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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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Market Analysis 8 Apr 2021

Apr 8th, 2021 No comments

Executive summary

The Dow Jones remains elevated as the bearish patterns in the sell divergence and rising wedge remain active. This dichotomy is also evident in the US equity market structure itself with increasingly negative breadth and volume, resulting in the slowest day on Wall Street yesterday (Wed), all against continuing higher prices. Despite this negative trend, prices could still go higher before finally topping out, as the continued titanic struggle to keep US markets elevated continues. 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 turn down slightly as US equities remain elevated, and may or may not correct more aggressively in the short term. But higher interest rates are coming, no matter what. The dollar breakout and the EuroDollar breakdown are both building momentum after corrective reversals which look close to completion. The Gold and silver rallies have faded, despite current reversals, and both metals and miners look ready for likely declines ahead.

Dow

The Dow Jones remains elevated as the bearish patterns in the sell divergence and rising wedge remain active. This dichotomy is also evident in the US equity market structure itself with increasingly negative breadth and volume, resulting in the slowest day on Wall Street yesterday (Wed), all against continuing higher prices. Despite this negative trend, prices could still go higher before finally topping out.

US Dollar

The corrective reversal in the US$ index is close to completion as the dollar prepares for the next rally up-leg. The succession of higher highs and higher lows continues intact, and this is corroborated by activity in competing currencies, especially the Euro. This is also dependent largely on the potential US Treasury yield correction and US equity market decline, both of which could interfere with further dollar strength.

Long term data in the weekly 5 year chart supports the bullish dollar breakout as momentum builds, despite the corrective reversal still in process. Similarity with the breakout 3 years ago provides good evidence of dollar strength soon.

EuroDollar

The corrective reversal in the EuroDollar is close to completion as the succession of lower highs and lower lows continues in preparation for the next decline.

Long term data in the weekly 5 year chart supports the bearish Euro as downwards momentum builds, despite the corrective reversal still in process. Also, similarity with the breakdown 3 years ago provides good evidence of continued EuroDollar weakness.

US Treasuries

US Treasury 10 year yield turns down slightly in the wake of the sell divergence, as US equities remain elevated. There is little activity in yield at the moment, which may or may not correct more aggressively in the short term, spurred on by the gold cross (green square) indicating the move towards higher yields is real. The sell divergence is still active though and this indicates a potential for a reversal which has long since been indicated by long term data in the 5 year chart (not shown). We still need increased yields during the ‘acid test’ when equities are actually declining, and this has not happened yet.

The above chart illustrates the negative correlation between US 10 year Treasury yield and the gold price, in a 5 year daily view. Any sustained yield correction down now is likely to provide energy for a stronger gold rally neither of which is happening yet. Much depends on the extent and timing of any US Treasury yield correction which will impact directly on US interest rates, dollar value, equity and bond market behaviour, and gold.

Gold

The Gold rally fades into a bearish decline below the H&S breakdown which indicates potential to drop all the way to about $1450. The potential corrective reversal in US Treasury yield could strengthen the gold rally which has already reversed back up towards $1750 in near completion of its potential correction range. Failing this, further declines are likely after that, because the H&S breakdown has held and the next H&S threatens activation below 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 continues to strengthen against the dollar but has reached a region of strong dollar support, and is now close to the start of a weakening phase as the dollar is close to the start of resuming strength.

Hui : Gold Ratio

The HUI / Gold ratio is moving sideways into an approaching triangle vertex-based reversal. Indications for further sideways movement in the short term is strong followed by further declines thereafter. The MAs appear to be providing strong resistance.

GDX US Gold ETF

The GDX is moving sideways as the H&S breakdown holds with the ultimate final target decline price in the region of $22 / $23. Price is moving towards the approaching triangle vertex-based reversal, and the chart remains bearish.


This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to further breakdowns.


Dust US Miners Bear Index

The Dust chart base breakout continues in a long time coming, and price is moving sideways to down towards the approaching triangle vertex-based reversal. The chart remains bullish.

Silver

The silver rally, like gold, fades into a bearish decline, but the potential corrective reversal in US Treasury yield could strengthen the silver rally which has already reversed back up towards the diagonal resistance trendline. But the breakdown is holding and if the trendline holds then further declines will test support soon.

Gold : Silver Ratio

The gold / silver ratio breakout is holding despite a slightly lower close at 68.98. This therefore still indicates higher ratios and lower metals ahead.

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Market Analysis 1 Apr 2021

Apr 1st, 2021 No comments

Executive summary

The Dow Jones remains elevated and much the same as last week, as divergence and the rising wedge continues to threaten decline waiting to happen. This is supported by non-confirmation of the 3 main US indices and the waning of breadth and volume in the equity market. The continued titanic struggle to keep US markets elevated cannot continue for much longer and we continue to be positioned 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 rise but are close to a corrective reversal which promise a weaker US dollar, extended equity gains, and higher gold. A breakout in the gold / silver ratio promises lower metals which implies a stronger dollar and US equities are in a topping pattern. But higher interest rates are coming, no matter what: Despite world governments need to prevent it.
The dollar breakout and the EuroDollar breakdown are both building momentum which is likely to extend into multi-month phases. The Gold rally has faded and silver remains weaker than gold, as the breakout in the gold / silver ratio indicates weaker metals and miners ahead.

Dow

The Dow Jones remains elevated as the bearish patterns in the sell divergence and rising wedge remain active. This dichotomy is also evident in the non-confirmation of the 3 main US indices and the waning of breadth and volume in the equity market, as the titanic struggle to keep US markets elevated continues.

US Dollar

Multi-breakouts start to build momentum in dollar value as the rally continues. But we are getting closer to a corrective reversal before the strength phase continues to yet higher values. This is dependent largely on the potential US Treasury yield correction and US equity market decline, both of which could interfere with further dollar strength. Price has advanced through the 200-Day MA (green) without much of a pause, so there may well be further dollar gains first.

Long term data in the weekly 5 year chart supports the bullish dollar breakout as momentum builds, with corrective resistance a little way off still. The similarity with the breakout 3 years ago indicates corrections are soon but that the rally will prove to be long-lived.

EuroDollar

EuroDollar behaviour supports the strong dollar rally as it builds momentum below the breakdown. The Euro appears more bearish than the dollar is bullish, with a pronounced decline through the 200-Day MA (green).

Long term data in the weekly 5 year chart indicates the EuroDollar in freefall as it more than mimics dollar behaviour in the opposite direction.

US Treasuries

US Treasury 10 year yield remains elevated in the rising channel as US equities remain elevated, spurred on by the gold cross (green square) indicating the move towards higher yields is real. The sell divergence is still active though and this indicates a potential for a reversal which has long since been indicated by long term data in the 5 year chart (not shown). We still need increased yields during the ‘acid test’ when equities are actually declining, and this has not happened yet.

The above chart illustrates the negative correlation between US 10 year Treasury yield and the gold price, in a 5 year daily view. Any sustained yield correction down now is likely to provide energy for a gold rally which is not happening yet. Much depends on the extent and timing of any US Treasury yield correction which will impact directly on US interest rates, dollar value, equity and bond market behaviour, and gold.

Gold

The Gold rally fades into a bearish decline below the H&S breakdown which indicates potential to drop all the way to about $1450. The potential corrective reversal in US Treasury yield could re-energise into a gold rally which could extend to $1750, but further declines are likely after that. The next H&S neckline will activate below about $1670.

South African Rand

The Rand is strengthening against a stronger dollar, in correcting down from dollar resistance and above that a region of strong resistance at the 200-Day MA (green). But this situation cannot last because it makes no sense, despite the potential for some dollar weakness (and further Rand strength) during a US Treasury yield corrective reversal to lower yields.

Longer term data in the US$zar weekly 5 year chart indicates the Rand moving sideways in a declining channel. This illustrates the likely dollar advance into a breakout of the channel and subsequent Rand weakness.

Hui : Gold Ratio

The HUI / Gold ratio is moving sideways into an approaching triangle vertex-based reversal. Indications for further sideways movement in the short term is strong followed by further declines thereafter. The MAs appear to be providing strong resistance.

GDX US Gold ETF

The GDX breakdown from the H&S is holding with the ultimate final target decline price in the region of $22 / $23. Price is moving sideways with strong resistance from the MAs towards the approaching triangle vertex-based reversal. The chart remains bearish.


This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to further breakdowns.


Dust US Miners Bear Index

The Dust chart base breakout continues in a long time coming, and price is moving sideways towards the approaching triangle vertex-based reversal. The chart remains bullish.

Silver

The silver breakdown gains momentum as silver remains weaker than gold in a chart that looks bearish. As with gold, silver is supported by Treasury yield decline and retarded by dollar advance.

Gold : Silver Ratio

The gold / silver ratio advanced to 69.93 as the breakout holds. The chart is beginning to look as if it has bottomed which means higher ratios and lower metal prices ahead. Technically, the breakout of the declining expanding channel trendline has invalidated, although this may be short-lived.

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Market Analysis 24 Mar 2021

Mar 24th, 2021 No comments

Executive summary

The status in US equities remains much the same as last week as divergence and the rising wedge continues to threaten decline waiting to happen. Rising US interest rates are set to correct down slightly and this is leading to conflicting signals in the markets which will probably lead to increased volatility until main trends continue. Lower US Treasury yields promise a weaker US dollar, higher gold, and extended equity gains, but technically it looks like the reverse could happen. A breakout in the gold / silver ratio promises lower metals which implies a stronger dollar and US equities are in a topping pattern. But higher interest rates are coming, no matter what: Despite world governments need to prevent it.

The dollar breakout and the EuroDollar breakdown are both holding in confirming the start of the dollar strengthening phase which could be multi-month. US Treasury yields continue to move up, but with the potential now for a reversal which may already have started. Gold is still in a rally but silver is weaker and looks vulnerable, while miners look bearish.

Dow

The Dow Jones turns down slightly from the top as the equity markets show signs of running out of steam. Technically, the Dow remains the same as last week as divergence and the rising wedge continues to threaten decline and trend change waiting to happen. Rising US Treasury yield is set to correct down slightly which may now already have started, and this will provide some relief which should extend equity gains further. But once the main US Treasury yield trend resumes, equity and bond markets will morph into a bear market as the year 2021 progresses. Much depends on the extent of the interest rate correction.

US Dollar

The dollar breakout holds and starts to build momentum at the beginning of the dollar strength phase. But this is dependent on US Treasury yield strength and US equity market decline, both of which could interfere with further dollar strength. This is also reflected in the dollar chart as price approaches strong resistance including the 200-Day MA (green). If the US Treasury yield correction is quick and the Dow Jones continues to decline then dollar strength could ultimately develop into a multi-month rally, and more.

Long term data in the weekly 5 year chart supports the bullish dollar breakout which is similar to the breakout 3 years ago and should develop into a strong rally. If this is true, it must be because of a short US Treasury yield correction down as well as continued US equity declines and lower gold prices.

EuroDollar

EuroDollar behaviour supports the strong dollar rally as it holds its breakdown in starting to build weak momentum. Although it too is now at strong support in the 200-Day MA (green).

Long term EuroDollar data in the weekly 5 year chart is also mimicking dollar behaviour in the opposite direction with a successful breakdown of the rising wedge similar to that of 3 years ago, indicating multi-month EuroDollar weakness.  

US Treasuries

US Treasury 10 year yield continues to move up in the rising channel, spurred on by the gold cross (green square) indicating the move towards higher yields is real. But, it has now developed sell divergence which creates potential for a reversal which has long since been indicated by long term data in the 5 year chart (next). We still need increased yields during the ‘acid test’ when equities are actually declining, and this has not happened yet.

Weekly yield has started to turn down in the 5 year chart. This has been prompted for some time now and is finally also signalled in the 12 month chart (previous). Because this is long term weekly data it may indicate the start of a lengthy correction which in turn could promise protracted declines in interest rates and the dollar, as well as continued increases in US equities and gold. Despite the fact it seems unlikely, and even impossible.

The above chart illustrates the negative correlation between US 10 year Treasury yield and the gold price, in a 5 year daily view. Any sustained yield correction down now is likely to provide energy for the gold rally to continue. Much depends on the extent and timing of any US Treasury yield correction which will impact directly on US interest rates, dollar value, equity and bond market behaviour, and gold.

Gold

Gold is starting to rally, and this will be supported further by US Treasury yield declines and retarded by dollar advances. Some indication of extent is provided by the chart which suggests the gold correction may reach as far up into the region of the H&S neckline. This covers a range from $1670 to $1800 which is a potential 8% gain.

South African Rand

The Rand is strengthening against a stronger dollar, in correcting down from the top of the reducing channel. There is a region of strong dollar resistance there including the 200-Day MA (green). Further dollar strength could propel the Rand into a breakout of the reducing channel which will be additionally bearish the Rand, but much depends on the pending US Treasury correction as to whether this happens sooner or later.

Hui : Gold Ratio

The HUI / Gold ratio reacts down sharply as miners lead gold lower. The ratio has reacted down below both the 200-Day (green) and 50-Day (red) MAs as it moves sideways towards a triangle vertex-based reversal. The chart is again beginning to assume a bearish appearance.

GDX US Gold ETF

GDX reacts down sharply from the H&S neckline (and 200-Day MA (green) as the breakdown holds, and price moves sideways towards a triangle vertex-based reversal. The chart remains bearish and the final H&S target decline remains in the region of $22 / $23.

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This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to further breakdowns.

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Dust US Miners Bear Index

The Dust chart base breakout continues in a long time coming, and the gold rally has resulted in price declining from resistance. But price has moved up off support as it continues sideways before the next breakout attempt.

Silver

Silver is now decidedly weaker than gold and has a mini-breakdown as it starts to look bearish. As with gold, silver is supported by Treasury yield decline and retarded by dollar advance.

Gold : Silver Ratio

The gold / silver ratio advanced to 68.38 in a breakout. This is the first sign in a while that indicates higher ratios and lower metal prices ahead. Technically, we need to breakout the declining expanding channel trendline.

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Market Analysis 17 Mar 2021

Mar 17th, 2021 No comments

Executive summary

The status in US equities remains much the same as last week as divergence and the rising wedge continues to threaten decline waiting to happen. Rising US interest rates are set to correct down slightly and this is leading to conflicting signals in the markets which may be aggravated further by US Fed pronouncements today, as this is FOMC week in the US. This could all add to increased volatility in probably extending equity gains further, weakening the dollar, and strengthening the gold rally. But once the main US Treasury trend resumes, equity and bond markets will be under increased bearish pressure as the year 2021 progresses.

The dollar breakout and the EuroDollar breakdown are both holding in confirming the start of the dollar strengthening phase which could be multi-month. US Treasury yields continue to move up, but with the potential now for a reversal which has the effect of retarding dollar gains and supporting a gold rally which has started.

Dow

The Dow Jones continues to edge up to new highs despite the sell divergence signal holding. The status therefore remains the same as last week as divergence and the rising wedge continues to threaten decline and trend change waiting to happen. Rising US interest rates are set to correct down slightly which will provide some relief and probably extend equity gains further, but once the main US Treasury yield trend resumes, equity and bond markets will morph into a bear market as the year 2021 progresses. Much depends on the extent of the interest rate correction.

US Dollar

The dollar breakout is holding in confirming the start of the dollar strength phase. This could ultimately develop into a multi-month rally but momentum is dependent on the pending US Treasury yield correction, in timing and extent. Declining yield will retard dollar gains. But once complete, the dollar will return to its primary strength phase as Treasury yields finally strengthen and equities decline.

Long term data in the weekly 5 year chart illustrates the bullish dollar breakout which, on a fractal basis, is not only likely to be similar to the breakout 3 years ago but in fact looks nearly identical. Despite short term interruptions caused by the Treasury yield correction, the dollar strength phase could be major with corresponding negative impact on equity and bond declines as well as lower gold prices.

EuroDollar

The EuroDollar breakdown is holding in confirming the start of the weakening phase, and also corroborating dollar strength. This could ultimately develop into a multi-month decline but, like the dollar, is dependent on the pending US Treasury yield correction, in timing and extent. Declining yield will retard Euro declines. But once complete, the EuroDollar will return to its primary weakening phase as US Treasury yields finally strengthen and equities decline.

US Treasuries

US Treasury 10 year yield continues to move up in the rising channel, spurred on by the gold cross (green square) indicating the move towards higher yields is real. But, it has now developed sell divergence which creates potential for a reversal which has long since been indicated by long term data in the 5 year chart (next). We still need increased yields during the ‘acid test’ when equities are actually declining, and both are not doing this yet.

Weekly yield has started to turn down in the 5 year chart. This has been prompted for some time now and is finally also signalled in the 12 month chart (previous). Because this is long term weekly data it may indicate the start of a lengthy correction which in turn could promise protracted declines in interest rates and the dollar, as well as continued increases in US equities and gold. Despite the fact it seems unlikely, and even impossible.

The above chart illustrates the negative correlation between US 10 year Treasury yield and the gold price, in a 5 year daily view. Any yield correction now is likely to provide energy for the gold rally to continue. Much depends on the extent and timing of any US Treasury yield correction which will impact directly on US interest rates, dollar value, equity and bond market behaviour, and gold.

Gold

Gold is starting to rally, and this will be supported further by US Treasury yield declines and retarded by dollar advances. Some indication of extent is provided by the chart which suggests the gold correction may reach as far up into the region of the H&S neckline. This covers a range from $1670 to $1800 which is a potential 8% gain.

South African Rand

The Rand is strengthening against the dollar, in correcting down from the top of the reducing channel. There is a region of strong dollar resistance there including the 200-Day MA (green). Further dollar strength could propel the Rand into a breakout of the reducing channel which will be additionally bearish the Rand, but much depends on the pending US Treasury correction as to whether this happens sooner or later.

Hui : Gold Ratio

The HUI / Gold ratio rises in the wake of the buy divergence as miners lead gold higher in a potential rally that has also deactivated the earlier H&S formation. But the ratio is beginning to react down from a region of strong resistance, including the 200-Day MA (green). A new potential H&S pattern could be forming lower down at the bottom of the support zone, as the ratio moves sideways towards the triangle apex from which a break is inevitable, either up or down.

GDX US Gold ETF

GDX has corrected up to the H&S neckline. From here price will either invalidate the H&S or confirm the breakdown, as price moves sideways towards the triangle apex may develop into a strong reversal point, including the 200-Day MA (green) at about $35. Invalidation of the H&S breakdown will rule out the target decline price at $22/ $23 for now.


This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to further breakdowns.


Dust US Miners Bear Index

The Dust chart base breakout continues in a long time coming, and the gold rally has resulted in price declining from resistance. Dust will now move sideways to down before any further breakout attempt.

Silver

Silver has started to rally but is doing so weaker than gold, for now. Price, as with gold, is supported by Treasury yield decline and retarded by dollar advance.

Gold : Silver Ratio

The gold / silver ratio advanced slightly to 66.57, as it continues to drift sideways to up. But we still need more price movement to make more intelligent judgements.

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Market Analysis 10 Mar 2021

Mar 10th, 2021 No comments

Executive summary

The status in US equities remains much the same as last week as divergence and the rising wedge continues to threaten decline waiting to happen. Rising US interest rates are beginning to correct down slightly which will provide some relief and probably extend equity gains further, weaken the dollar, and strengthen the gold rally, but once the main trend resumes, equity and bond markets will morph into a bear market as the year 2021 progresses.

The dollar has a breakout which confirms the start of a strengthening phase which could be multi-month. US Treasury yields continue to move up, but with the potential now for a reversal which has the effect of retarding dollar gains and supporting a gold rally which has started.

Dow

The Dow Jones continues to hold to new highs despite declines in the oscillators which has developed divergence into a compound sell divergence. The status therefore remains the same as last week as divergence and the rising wedge continues to threaten decline waiting to happen. Rising US interest rates are beginning to correct down slightly which will provide some relief and probably extend equity gains further, but once the main trend resumes, equity and bond markets will morph into a bear market as the year 2021 progresses.

US Dollar

The dollar has a breakout from the reducing wedge which confirms the start of a strengthening phase which could be multi-month. But US Treasury yields could be starting a downward correction which will retard dollar gains. Once complete however, the dollar will return to its primary strength phase as Treasury yields finally strengthen and equities decline.

Long term data in the weekly 5 year chart illustrates the bullish breakout which, on a fractal basis, is likely to be similar to the breakout 3 years ago. Despite short term interruptions caused by Treasury yield corrections, the dollar strength phase could be major with corresponding negative impact on equity and bond declines as well as lower gold prices.

EuroDollar

The EuroDollar has a breakdown from the rising wedge, confirming the start of its primary weakness phase as US Treasury yields and the US dollar strengthen. The Euro is a follower not a leader, and will be driven inversely by the impacts driving the dollar.

US Treasuries

US Treasury 10 year yield continues to move up in the rising channel, spurred on by the gold cross (green square) indicating the move towards higher yields is real. But, it has now developed sell divergence which creates potential for a reversal which has long since been indicated by long term data in the 5 year chart (next). We still need increased yields during the ‘acid test’ when equities are actually declining, and both are not doing this yet.

Weekly yield has started to turn down in the 5 year chart. This has been prompted for some time now and is finally also signalled in the 12 month chart (previous). Because this is long term weekly data it may indicate the start of a lengthy correction which in turn could promise protracted declines in interest rates and the dollar, as well as continued increases in US equities and gold. Despite the fact it seems unlikely, and even impossible.

The above chart illustrates the negative correlation between US 10 year Treasury yield and the gold price, in a 5 year daily view. Any yield retracement now is likely to cause gold to increase, providing some measure of extent in both cases. Much depends on the extent and timing of any Treasury yield correction which will impact directly on US interest rates, dollar value, equity and bond market behaviour, and gold.

Gold

Gold is starting to rally, and this will be supported by Treasury yield declines and retarded by dollar advances. Some indication of extent is provided by the chart which suggests the gold correction may reach as far up into the region of the H&S neckline. This covers a range from $1670 to $1800 which is a potential 8% gain.

South African Rand

The Rand has started to weaken against the dollar but has corrected down from the top reducing wedge trendline in a region of strong resistance, just below the 200-Day MA (green). Any further dollar strength could propel the Rand into a breakout of the reducing channel which will be additionally bearish the Rand.

Hui : Gold Ratio

The HUI / Gold ratio rises in the wake of the buy divergence as miners lead gold higher in a potential rally. But in the scheme of things price is really only moving sideways towards the triangle apex. The chart has lost its bearish character, as well as any H&S breakdown potential.

GDX US Gold ETF

GDX has started to correct up despite the H&S breakdown which is still active. However, correction potential is increasing and this will start to test resistance soon. The triangle apex is approaching and may develop into a strong reversal point, including the 200-Day MA (green) at about $35. Invalidation of the H&S breakdown will rule out the target decline price at $22/ $23 for now.


This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to further breakdowns.


Dust US Miners Bear Index

The Dust chart base breakout continues in a long time coming, and the gold rally has resulted in price declining from resistance. Dust will now move sideways to down before any further breakout attempt.

Silver

Silver has started to rally and could technically go to a new high. But price, as with gold, is supported by Treasury yield decline and retarded by dollar advance.

Gold : Silver Ratio

The gold / silver ratio advanced slightly to 65.57, as it continues to drifts sideways to down. But we still need more price movement to make more intelligent judgements.

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Market Analysis 3 Mar 2021

Mar 3rd, 2021 No comments

Executive summary

The Dow Jones remains close to a peak in a threatening structure that is much the same as last week. But rising US Treasury yields are probably due a correction which will provide some relief in extending equity gains further, weaken the dollar, and initiate a gold rally. But that will be a correction followed by the main trend again afterwards including higher interest rates, stronger dollar, lower gold, and equity and bond markets in a culminating bull market which will morph into a bear market as the year 2021 progresses.
The dollar is trending sideways which could see the currency move to a new low during the US Treasury correction, followed by a return to its primary strength phase as Treasury yields strengthen again and equities decline. Gold declines are close to a reversal.

Dow

The Dow Jones remains close to a peak but is nibbling at a breakdown through the rising wedge, while the sell divergence signal remains active. The index actually broke below the rising wedge but bounced up to invalidate the break. Otherwise, the threatening structure remains the same as last week, awaiting the final sell trigger. Rising US interest rates are probably due a correction which will provide some relief and extend equity gains further. Once the main trend resumes, equity and bond markets will morph into a bear market as the year 2021 progresses.

US Dollar

The dollar is trending sideways but in the wake of a reverse sell divergence (red circles) could see the currency move to a new low during the US Treasury correction. Once complete, the dollar will return to its primary strength phase as Treasury yields finally strengthen and equities decline. This is supported by essentially bullish Cots data (not shown).

Long term data in the weekly 5 year chart indicates more dollar weakness before the bullish wedge breakout, similar to the breakout of 3 years ago on a fractal basis. This will lead to substantial gains with concomitant impact on equity and bond declines as well as lower gold prices.

EuroDollar

The EuroDollar is trending sideways but in the wake of a reverse buy divergence (blue circles) could see the currency move to a new high during the US Treasury correction. Once complete, the Euro will return to its primary weakness phase as US Treasury yields and the US dollar strengthen. The Euro is a follower not a leader, and will be driven inversely by the impacts driving the dollar.

US Treasuries

US Treasury 10 year yield continues to advance in the rising channel, spurred on by the gold cross (green square) indicating the move towards higher yields is real. However, it is starting to take a breather as US equities take a breather. Also, the sell divergence in the long term data 5 year chart (next chart) indicates a strong correction to lower yields at some point, and this might be now. We still need increased yields during the ‘acid test’ when equities are actually declining, and both are not doing this yet.

The weekly chart indicates the 10 year yield reverse sell divergence signal indicating a correction to lower yields. Yield has actually started to move down already and this might be the start of the correction which could be lengthy because this is weekly long term data. This in turn could promise protracted declines in interest rates and the dollar, and protracted and continued increases in US equities.

Gold

Gold declines in multi-breakdowns including activation of the H&S which theoretically could jettison price by the height of the head down to base support at $1450. But gold is well into the support zone and could be close to a correction as it nears $1670. Also, US Treasury yields are starting to decline and this could trigger a weaker dollar and stronger gold. Continued bearish Cots data supports lower gold and any correction therefore might be shortlived.

Gold Cots data indicates a slight narrowing of the dilation which proportionately represents the gold declines to date. The data supports further gold declines, with or without any correction.

South African Rand

The Rand has started to weaken against the dollar in the wake of the dollar buy divergence. But price remains well within the reducing channel formation which it needs to breach before any sustained Rand weakness, as price drifts sideways towards the triangle vertex-based reversal point which will supply impetus either way.

Hui : Gold Ratio

The HUI / Gold bearish dome holds as the H&S activates and then invalidates, as the ratio rises in the wake of the buy divergence. This indicates a sideways move with the US miners not really more bearish than gold itself, despite a more bearish GDX in the next chart. The chart retains a bearish character, but if a gold correction up is to be expected soon, as seems likely, then the dome structure might be threatened. Any decisive break down is obviously bearish US miners.

GDX US Gold ETF

GDX has a more bearish chart in that the H&S has activated and is holding within the bearish dome. Technically, this presumes price could jettison by the height of the head down to the level of $23 but, as with gold itself, is probably close to a correction up first.


This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to further breakdowns.


Dust US Miners Bear Index

The Dust chart base breakout continues in a long time coming, and the gold decline has resulted in only a tepid breakout attempt that has met resistance. As gold is close to a countertrend rally it seems probable that Dust will now move sideways to down before any further breakout attempt.

Silver

Silver is still stronger than gold and the continued non-confirmation implies an end to any precious metal rally potential, being more normal at times of major trend change. Silver therefore seems poised to decline because of this and bearish Cots data, but still vulnerable (like gold) to the cocktail of impacts in US Treasury yield movement, interest rate change, dollar value, etc., which suggests a silver correction up next.
Pic Silver Cots 3y

Silver Cots data indicates continued massive dilation (red circle) which is bearish with silver declines to continue. This can be seen (verified) by the opposite massive constriction which occurred in Sep 2018 at the start of a strong strengthening phase in silver.

Gold : Silver Ratio

The gold / silver ratio declined slightly to 64.50, as it continues to drifts sideways to down. But we need more price movement to make more intelligent judgements.

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Market Analysis 24 Feb 2021

Feb 24th, 2021 No comments

Executive summary

Rising interest rates cause asset prices to decline and the currency to advance, and they are rising in the US as Treasury yields continue to rise. Gold seems to be the first asset class to succumb and the dollar is also in the process of bottoming. But, the rise has been swift and there are signs that a correction is close which will include reversals in declining Treasury yields which will trigger lower dollar, higher gold, and ironically even yet a higher Dow Jones. But that will be a correction followed by the main trend again in higher interest rates, stronger dollar, lower gold, and equity and bond markets in a culminating bull market which will morph into a bear market as the year 2021 progresses.
The dollar is weakening in a correction before it resumes its strengthening phase. Gold and US miners have started potential rallies which, once complete, will resume further declines.

Dow

The Dow Jones remains at a peak in a chart structure including a bearish rising wedge combined with a sell divergence in a threatening structure that awaits the final sell trigger. Rising interest rates cause asset prices to decline and this will impact the Dow if the trend continues. But, the rise has been swift and there are signs that a correction is close. But that will be a correction followed by the main trend again in higher interest rates, stronger dollar, lower gold, and equity and bond markets in a culminating bull market which will morph into a bear market as the year 2021 progresses.

US Dollar

The dollar is weakening in the wake of a reverse sell divergence (red circles) which could see the currency move to a new low. But marginal strength is still holding within the bullish reducing wedge pattern, powered by the consecutive buy divergences (blue circles), which will see the dollar return to its primary strength phase as Treasury yields finally strengthen and equities decline. This is supported by essentially bullish Cots data.

In long term data in the weekly 5 year chart the dollar breakout is just holding, although weakening fast. This may justify reversals in declining US Treasury yields and a gold rally. Once the dollar has a decisive breakout from the bullish reducing wedge pattern it is likely to follow the breakout of 3 years ago on a fractal basis, in substantial gains with concomitant impact on equity and bond declines as well as lower gold prices.

US dollar Cots data, which admittedly is not a short term indicator, is still dollar bullish although the slight dilation (red circles) could be cause for interim dollar weakness before the final strength phase starts in earnest.

EuroDollar

The EuroDollar is strengthening in the wake of a reverse buy divergence (blue circles) which could see further strength. But marginal weakness is still holding within the bearish rising wedge pattern, powered by the consecutive sell divergences (red circles), which will see the EuroDollar return to its primary weakening phase. The Euro is a follower not a leader, and will be driven inversely by the impacts driving the dollar. Euro weakness is also supported by the increasingly negative economic data coming out of the EU (certainly when compared with the US which is bad enough).

US Treasuries

US Treasury 10 year yield continues to advance as US equities continue to grind out new highs, spurred on by the 50-Day MA (red) crossing up over the 200-Day MA (green) indicating the move towards higher yields is real. However, the sell divergence in the long term data 5 year chart (next chart) indicates a strong correction to lower yields at some point. So, yield still continues to grind up slowly within the confines of the rising channel, but we still need increased yields during the ‘acid test’ when equities are actually declining, which they are not doing yet.

The weekly chart indicates the 10 year yield actually gapped up for a second week running but still the sell divergence signal holds, and this indicates lower yields next. This is in the long term data and yield declines may actually be lengthy. This in turn could promise protracted declines in interest rates and the dollar, and protracted and continued increases in US equities.

Gold

Gold starts a potential rally off the double bottom which has stalled the multi-breakdowns. This could be a strong rally if US Treasury yields start declining, or otherwise mild if not. Otherwise gold is positioned to decline further with support from rising interest rates and the dollar, plus continued bullish Cots data.

Gold Cots data indicates continued massive dilation (red circle) which is bearish with gold declines to continue. This can be seen (verified) by the opposite massive constriction which occurred in Sep 2018 at the start of a strong strengthening phase in gold.

South African Rand

The Rand starts to weaken against a dollar also weakening, in the wake of a dollar/Zar buy divergence. But price remains well within the reducing channel formation which it needs to breach before any sustained Rand weakness, as price drifts sideways towards the triangle vertex-based reversal point which will supply impetus either way.

Hui : Gold Ratio

The HUI / Gold ratio bearish dome holds, but the buy divergence could breakout up to destroy the dome. However, a H&S pattern has developed and any decisive breakdown through the neckline will be bearish in testing the support zone all the way down to the bottom at a ratio of 0.115. The chart continues to look bearish for now, with the promise of lower miner and gold prices to come.

GDX US Gold ETF

GDX has a similar chart with competing buy divergence and H&S pattern that could see either the dome destroyed or severe declines down to the $22/$23 level.


This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to further breakdowns.


Dust US Miners Bear Index

The Dust chart base breakout continues in a long time coming, with any breakout soon countered by a gold rally.

Silver

Silver is still stronger than gold and the continued non-confirmation implies an end to any precious metal rally potential, being more normal at times of major trend change. Silver therefore seems poised to decline because of this and the bearish Cots data, although still vulnerable (like gold) to the cocktail of impacts in US Treasury yield movement, interest rate change, dollar value, etc. The recent spike in silver interest is probably subsiding.

Silver Cots data indicates continued massive dilation (red circle) which is bearish with silver declines to continue. This can be seen (verified) by the opposite massive constriction which occurred in Sep 2018 at the start of a strong strengthening phase in silver.

Gold : Silver Ratio

The gold / silver ratio advanced slightly to 65.22, as it continues to drifts sideways to down. But we need more price movement to make more intelligent judgements.

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Market Analysis 18 Feb 2021

Feb 18th, 2021 No comments

Executive summary

US interest rates are rising and this will cause asset prices to decline and the dollar to advance. Gold is the first asset class to start declining and the dollar has seemingly bottomed. This will spill over to equities if the trend continues, and the Dow Jones is about to oblige as it grinds out another new high in a chart structure that threatens declines about to happen.

The US dollar strengthening phase has started because interest rates are rising, although this may correct if US Treasury yields start to weaken again. Gold has started to weaken and is poised for further declines although silver is the stronger of the two. US miners continue to look bearish.

Dow

US Treasury yields are the principle driver of US interest rates, and they are rising. Rising US interest rates cause asset prices to decline and the dollar to advance. Gold is the first asset class to start declining and the dollar has seemingly bottomed. This will spill over to equities if the trend continues, and the Dow Jones is about to oblige as it grinds out another new high in a chart structure that threatens declines about to happen. The bearish rising wedge continues as the sell divergence extends in a threatening structure that awaits the final sell trigger. This is a culminating bull market which will morph into a bear market as the year 2021 continues to progress, with many different aspects of investor sentiment having evolved through exuberant to euphoric and beyond as the market surge moves through various risk barriers towards madness.

US Dollar

The dollar is powered by rising interest rates and the support of bullish Cots data, whilst technically it is still in the reducing wedge pattern in spite of the 2 consecutive buy divergences. It may still correct down further because of the strong link through US equities and interest rates, to US Treasury yields which may still weaken. If there are further equity gains then the dollar will continue to languish, and vice versa. Dollar strength will become supercharged once US equities actually start real declines caused by higher interest rates.

In long term data in the weekly 5 year chart the dollar breakout has held with some strength after the ‘kiss goodbye’. This truly pregnant moment continues, as we await developments in US Treasury yields which impact interest rates, equity and bond values, as well as the gold price.

US dollar Cots data, which admittedly is not a short term indicator, is still dollar bullish (for close to 3 months now). And whether the dollar weakens next or not it will strengthen eventually, and quite soon too.

EuroDollar

The EuroDollar is in a weakening phase, although still in the rising wedge pattern despite the 2 consecutive sell divergences and the additional support of bearish Cots data (not shown). And, like the dollar except opposite, this correction may still develop more upward momentum, but the Euro is a follower not a leader, and will be driven inversely by the impacts driving the dollar. Euro weakness is also supported by the increasingly negative economic data coming out of the EU (certainly when compared with the US which is bad enough).

US Treasuries

The US Treasury 10 year yield rally indicates rising interest rates, as US equities continue to grind out new highs. But in so doing it has created a sell divergence which promises lower yields next. This is in addition to the sell divergence in the long term data 5 year chart (next chart). So, yield still continues to grind up slowly within the confines of the rising channel, but we still need increased yields during the ‘acid test’ when equities are actually declining, which they are not doing yet.

The weekly chart indicates the 10 year yield actually gapped up but still the sell divergence signal holds, and this indicates lower yields next. This is in the long term data and yield declines may actually be lengthy. This in turn could promise protracted declines in interest rates and the dollar, and protracted and continued increases in US equities.

Gold

Gold is poised to decline further with support from rising interest rates and the dollar, plus continued bullish Cots data. Technically there are multi-breakdowns with every evidence of further testing of the support zone. But there is now a double bottom with the previous low in Nov 2020, and if we have US Treasury yield declines we could have another gold rally.

Gold Cots data indicates continued massive dilation (red circle) which is bearish with gold declines to continue. This can be seen (verified) by the opposite massive constriction which occurred in Sep 2018 at the start of a strong strengthening phase in gold.

South African Rand

The Rand starts to weaken against a stronger dollar, in the wake of a dollar buy divergence. But price remains well within the reducing channel formation which it needs to breach before any sustained Rand weakness.

Hui : Gold Ratio

The HUI / Gold ratio dome turns bearish again as miners lead gold lower, with the ratio turning down from resistance at the 50-Day MA (red). The chart continues to look bearish with the promise of lower miner and gold prices to come.

GDX US Gold ETF

GDX has a similar chart but is more bearish, with a breakdown through the H&S neckline which should produce further sharp declines. Using the height of the H&S as a backsight the target GDX decline price is in the range of $22 / $23 (30% decline).


This situation applies also to all US miners, and HUI, GDXJ, and XAU are all positioned in likewise charts subject to further breakdowns.


Dust US Miners Bear Index

The Dust chart base breakout is proving to be a long time coming, and continues into 7 months. It has still not broken up, although a breakout soon continues to appear probable.

Silver

Silver is stronger than gold at the moment but is also poised to decline with bearish Cots data, and the cocktail of impacts in US Treasury yield increases, higher interest rates, stronger dollar. But with the spike in recent silver interest and continued overflow, silver could rally first.

Silver Cots data indicates continued massive dilation (red circle) which is bearish with silver declines to continue. This can be seen (verified) by the opposite massive constriction which occurred in Sep 2018 at the start of a strong strengthening phase in silver.

Gold : Silver Ratio

The gold / silver ratio declined with silver stronger than gold, and this may persist for a while longer. The ratio continues to drift sideways to down and we need more price movement to make more intelligent judgements.

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