Gold – FX – Dow – 25 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 25 October: 1504 (1487)

Gold/USD LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
85 (85) 61 (65) 52 (50)
Allocation 100% (100%)

Gold reserves and asset re-allocation for insurance purpose.

The $18 decline that started immediately following NY opening from 1518 to 1500 created a sharp ST oversold condition with some discovery near the close. The MT Weekly timeframe is shallowing and ready to turn up in our estimate. Several Central Bankers in Europe are concerned about the strong forward guide on QE and are said to be buying 'GOLD'. But there is no evidence of this and official reserves appear static for the larger Gold holding countries in Europe. Technical risk favours holding Precious metals Gold, Silver, Platinum, Palladium. Across professional investment communities there is little sympathy to increase holdings in traditional asset classes. Whereas Gold (and Silver) in any Long term analysis have performed as tghe best insurance engine based on an allocation of between 2 and 5% depending on base currency it is becoming a necessity to review such allocation with a view of increasing to between 10 and 20%. This is institutional where it said to be expecting new numbers showing a re-allocation from equities to Real estate and private markets. For private investors such allocation of free liquid assets into Gold and Silver may even be higher towards the 30 or even 40% level. Holding cash in Banks traditionally is a trusted risk, but is it? The technical risk weight analysis from Short term via Medium Term to Long term still validates a full allocation to Precious metals. This allocation should only be in physical form with a trusted custodian, not being a system bank. No Change.

Last week: Market was flat in the week ending 18 October and virtually unchanged with daily risk weight turning up. Last week we explained the reason for defying technical gravity. No change in that respect and we stay fully invested expecting the weekly to turn up again following a stronger price move despite the monthly getting fairly overbought, but experience tells this could continue for quite some time. There is never absolute certainty that our risk analysis holds its own, but this is a situation where we could easily be wrong footed, especially after the strong and unbroken LT rally of the past 12 months.


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 25 October: 1357 (1334)

Gold/EUR LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↓)
% Risk
Weight
89 (88) 57 (65) 43 (18)
Allocation 100% (100%)
The correction that commenced 3 Sept seems to have ended on 20 October with a firmly established ST uptrend that has somne way to go yet with MT risk weight now at a more neutral level expecting that to turn up and follow the market to new intermediate highs. No Change.

Last week: A strong dollar pushed Gold down a bit further against Euro which was expected. We said that price could go weaker but a strong cushion is the main reason to allow this market to resume its uptrend in due course. Maybe MT-Weekly risk weight needs to drop further to diverge into a bullish scenario again. We are confident the leading trend is still up and that we can experience a series of risk weight highs over the next 12 months again. Just like the 2006 -2011 period. 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 25 October: 1172 (1146)

Gold/GBP LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↓)
% Risk
Weight
84 (82) 33 (47) 20 (12)
Allocation 100% (100%)
Most, if not all, the Brexit speculation is now fully embedded with risk being taken off. This should stabilize GBP and even weaken it. Gold should benefit MT in this scenario. MT Weekly risk is becoming fairly neutral in the normal corrective scenario since early September. No Change.

Last week: Sterling has been particularly strong gaining another 3%. This strength will not last as we will explain in the currency section. Gold will resume its primary uptrend against GBP once this correction ends, and it looks like we are not that far off. No Change to stay with full allocation


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 25 October: 18.00 (17.51)

Silver/USD LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↓) ↑ (↑)
% Risk
Weight
72 (70) 54 (55) 62 (53)
Allocation 100% (100%)
A large buyer clearly entered the market this week resulting in a decent rally on Thursday 24 October with strong follow through to peak at 18.33 on Friday before dropping back to close at 18.00. All risk weight time frames in positive mode. Our patient initial target is still 21.13 being the horizontal target high established in July 2016. If this happens with the MT risk weight making a new High we we should expect further strength along the timeline. But any risk scenario will be revisited if the advanced unfolds as expected and most likely at this moment. No Change.

Last week: Daily risk weight trend turned up this week. Silver, being a semi, at least, manipulated commodity requires patience. The primary trend still looks firmly in place in spite of the relatively strong correction the past 6 weeks. No change


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 25 October: 16.23 (15.68)

Silver/EUR LT-M MT-W ST-D
Trend ↓ (↓) ↑ (↓) ↑ (↓)
% Risk
Weight
78 (75) 54 (56) 45 (25)
Allocation 100% (100%)
Silver/Euro looks like it may correct into the 16.00 handle and if that happens a similar scenario will play out for Silver versus other majors. However any drop will likely create an oversold ST image and a similar price resistance objective applies for Silver against Euro. With 2 previous peaks at 18.97. No Change.

Last week: The Silver/Euro correction following a week of more strength for Euro vs USD is shallowing. Otherwise the same reasoning as for Silver/USD applies. Keep full allocation Silver. 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 25 October: 14.01 (13.49)

Silver/GBP LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
73 (72) 40 (47) 30 (15)
Allocation 100% (100%)
Silver/GBP reacted fully in line with the global silver move this week.
No Change.

Last week: Strength of Sterling against just about everything else financial has become speculative and we may expect a fairly strong correction fairly soon. From what level remains to be seen but risk against GBP is increasing. It means No Change in keeping full allocation Silver vs GBP.


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 25 October: 83.25 (84.73)

GOLD/SILVER Ratio LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↑) ↓ (↓)
% Risk
Weight
44 (45) 40 (41) 34 (42)
Allocation 50/50 AU/AG (50/50 AU/AG)
Risk-weight remains in favour of Silver. Along the volatile road towards a ratio 50 and below we will see many peaks and throughs. Patience will reward the investor staying with Silver. No Change.

Last week: Technically the risk weight down trend is still in play with a great opportunity to participate in the correction towards equilibrium. This may become a long term position with many ups and downs. No Change for now


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 25 October: 1.1075 (1.1115)

EUR/USD LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↓ (↑)
% Risk
Weight
7 (8) 42 (30) 72 (89)
Allocation 100% (100%)
The way we read this market is that the USD has turned down about one month ago. Risk weight sentiment certainly indicates this with a very oversold LT-Monthly in uptrend and weekly risk in fairly strong and still early uptrend. It means any ST attempt to strengthen the Greenback through intervention is likely to fail. Natural pressure on the USD may come from re-allocation away from US equity and bond markets by foreign investors and institutional investors. No Change keeping 100% dollar long exposure covered.

Last week: Some bearish divergence between Daily and Weekly may push the dollar up a little this coming week, but the MT and LT picture looks like the primary dollar downtrend that started in March 2017 has been re-established after a long, slow and frustrating 2018/19 rally. No change in keeping long dollar risk fully covered


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 25 October: 0.9935 (0.9820)

USD/CHF LT-M MT-W ST-D
Trend ↑ (↓) ↓ (↓) ↑ (↓)
% Risk
Weight
54 (51) 68 (70) 50 (25)
Allocation 100% (100%)
CHF is still struggling to move away from that par level. It is a matter of time even though we may see this level for some time to come. Risk weighs on a weaker dollar, thus a fully forward covered long dollar exposure is the right approach to managing transaction risk. No Change.

Last week: Dollar weakness accellerated against CHF on Wednesday into Friday close and it may well be due to GBP strength where speculative positions are likely to be very high increasing GBP risk rapidly. Nevertheless, the dollar is weakening across the board and our technical instruments have been expecting this for quite some time. No Change either for $/CHF. Stay with full hedge on long dollar exposure


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 25 October: 1.2815 (1.2920)

GBP/USD (Cable) LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↓ (↓)
% Risk
Weight
25 (25) 78 (70) 82 (89)
Allocation 100% (100%)
GBP turned mildly down and with ST showing bearish divergence in its own time frame the ST correction may last a bit. From a risk perspective any fresh exposure cover can be delayed until we see ST bullish divergence. Further unwinding of BREXIT positions may put some pressure on Cable in the short run but the leading time frame is the LT risk weight trend which is up after just turning from an oversold level. No Change.

Last week: Sterling added another 2% to the strong performance of the week ending October 11. Thew tempo of this Cable rally is a bit stretched although the LT technical picture is the same for GBP vs USD. The dollar looks weak LT but may run our of steam vs GBP a bit earlier for a temporary correction. For now there is a protective hedge cushion and we see room for a bit further strength short term, albeit a bit speculative. 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 25 October: 97.83 (97.14)

USD Index LT-M MT-W ST-D
Trend ↑ (↓) ↓ (↓) ↑ (↓)
% Risk
Weight
88 (86) 45 (60) 22 (5)
Allocation 100% (100%)
The USD Index ST and MT risk weight is in the process of diverging versus LT. This looks like a downtrend correction and will continue to give the USD some room to strengthen but the LT Monthly trend is looking to turn down from an overbought level. No Change in maintaining a fully covered long dollar exposure.

Last week: The Index turned down sharply from the beginning of last week and reached the lows we saw in August. Even though Daily risk weight is in oversold territory below 10%, the dollar looks weak across the board. MT and LT risk weight is leading and long dollar exposures must be kept fully covered


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 25 October: 1.1560(1.1579)

GBP/EUR LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↓ (↓)
% Risk
Weight
45 (45) 87 (84) 86 (87)
Allocation 80% (100%)
The overall uptrend is still alive and seems to have paused temporarily. We'd like to see the ST risk weight trend to follow through on the downside and either provide a signal to reduce the hedge to well below 80% or re-enter at a lower level. No Change for now.

Last week:

This image feels like Sterling has paused a longer term downtrend against the EURO within a 10% range. This is part of the risk that now also influences positioning and if GBP is to weaken again and to continue the trend that started in 2015,the UK Treasury will happily let this happen to eleviate a fundamentally weak financial status.
The resistance line between the highs of early 2017 and early 2018 maybe a bridge too far for GBP. It could penetrate at 1.1725 and even follow through to the 1.20 level but risk weight is telling the story of a possible ending of a 3 year correction ag Euro that started in October 2016. The ST and MT risk weight is already in overbought territory and we would feel happy to unwind 20% of the position on Monday, leaving an 80% short GBP cover. With ST-D and MT-W at these levels a further sprint and crossing of 1,1700 could be reason to unwind further but we need to see more evidence of that MT risk becoming overweight and turning down. The change is to unwind to 80% cover on short GBP exposure


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 25 October: 8655 (7947)

BITCOIN BTC/USD LT-M MT-W ST-D
Trend ↓ (↓) ↑ (↓) ↑ (↓)
% Risk
Weight
55 (54) 15 (7) 45 (28)
Allocation 0% (0%)
Volatility returned to Bitcoin last week with a sharp drop towards 7,300 and a subsequent strong reversal to 9,000 at the end of the week. At least this gives hope for many investors who see their asset values float with changes of 30% in a matter of day. ST and MT risk weight did indicate this possibility of course, but this market is still well beyond acceptable portfolio risk allocation. No Change.

Last week: Since the June high at 14,000 the MT time frame can be expected to show bullish divergence before this market can be expected to restart an uptrend. Strong fundamentalists tend to also get influenced by market forces that they haven't foreseen and cannot explain. Nouriel Roubini is such person who seems to embrace the possibility of Bitcoin becoming a store of value. But at what level? Traditionally such change in opinion is more likely than not to confirm the original thesis. We are more aligned with his original view until this market becomes more transparent and probably at much lower levels including a much depreciated USDollar. 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 25 October: 26958 (26770)

US30 (Dow Jones) LT-M MT-W ST-D
Trend ↑ (↓) ↑ (↓) ↑ (↓)
% Risk
Weight
90 (85) 82 (72) 92 (55)
Allocation 0% (0%)
With Apple and Microsoft over 1T market cap and Alphabet and Amazon a little under, just these fours moguls now average 984B mc which is truly mind boggling and probably causing much concern with certain authorities. There are now plenty statistics expecting an economic recession, which if it happens is likely to spread universal. Our risk weight only becomes higher although one cannot exclude spikes of any size. That does not however remove the indicator of high correction risk that could even be dramatic if unpredicted, like black swan, events unfold. The fact that new highs appear harder to reach is a sign of that high risk being very present in every day trading and investing. Such high risk scenario is the reason why greed can turn risk into being your biggest enemy. Hence No Change.

Last week: The Dow Jones index remains high risk and potentially carries a value that incorporates a massive future weakening of the USDollar. Major corporations in the financial industry have no choice but to continue to protect shareholder value with assistance from Central banks and further quantitative easing. It is a completely manipulated market and it may well be naive not to embrace and particpate in full. This index of 30 stocks may well remain very firm for another few years but it does not change the image of high risk-weight looking at a variety of commonly used technical tools. We watch Stochastic, MACD and RSI and all show more downside risk. The latter is the only reason to stay away from this asset class. 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 25 October: 3022 (2986)

Standard & Poor 500 LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↓ (↓)
% Risk
Weight
89 (89) 76 (76) 91 (91)
Allocation 0% (0%)
All of the largest companies in the S&P 500 can be considered systemic participants. A substantial devaluation could have a widespread effect on future returns which may affect hundreds of million of people depending on a price index proof pension fund. This already is a major problem today with interest rates at zero. Risk weight at overbought level in all time frames shows massive vulnerability that is increasingly difficult to time. One can be certain that many of the largest investment fund managers are extremely concerned because bubbles do not offer the comfort of high liquidity when they pop. No Change.

Last week: In essence the S&P 500 shows the exact same picture as INDU and most international stock market indices. Sheer financial power has kept this index in a stronger position than most indices whilst the S&P continues pushing for another new high. No Participation, 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 25 October: 59.25 (59.25)

Brent LT-M MT-W ST-D
Trend ↓ (↓) ↑ (↓) ↑ (↑)
% Risk
Weight
29 (25) 27 (28) 92 (54)
Allocation 0% (50%)
Brent rallied nicely after we removed our allocation. With ST risk weight at 92% and diverging vis a vis MT and LT, we feel more comfortable not having a position until this market shows its hand which will likely be driven by geo-political events. No Change for now.
Last week: On Oct 16 we closed out as ST risk-weight trend turned down at the close of Oct 15. ST risk is relatively hard to predict as long as MT risk-weight remains in a downtrend, unless there is substantial bullish or bearish divergence between different time frames. Nominal risk levels do not offer clear direction so we must stand aside again. It could literally go either way in the next few weeks, hence no investment until a fresh opportunity presents itself

Posted in A - All Financial Blogs | 2020 Forecast.