Gold – FX – Dow – 11 October 2019

GOLD: Gold vs US Dollar, Euro and GBP

Gold/USD live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 1488 (1504)

Gold/USD LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↓ (↑)
% Risk
Weight
86 (85) 73 (68) 52 (54)
Allocation 100% (100%)

October 2019: Is Gold starting a fresh downtrend?

Do we have a Risk management dilemma having all Gold time frames in a downtrend? The exception is Hourly, which at the close last Friday is in a bullish divergence uptrend at around 40% and does not provide real additional input. This potential dilemma to 'take (some) profit or not' applies to all major Gold/currency relationships. Let's examine the best course of action:
Our fully invested average Long position is at 1220, That is a 22% cushion from entry point. As explained in recent weeks our maintaining the full allocation was based on a continuous uptrend which narrowly held at the end of September. Our second major argument to hold the position is that following a serious longer term price advance which almost blindly gives the expectation of a bearish divergence market setup in the MT-Weekly timeframe sometime in the future at least. That hasn't happened yet. The previous week's recovery from 1460 to 1520 only lasted 4 days before turning down again on Friday 4 Oct.
The pure risk weight scenario would call for limiting risk and preserving some profit. The broader risk, looking at the chart pattern, is a possible drop towards the previous price consolidation area between 1385 and 1400. Now look at the Monthly chart:

Trend lines become moving targets. As soon as a trendline is broken it creates a new trend line against the trend of the original one. I.e if a downtrend is broken and a temporary high is set afterwards, that new high becomes the pivot point for the new resistance line. In the above monthly Gold/USDollar chart one can see how often both the Long term support line as well as the long term resistance line since the 2011 high has moved. 6 times in total.
This brings us to a third element in our analysis based on a large price cushion. Up and down Trend lines cross somewhere in the future. Based on the resistance line that was broken last June the cross happens in Febr/March 2020. Typically such future date cross is one to watch as it often coincides with an intermediate price high or low.
Based on the fresh resistance line drawn between the 2011 high at 1920 and last month's high at 1557 shows a cross point for early 2023.
The same trend analysis should of course be applied to MT Weekly and Short Term Daily charts which can show a multitude of potential pivot points in the different time frames.
Our conclusion is that from a Long term risk-weight analysis perspective we DO NOT change our existing 100% allocation. The experience that we may expect a MT Weekly bedarisk divergence before anything else is critical. From a short term trading perspective one could follow Hourly and sell 30% or so on a very ST down turn and stay with it until the ST Daily shows a signal turning up again.
This is an unusual position as it only applies to older positions that show a fairly substantial profit. With younger positions, like we had with Brent Crude recently one simply has to be more agressive. No Change.

Last week: Strong price rally late last week turning up in the ST-D timeframe from bullish price to risk weight divergence. As we expect bearish divergence in the MT-W or even LT-M time frames, we must first see new price highs at least. Given the strength of Gold since August last year from 1175 and holding around 1500 means the next price high could be significantly above the recent 1550 high. No Change


Gold/EUR live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 1349 (1363)

Gold/EUR LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↑) ↓ (↑)
% Risk
Weight
88 (89) 72 (77) 45 (50)
Allocation 100% (100%)
The same analysis arguments apply to Gold/Euro, although Between Febr 2019 and sept 2019 high there is a clear bearish divergence in the MT-Weekly timeframe and this was caused by the dollar continuing its shallow but steady uptrend against the Euro. Because the dollar still looks rather vulnerable we could see a bit more pressure on Gold vs Euro if indeed the dollar starts to finally loose some ground from very overbought risk-weight levels in MT and LT timeframes. Our net cushion is smaller at around 14% and this is technically becoming a short term trading play with a potential price objective of 1260. Potential only and nowhere certain as the Daily timeframe may show bullish divergence sooner rather than later. From an investment point of view the risk to stay with the full allocation is a very acceptable one which could prove very illuminating in 6 months time. No Change.

Last week: A bit more LT overbought weight for GOLD vs EURO because the Euro looks a little stronger against USD and now holding around the 2012 high, but the technical picture is otherwise very similar to that of Gold/USD with LT (2 or 3 years out) channel resistance level of between 1775 and 1850. Anything can happen in the meantime including a price explosion. The fundamental reason for the latter is that Banks behave very much like the general market (buy high sell low). They may decide to start buying gold extensively much later into the price advance, simply because rates are negative and Gold is a Tier 1 Asset now. No Change


Gold/GBP live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 1175 (1219)

Gold/GBP LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↑) ↓ (↑)
% Risk
Weight
85 (87) 60 (67) 55 (62)
Allocation 100% (100%)
Strength of Sterling, which we anticipated for a long time in our Forex analysis, is of course having its effect on this Gold/GBP relationship. All time frames are now in downtrends except Hourly. The most recent price consolidation region is around 1100-1125 which was July this year. The 'risk to lose' cushion is sufficient to stay with full allocation in the strong expectation that last month's high is definitely not a Long Term high because LT highs are always preceded by a series of bearish risk weight divergences in MT and usually similar or close to it in the LT risk weight timeframe. From a trading perspective, the current talk of a potential Brexit deal this weekend may push the price down further on Monday, even though this has absolutely nothing to do with the true market conditions that are almost impossible to weigh and which determine the real price of Sterling in international trade. We stay with full Gold allocation, partly because there are so few real alternatives in other asset classes with low risk weight. No Change.

Last week: Gold also saw pressure and then rallied and finished strongly against Sterling last week. Short term it seeks direction and the analysis is again similar to that of Gold vs Dollar and Gold vs Euro. Waiting patiently for a new MT price high. No Change


SILVER: Silver vs US Dollar, Euro, GBP and Gold/Silver ratio

Silver/USD live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 17.52 (17.52)

Silver/USD LT-M MT-W ST-D
Trend ↑ (↑) ↓ (↓) ↓ (↑)
% Risk
Weight
70 (70) 55 (59) 40 (32)
Allocation 100% (100%)
Silver closed unchanged last week after a 1/2% range between top and bottom. Technically Silver/USD is leaning towards a similar picture as Gold/USD. Our full allocation cushion is 20% and the early September top is definitely NOT a new LT top. Experience learns that Silver has a lot more work to do to the upside if only that the Ratio (85) to Gold is so far away from equilibrium. We are confident to stay with the full allocation. No Change.

Last week: Silver shows similar technical characteristics as Gold where we should expect a new price high at least in combi with a sub 85% risk weight to show bearish divergence in the MT-W time frame. This market has a long way to go yet if it indeed behaves as per pour base analysis. A price objective is totally irrelevant because we primarily manage risk based on risk weight irrespective of the price level


Silver/EUR live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 15.86 (15.95)

Silver/EUR LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↓ (↑)
% Risk
Weight
77 (77) 59 (62) 35 (30)
Allocation 100% (100%)
Different timeframes show risk weight levels that can continue or turn anytime. There is no clear direction of risk other than that the ST Daily may push a little lower first to under 15.50. All timeframes are down, but the cushion is again sufficient to ride out this little depression. No Change.

Last week: The ST-D showed minor bullish risk weight to price divergence and similar to Silver/USD the MT-W should normally first reach new highs with a lower than previous % risk weight to show a potential intermediate Longer Term high. This could be a matter of weeks or many months. We hold on to our LT position, so No Change


Silver/GBP live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 13.84 (14.21)

Silver/GBP LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↓ (↑)
% Risk
Weight
72 (75) 52 (56) 40 (35)
Allocation 100% (100%)
Same analysis as Gold/GBP and Silver/Euro. Even though we currently experience downward risk weight in all timeframes we haven't yet see a serious technical top. It looks like we need to do a tyre exchange in a relatively dark tunnel, but we have the tyre and we take our time. Given the comfortable cushion and lack of serious investment alternatives in what can be considered 'real money' we stay with the full allocation.

Last week: Silver vs Sterling continues to show similar price behavior as against Euro and the same analysis arguments apply. No Change in full allocation


Gold/Silver Ratio live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 84.64 (85.53)

GOLD/SILVER Ratio LT-M MT-W ST-D
Trend ↓ (↓) ↑ (↑) ↓ (↓)
% Risk
Weight
46 (47) 41 (39) 68 (79)
Allocation 50/50 AU/AG (50/50 AU/AG)
A function of being 50/50 allocated between Gold and Silver shows in remaining fully committed to the individual Gold and Silver pairs. The downtrend that started in July and was expected already for some time is in force and even though another attempt to crush Silver cannot be excluded it doesn't look like key players are willing to take that risk which has to do with the noticeable interest shown by Central banks around the globe in at least maintaining a strong allocation to Gold which already had a big positive effect on Silver in the alternative media where speculators tend to lean more towards Silver following the many well known precious metals analysts.

Last week: The Gold/Silver ratio still appears to show relative weakness for Silver and this may last for a while longer. The current putlook from risk weight analysis is not very clear but the cushion against recent highs at 93.00 must favor giving the lead to the LT-M time frame which is still down. with the ST-D showing a bit of risk weight divergence vs MT-W and LT-M. No Change


FX: EUR/USD, USD/CHF, GBP/USD, USD Index, GBP/EUR, Bitcoin

EUR/USD FX live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 1.1035 (1.0975)

EUR/USD LT-M MT-W ST-D
Trend ↑ (↓) ↑ (↓) ↑ (↑)
% Risk
Weight
6 (5) 18 (16) 68 (37)
Allocation 100% (100%)
The dollar definitely looks potentially weaker now that it has for a very long time. The only caveat is a potential bearish divergence between ST-Daily and MT-Weekly which could push the dollar up again temporarily. The deeply oversold position of Weekly and Monthly in 2016 risk weight will not hold. The Monthly risk weight in fact shows very Bullish price to weight divergence. A much higher risk weight (25%) in 2016 at 1.0600 versus a 6% risk weight at 1.10. That is a very bullish picture for Euro. No Change.

Last week: Another manipulated attempt, it seems, for the USD to push higher across the board and which failed to hold towards the end of last week. The very slow but steady average advance of the USD since early 2018 typically would show a forceful reaction in the other direction. With LT-M risk weight in deep oversold territory, the best risk management position is to remain fully covered against a Long dollar transaction exposure. No Change


USD/CHF FX live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 0.9962 (0.9947)

USD/CHF LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↑ (↓)
% Risk
Weight
55 (55) 75 (70) 55 (66)
Allocation 100% (100%)
The Swiss Franc does not look as strong against the USD and shows a flavor of intervention, the scale of which is hard to determine from SNB figures. CHF may not be the same Safehaven currency that it used to be, because of the very opportunistic investment criteria at the Swiss National Bank. Assuming that potential dollar weakness will also show vs CHF, the better risk averse approach is to remain fully hedged on long dollar transaction exposure. No Change.

Last week: The Swiss Franc looks undecided in all time frames leaning a little weaker against USD in the Short to Medium time frames whilst LT-Monthly is up slightly in mid range at 55%. Long dollar transaction exposures to remain fully hedged. No Change


Cable GBP/USD FX live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 1.2635 (1.2320)

GBP/USD (Cable) LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↓) ↑ (↑)
% Risk
Weight
22 (15) 56 (51) 42 (27)
Allocation 100% (100%)
A 3% move up of Cable since last week is the result of a strong market reaction to political events in the United Kingdom and probably helped by an unwinding of short positions that stand to lose seriously if this market continues its current trend. Risk weight level development favours a continuation of the current trend and we see no reason to change a fully hedged long dollar transaction exposure.

Last week: Technically we could see a little pressure on Cable the coming weeks waiting to align with the Long Term Monthly which is 'Up' and showing bullish divergence in oversold territory. From the perspective of risk, the LT-M must now lead even though the MT-Weekly shows some bearish risk weight divergence vs LT-M. No Change


USdollar Index Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 98.33 (98.84)

USD Index LT-M MT-W ST-D
Trend ↓ (↑) ↓ (↑) ↓ (↓)
% Risk
Weight
91 (93) 75 (78) 42 (58)
Allocation 100% (100%)
The Dollar index is in as firm downtrend. The ST Daily may develop mild bullish divergence in the coming fortnight which can pause or temporarily reverse this trend. Only massive Central Bank intervention could stop what we see is a strong technical potential for dollar weakness. This has of course been our position for some time. Especially the LT-Monthly time frame looks very heavy indeed. To avoid logical misunderstanding, a full allocation in this analysis is meant as a fully hedged Long dollar exposure. No Change.

Last week: The Index reached an interim high early last week before reversing again. This has been the general picture for a long time, yet the risk pattern is not positive for the USD index with LT-M timeframe above 90%. No Change in keeping 100% cover on future net USdollar incoming payments


GBP/EUR FX live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 1.1438 (1.1216)

GBP/EUR LT-M MT-W ST-D
Trend ↑ (↑) ↓ (↓) ↑ (↓)
% Risk
Weight
40 (35) 82 (82) 42 (30)
Allocation 100% (100%)
An unusual move where GBP first showed weakness and then finished the week by unwinding the previous 2 weeks erosion of 3.5% plus add another 1% on top. We follow the same position we took last week ands await further technical proof that the GBP long position needs to be re-addressed. No Change.

Last week: With ST-D at 30% in uptrend, LT-M in up trend at 35% and weekly 82% we need to wait for a full weekly divergence versus LT-M, but that requires the relative bullish risk weight divergence between ST and MT to close a bit further. Then we maybe can decide to lighten up on the Long GBP hedge in place. No Change for now


BTC Bitcoin Price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 8257 (8133)

BITCOIN BTC/USD LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↓)
% Risk
Weight
55 (55) 10 (21) 70 (15)
Allocation 0% (0%)
The ST Daily turned down from a mild bearish divergence vis a vis the Weekly risk weight level at 10%. This may cause price to drop. BTC was helped by the news that LIBRA is looking to delay or suspend a serious introduction. This markety need to mature before we can begin to seriously consider investment risk. Market soundings appear to indicate that there is Institutional interest but we have to be very suspicious how real this is. No change.

Last week: Relatively little change last week but downward pressure in LT and MT time frames. No Change

Remaining 'opening up' gap still to fill at 2828. We exclude weekend action to determine opening gaps as major players are not participating in size.
If this market is poised to turn from extremely overbought (Dec 2017) to completely oversold, it doesn't appear to be finished.


INDEX: US30, S&P500, Brent crude oil

Dow Jones Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 26816 (26573)

US30 (Dow Jones) LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
85 (85) 72 (75) 55 (25)
Allocation 0% (0%)
Clearly the INDU is the biggest opportunity loss, but unfortunately risk awareness does have to take over if markets show very overbought conditions. ST time frames keep pushing this market up and up. We are now at the level where we decided to firmly stay out which was in Sept/Oct 2018. During the past 12 months we have seen a massive drop confirming our risk position, followed by a hefty struggle to find direction between March and October this year. Every indicator in our book says to 'be very careful'. We still cannot participate in this asset class until the Index takes a more serious breather from its 9 year advance. No Change.

Last week: ST vs MT bullish divergence caused the Dow Jon es index to rally on Thursday and Friday.
The risk picture, Mt and LT trends down, is actually bearish. No change


S&P 500 Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 2970 (2952)

Standard & Poor 500 LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
88 (88) 75 (78) 52 (25)
Allocation 0% (0%)
Bearish divergence in the Monthly timeframe which repeated itself again following another down and up year is the key reason for not investing in this index. The unprecedented and insatiable appetite for this market just doesn't sink in. Of course we understand that cheap money has driven these markets for the past 10 years, but where technical risk becomes a very serious issue, the opportunity of following traders who believe these are the right fundamentals sometimes can be relatively costly. If money earning capacity is equal to adopting massive position risk than so be it. The Risk-weight picture simply remains too high in this asset class. No Change, no position.

Last week: S&P also showed ST divergence vs MT and LT. That needs to be alleviated although the one way behavior late last week caused hourly risk to get very overbought. This remains a very high risk index which should be avoided. No Change


Brent Crude oil Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 11 October: 60.68 (58.43)

Brent LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
28 (27) 30 (35) 32 (8)
Allocation 0% (50%)
Our 50% entry last was based on a ST low risk-weight picture after a very bouncy few weeks. That picture appears to become somewhat blurred because the MT and LT could turn either way even though the longer timeframes are at relatively low risk-weight levels. As long as we do not actually see a risk-weight uptrend in MT and LT it could continue downward. As a result we will put a stop loss on the position at any level where the daily turns down the coming week. There is a bit of a Gap at 63.00 on 25 Sept. This might be an objective to release the position for another quick 10% opportunity result.

Last week: As the ST-D risk weight is now in uptrend and still in oversold (8%) territory our position appears relatively low risk, but we are less certain than 2 1/2 weeks ago with boith MT-W and LT-M in a downtrend. If the Short Term Daily turns down again from a slightly higher risk weight level it now looks like the better risk position is stay away. In that case we will sell our 50% allocation and closely monitor price the coming days. No Change for now

Posted in A - All Financial Blogs | 2020 Forecast.