakening and not as decisive as gold itself. The chart needs to break up otherwise it will start testing support levels and eventually activate the potential bear flag.

GDX Junior : GDX Ratio

The GDXJ:GDX ratio has a breakout, indicating junior miners are strengthening faster than GDX miners. This is the one indication (amongst all others) suggesting strength ahead.

XAU US Gold and Silver Miners Index

The combined gold and silver miners chart breakout is holding, just. But like the others it needs to break up otherwise it will start testing support levels and eventually activate the potential bear flag.

NUGT US Miners Bull Index

NUGT reflects the current gold miners’ strength but all the same impact factors apply. It has developed a pennant which indicates continued strength.

Silver

The silver chart is still exhibits non-confirmation with gold, which is bearish precious metals. On balance, lower prices lie ahead with identical impact factors as for gold.

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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Market Analysis 20 May 2021

May 20th, 2021 No comments

Executive summary

US equities are starting to decline from elevated levels in the wake of the bearish patterns in sell divergence and rising wedge. Despite this, investor optimism and euphoria appears to not be affected yet and the current market status will probably still continue for a short yet before finally topping out. An early sign of change is the collapse of the crypto market.

US Treasury 10 year yield is starting to resume an advance as US equities start to decline, as yield continues to work higher slowly. This therefore means the bond market is finally moving in the same direction as the equity market, although still tentatively, and the ACID test is still in progress.

The dollar correction down is still incomplete and is likely to weaken further despite any short term strength. Gold and miners continue to rally with breakouts although there are extenuating circumstances indicating that this may be false. These include Treasury yield behaviour, crypto market collapse, and silver’s continuing non-confirmation.

Dow

The Dow Jones starts to test support as the top pattern develops potential to decline further, in the wake of continuing compound sell divergence. The threatening bearish rising wedge formation still remains intact, but barely so.

The Dow 3 months chart however continues to look more bearish with the breakdown from the short term rising wedge holding good, in the wake of the sell divergence. A further breakdown should drop the index to the bottom of the indicated support zone to the region of 32000. However, activity yesterday ended on a bullish candle which indicates more gains in the short term first. The 50-Day MA (red) is providing support.

US Dollar

The US$ index enjoyed a slight recovery in its downtrend as US equities continue declines. But the dollar is likely to continue down to a new low before the bullish patterns in the expanding triangle and reducing wedge impact the dollar to the next strengthening phase. The chart structure now also includes a sequence of lower lows and lower highs.

EuroDollar

The EuroDollar chart reflects the exact opposite of the dollar chart, with a slight weakening in its uptrend. But the Euro is likely to continue up to a new high before the bearish patterns in the expanding triangle and rising wedge impact the Euro to the next weakening phase. The chart structure now also includes a sequence of higher lows and higher highs.

US Treasuries

US Treasury 10 year yield is starting to resume an advance as US equities start to decline, as the mini-break continues to work higher slowly. This therefore means the bond market is finally moving in the same direction as the equity market, although still tentatively, and the ACID test is still in progress.

If Treasury yields continue to advance it will impact gold negatively, due to the inverse correlation between the two. If this starts to occur energetically then gold declines will be significant, and it would appear as if we are on the cusp of this happening.

Gold

Gold has a breakout on high volume with US miners starting to show some strength also. But the gold market is threatened by other factors which suggest the breakout may be false and short-lived. Treasury yields are starting to advance again, and there is a continuing non-confirmation of silver against gold which has a traditionally retarding impact on precious metals’ strength. A concomitant impact may be the collapse of the crypto market with Bitcoin down 50% in a month. The gold spike may be due to crypto investors (and speculators) switching into gold, which probably will not last.

The collapse of Bitcoin since mid-April has seen gold gain most of it’s spike during the same timeframe, especially the last 10 days.

South African Rand

There is slight Rand weakness in it’s overall strengthening against the dollar as the dollar compound buy divergence continues. This all promises eventual Rand weakness as the reducing patterns breakout, but with short term dollar weakness still to come the Rand is likely to continue to stay strong.

Hui : Gold Ratio

There is a HUI / Gold ratio breakout after the gold breakout which is holding for now, but weakening. The breakout may be false as with the gold breakout, in which case the rising wedge will be threatened and begin to act as a bear flag.

GDX US Gold ETF

GDX also has a breakout after the gold breakout which is holding for now, but weakening. It will invalidate if the gold breakout is false, and technically it needs to break up otherwise it will test support levels, in which case the rising wedge will be threatened and begin to act as a bear flag.

XAU US Gold and Silver Miners Index

The combined gold and silver miners chart breakout creates a new high and is therefore more bullish than the other miners’ charts. But all the impact factors nevertheless apply here too, and if the gold price is false the breakout will invalidate with lower prices to come.

NUGT US Miners Bull Index

NUGT reflects the current gold strength but all the same impact factors apply.

Silver

The silver chart illustrates the continuing non-confirmation with gold, which is bearish precious metals. On balance, lower prices lie ahead with identical impact factors as for gold.

Gold : Silver Ratio

The gold / silver ratio is neutral despite a slightly higher close, but a triangle vertex-based reversal approaches with a break either way to follow. This is quite surprising given the extent of gold and miners breakouts, which reinforce the argument that precious metals are not going any higher.

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Market Analysis 13 May 2021

May 13th, 2021 No comments

Executive summary

The Dow Jones starts to decline from elevated levels in the wake of the bearish patterns in sell divergence and rising wedge. Despite this, high levels of investor optimism and euphoria remain with as yet no sign of panic. This therefore may probably still continue for a short yet before finally topping out. 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 resume advancing as US equities start to decline. This is a major change to the pattern because it means the bond market is finally moving in the same direction as the equity market. The so-called ACID test is therefore in progress with the bond market declining together with equities. This is a signal of genuine bear market conditions. The dollar correction down is still incomplete and is likely to weaken further despite any short term strength. Gold and miners continue to rally and still have a short window of bullish potential followed by declines, very much dependent on US Treasury yield behaviour.

Dow

The Dow Jones starts to decline from elevated levels in the wake of sell divergence which has now developed into compound divergence. The decline dropped down to the bottom rising wedge which still remains intact.

The Dow 3 months chart however indicates a breakdown of the short term rising wedge as well as a bearish ‘Shooting Star’ candle at the peak. This is a bearish chart which promises more declines.

US Dollar

There is a slight recovery in the US$ index downtrend as US equities start to decline. The potential is there for more short term dollar strength as equities continue declines, but the dollar chart has changed and now indicates further declines thereafter. The succession of higher highs and higher lows is broken and the whole essence of the US market has changed with respect to Treasury yields, interest rates, and equity behaviour, and support levels will be tested soon.

Long term data in the weekly 5 year chart indicates that the dollar reversal is still incomplete and the comparison with the breakout 3 years ago is no longer similar. Also, the earlier breakout has been invalidated, and further dollar weakness is likely to test support levels.

EuroDollar

There is a slight weakening in the EuroDollar uptrend in a chart that reflects the exact opposite of the dollar chart. There is perhaps more potential for short term Euro weakness, but the chart has changed and now indicates further strength which will test resistance levels soon.

US Treasuries

US Treasury 10 year yield starts to resume advancing as US equities start to decline. This is a major change to the pattern because it means the bond market is finally moving in the same direction as the equity market. The so-called ACID test is therefore in progress with the bond market declining together with equities. This is a signal of genuine bear market conditions.

Negative correlation between US 10 year Treasury yield and the gold price is a historical fact, and once the US Treasury yield uptrend resumes it will also trigger significant gold declines.

Gold

The corrective gold rally continues in a rising wedge formation which is approaching a key resistance region (black circle). This region connects the downsloping reducing channel top line with the upsloping rising wedge, at the same time as the US Treasury yields appear to be resuming yield increases. There is therefore a short window of bullish gold potential followed by declines, or a breakout through the key resistance region with strong gold gains and presumably continued weakening Treasury yields.

The longer term 5 year chart indicates that a gold breakout through key resistance would trigger a bull flag whilst failure to break up would soon start testing support levels. Note the buy signal in the MACD at the bottom. However, the latter is the more likely after some short term gold strength.

South African Rand

There is slight Rand weakness in overall strengthening as the dollar buy divergence develops into compound divergence. This is all to develop into short term Rand weakness, medium term Rand strength, and eventual Rand weakness as the reducing patterns finally break up into dollar strength.

Hui : Gold Ratio

The HUI / Gold ratio rally is gradual, but could energise massively if the gold bull flag triggers. As with gold, there is a key resistance region just above the current price. However, the rising wedge is likely to break to the downside eventually.

GDX US Gold ETF

The GDX rally in progress is more bullish than the HuiGold rally, and the breakout is holding. This could also energise massively in the short term, but is likely to break down eventually through what could be a developing bear flag.

XAU US Gold and Silver Miners Index

The XAU combines gold and silver miners and illustrates a strong rally in progress. This too is likely to energise up in the short term but reverse bearishly in the longer term

Dust US Miners Bear Index

The sharp declines in Dust reflect the current gold strength with eventual breakouts as the gold rally dissipates.

NUGT US Miners Bull Index

NUGT reflects the current gold strength and should test resistance in the short term.

Silver

The silver breakout moves higher but is limited by potential Treasury yield strength.

Gold : Silver Ratio

The gold / silver ratio is neutral despite a slightly lower close, but a triangle vertex-based reversal approaches with a break either way to follow.

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Market Analysis 22 Apr 2021

Apr 22nd, 2021 No comments

Executive summary

The Dow Jones remains elevated and the bearish patterns in the sell divergence and rising wedge remain active, as the high levels of investor optimism and euphoria remain extreme. This will probably still continue for a short yet before finally topping out. 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 yields continue to correct down as US equities remain elevated, although an end to the correction appears to be soon. Higher interest rates are coming, no matter what. The dollar correction down and the EuroDollar correction up are close to completion. Gold and silver rallies might have a short way to go yet and US miners are providing slightly mixed signals, with prospects for metals and miners likely to start significant declines soon.

Dow

The Dow Jones remains elevated and the bearish patterns in the sell divergence and rising wedge remain active, as the high levels of investor optimism and euphoria remain extreme. This will probably still continue for a short yet before finally topping out.

US Dollar

The corrective reversal in the US$ index is beginning to show signs of completion (black circle) as the dollar prepares for the next rally. The succession of higher highs and higher lows is still intact, and this is corroborated by activity in competing currencies, especially the Euro. This is also dependent largely on the timing of US Treasury yield correction and US equity market top, both of which will support the start of a dollar rally.

Long term data in the weekly 5 year chart indicates that the dollar reversal is still incomplete and the comparison with the breakout 3 years ago still holds, but tenuously so.

EuroDollar

The corrective reversal in the EuroDollar is also beginning to show signs of completion (black circle) as the Euro prepares for the next decline. The succession of lower highs and lower lows is still intact, by way of continuing to corroborate expected dollar movements.

Long term data in the weekly 5 year chart indicates that the EuroDollar reversal is still incomplete and the comparison with the breakout 3 years ago still holds, but tenuously so.

US Treasuries

US Treasury 10 year yield continues to correct down in the wake of the sell divergence, as US equities remain elevated. We still need increased yields during the ‘acid test’ when equities are actually declining, and although this has not happened yet it could happen at any time, when equities and the bond market start declining at the same time. It appears the Treasury yield correction may not last much longer.

The above chart illustrates the negative correlation between US 10 year Treasury yield and the gold price, in a 5 year daily view. Just as the Treasury yield correction down is causing the gold rally, so also will the end of the yield correction cause the end of the gold rally and resume the start of gold declines.

Gold

The Gold rally is close to completion as both the Treasury yield correction and dollar correction appear to be close to completion. The chart illustrates the potential gold correction range and how close it is to completion. The next decline phase will threaten activation of the next H&S neckline at about $1670.

A quick look at the longer term 5 year chart indicates that gold could soon test support below $1670 all the way down to the $1450 level.

South African Rand

The Rand is close to the start of the next weakening phase as the dollar is close to resuming strength. This is supported in the chart by the creation of a dollar buy divergence as price approaches a triangle vertex-based reversal.

Hui : Gold Ratio

The HUI / Gold ratio breaks higher, but not through the declining channel, as it moves up the rising wedge towards the triangle vertex-based reversal. But the MAs continue to provide strong support.

GDX US Gold ETF

GDX has a breakout as it invalidates the earlier H&S breakdown, but has also created a mild sell divergence promising lower prices ahead. GDX is the only US miner vehicle with a breakout whilst all the others have not, as indicated on the next chart.

Other US miners

Other US miners have not achieved breakouts, including the GDXJ (Juniors).

Dust US Miners Bear Index

Dust declines continue as the gold rally continues. The chart is now reaching regions of strong support which is another indication of gold being close to the end of its rally. The opposite influence is indicated in the next chart NUGT which is a US miners bull index.

NUGT US Miners Bull Index

NUGT has a breakout (enjoying the gold rally) but in the process has developed a reverse sell divergence, which promises an end to the gold rally.

Silver

The silver rally should go higher but is limited because the dollar and Treasury yield corrections are close to completion.

Gold : Silver Ratio

The gold / silver ratio breakout is invalidated with a slightly lower close at 67.49. This becomes somewhat indecisive as the ratio also approaches the triangle apex for a break either way.

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