Gold – FX – Dow – 6 December 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)

GOLD: Gold vs US Dollar, Euro and GBP

Close 6 December: 1460 (1463)

Gold/USD LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↓ (↑)
% Risk
Weight
80 (82) 15 (20) 65 (36)
Allocation 100% (100%)
A simple reminder of what 'Risk being your friend' really means; Risk is your friend if a position in financial markets is under reasonable control, not leveraged and that protects your total assets to a large degree. Speculation is fine, but only in limited size with stops at a preset maximum of risk exposure.
The current financial market space is widely reported on by many very well known analysts and the clear consensus is one of great uncertainty, with current stratospheric prices in stocks and bonds. Most of the high risk warnings come from alternative media contributors seeking protection in hard assets whilst mainstream keeps pushing the bull market. Because most small and many large speculators, serving smaller investors, ultimately loose money on their investments, the buck will stop somewhere and at a moment that comes as totally unexpected in their perception. Yet the warning signs are hot and we only comment based on what our tools tell us. Not being exposed when risk is seriously high, based on experience and simple technical analysis, is usually the road to safety. 1929(stocks), 1980(gold and silver), 1990-2000 (house prices), 1987 (stocks), 2000 (stocks) and 2008 (most asset classes) are easily forgotten, yet reminders of what might be in store for us. Human psychology is to believe that 'it will be different this time' but it NEVER is. The pattern of Recovery, Expansion, Recession and Depression will not be broken except for the actual duration of each of these business cycles which today is being dominated by unprecedented and extreme monopolist interventions.

Turning our attention back to Gold again, the yellow metal was strong all week and being hammered in the last 5 hours of trading on Friday Dec 6 due to positive consumer sentiment in the US. Data is coming from a new month and even though the risk weight trends are down, there is little price change as such week on week whilst the divergence between the MT Weekly and LT Monthly is still in play. The scenario and preference to maintain a fully invested position is driven by the fact that this market is still up 400 dollars from the Dec 2015 low whilst risk weight has not shown a serious peak formation in the MT and LT trends. Hence we remain highly confident having increased our total exposure relative to total assets to 25%.
This insurance policy approach using hard assets will protect against the worst possible and yet unimaginable scenario at this stage in the economic cycle. In the last week of 2019 we will make a Gold price forecast for 2020.

Last week: A flat to weak market during Thanksgiving week ending on a positive note with daily risk weight trend turning positive.
We repeat last week's comment, hence 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 6 December: 1321 (1328)

Gold/EUR LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↓ (↑)
% Risk
Weight
81 (85) 14 (18) 48 (43)
Allocation 100% (100%)
As against the USD Gold may even weaken a bit further and the same picture and analysis drives this Gold/EUR pair. No Change to being fully invested. In the last week of 2019 we will make a Gold price forecast for 2020.
Last week: An identical move and similar values to Gold vs USD. Weekly risk weight (Low) looking to diverge bullish vs LT Monthly (high) as well. 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 6 December: 1110 (1132)

Gold/GBP LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↓ (↑)
% Risk
Weight
65 (74) 6 (8) 15 (22)
Allocation 100% (100%)
GBP has been relatively strong causing gold to tumble a little bit further than against other major currencies. The Outlook for Gold however is as positive as against USD and EUR with MT being in Low risk position dipping below the risk weight low in May whilst prices are 200 pounds higher. That is considered bullish divergence. No Change.
Last week: Market appears to find support with daily narrowly turning up and MT bullish divergence developing vs LT. 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 6 December: 16.55 (17.00)

Silver/USD LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↓ (↑)
% Risk
Weight
60 (65) 9 (15) 30 (52)
Allocation 100% (100%)
Silver clearly has suffered most last week during Fridays sell off. The outcome of this weeks Silver analysis, like all outcomes the past year, is that we are far away from peaking action. Just haven't seen anything that comes close to a longer term top and it shouldn't of course after a 6 year slide with little recovery. Signals are weakish at this moment but the long term picture shows no sign of being tired, besides a short term pause perhaps. No Change.

Last week: A flat market last week with Silver holding the 17.00 level. 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 6 December: 14.95 (15.42)

Silver/EUR LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↓ (↑)
% Risk
Weight
62 (68) 10 (23) 25 (60)
Allocation 100% (100%)
Silver Euro is broadly the same picture, so no change in staying with a full allocation.

Last week: Daily risk weight moving higher without much price change. We need to watch this development to ensure we do not get tricked into a short term retracement. This till is not the most likely scenario because MT risk weight shows near oversold levels whilst price remains well above last years lows. 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 6 December: 12.58 (13.13)

Silver/GBP LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↓ (↑)
% Risk
Weight
50 (61) 5 (7) 15 (43)
Allocation 100% (100%)
A 20% drop from the peak in September is of course significant with half of that due to a fierce recovery of GBP in Forex markets. Given the apparent bullish divergence between risk and price now against the May low at 11.20 we can see the potential for a much stronger recovery of Silver vs GBP in the coming quarter. No Change.

Last week: Flat market for one month now. MT similar oversold levels as one year ago at much higher price level. This generally translates to being a support signal. No Change


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 6 December: 87.86 (86.01)

GOLD/SILVER Ratio LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↑ (↓)
% Risk
Weight
45 (45) 77 (70) 78 (35)
Allocation 50/50 AU/AG (50/50 AU/AG)
The Gold/Silver ratio is pointing up in all timeframes and diverging in Daily whilst MT is showing a very steep acceleration, possibly not finished yet, whilst LT Monthly is neutral and pausing. No clear bottom has been reached and we focus on this ration returning to an equilibrium level closer to 50. No Change.

Last week: The LT Monthly narrowly turned up at a neutral 45 level. This is not a secure oversold or overbought level turn, hence we remain cautious and stay with our fully invested Silver allocation.


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 6 December: 1.1055 (1.1015)

EUR/USD LT-M MT-W ST-D
Trend ↑ (↑) ↓ (↓) ↓ (↓)
% Risk
Weight
20 (13) 48 (47) 75 (21)
Allocation 100% (100%)
The Dollar keeps dropping on us against the direction of risk and it may, looking at the charts and indicators, not be finished. We would like to see a sign of peaking action MT in order to deviate from our bearish stance on the greenback. No Change.

Last week: If Daily turns up this week it shows a risk weight bottom versus 3 weeks ago with a slightly lower price low on 29 Nov compared to the 14 Nov bottom. 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 6 December: 0.9897 (0.9995)

USD/CHF LT-M MT-W ST-D
Trend ↓ (↑) ↓ (↑) ↑ (↓)
% Risk
Weight
50 (55) 74 (75) 16 (87)
Allocation 100% (100%)
As expected this USD/CHF did find resistance again above par and looks it may continue to hover around this price level for a while longer. The overall picture is still in the direction of dollar weakness being the greater risk and we remain fully in favor of 100% hedge against long USD dollar transaction exposure.

Last week: Monthly risk weight narrowly turned up at the 29 Nov close. The dollar advance this past week peaking just above par again looks to be finding resistance too again. 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 6 December: 1.3130 (1.2910)

GBP/USD (Cable) LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↑ (↑)
% Risk
Weight
60 (41) 88 (86) 93 (63)
Allocation 100% (100%)
DDay is Thursday 12th. No one knows. Technicals in our view point towards GBP ending its bull run but may appreciate still against the USD which is considered weaker. Short term cable may pause or even drop sharply given the very overbought risk weight level. As long as we do not see ST bearish divergence the better approach is to stay fully covered on long dollar exposures which thus far has been the right approach since the middle of this year. No Change.
Last week: GBP performed relatively strong last week. Short term weakness of Cable in the next 2 weeks can be used to add cover for USD receivables as LT risk weight trend is still up. The overall feel is more neutral without very clear direction which could a bit more volatility in the short term. 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 6 December: 97.68 (98.27)

USD Index LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↑) ↑ (↓)
% Risk
Weight
70 (81) 40 (38) 16 (83)
Allocation 100% (100%)
The USD Index against the basket looks heavier than the individual dollar charts against majors. This confirms the preferred position of full cover against long dollar transaction risk.
Last week: LT Risk weight at same overbought level and pointing down. MT risk is up but neutral level could easily turn back down as LT trend has more weight at the 80 level whilst daily turned down at Month end at the 83% risk level. No Change to remain fully covered on Long dollar transaction exposures

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 6 December: 1.1860 (1.1725)

GBP/EUR LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↑ (↑)
% Risk
Weight
80 (62) 93 (92) 90 (79)
Allocation 50% (50%)
50% cover is still the right psychological cover level after having benefitted from a very strong pound since July. The market edged a little higher still but risk in ST and MT time frames is very high. With the British election coming up Thursday 12th the most likely scenario is a buy 'the rumor sell the fact approach'. With high risk weight we prefer to preempt such a possible scenario and rather have a low cost opportunity to re-enter at a lower level or even flat level in due course. No Change.

Last week: The month ended on a stronger note (0.8%) against our risk analysis. The risk weight picture shows potential bearish divergence in the daily time frame whilst MT is at an overbought level. This higher risk scenario warrants a careful approach to the value of sterling. No Change


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 6 December: 7523 (7739)

BITCOIN BTC/USD LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
47 (46) 16 (20) 70 (49)
Allocation 0% (0%)
No Change of course, but we'll do a fresh analysis covering 2020 expectations in coming weeks.

Last week: A very volatile short term experience again with several 5-10% moves within days. No Change

Remaining 'Gap open' (July 2017) still to fill at 2828. We exclude weekend action to determine opening gaps as major players are(were) not participating in size during weekends.
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 6 December: 28015 (28051)

US30 (Dow Jones) LT-M MT-W ST-D
Trend ↑ (↑) ↓ (↓) ↑ (↓)
% Risk
Weight
95 (92) 93 (96) 45 (91)
Allocation 0% (0%)
A drop and another rally this week. The scenario of the last 2 years. Risk remains as high and we don't look back at an opportunity that wasn't to be. Risk is king and protects from ending up in tears. No Change.

Last week: LT Monthly at Month end still up at 92% risk. The weekly and daily however turned marginally down at >90% levels. This could trigger a rapid drop hence high risk and 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 6 December: 3145 (3140)

Standard & Poor 500 LT-M MT-W ST-D
Trend ↑ (↑) ↓ (↓) ↑ (↓)
% Risk
Weight
97 (93) 96 (97) 55 (94)
Allocation 0% (0%)
The ST scenario is definitely bullish again but MT and LT risk weight are too high for comfort. ST risk weight can turn on a moment notice and the risk is that LT and MT take over as primary direction. That fresh direction can only be down because risk weight in LT and MT time frames will remain verynhigh as long as priced stay up here from one week to the next.
No Change.
Last week: The same analysis as INDU applies to S&P. Lt Monthly could divergence again if MT and ST make it turn down. This is a high risk market and we stay out being aware of an opportunity loss due to maximum high risk awareness. 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 6 December: 64.27 (60.73)

Brent LT-M MT-W ST-D
Trend ↑ (↓) ↓ (↓) ↑ (↓)
% Risk
Weight
32 (27) 41 (41) 61 (65)
Allocation 0% (0%)
The strong drop last week was followed by a similar, slightly stronger rally this week. Time frames and risk weight except MT are up with ST Daily potentially showing bearish divergence.
There is absolutely no fundamental signal from the Aramco IPO to threatening talk only of supply reduction. The latter being highly unlikely given the need for much more cash in all of the oil producing countries. Risk remains too high for comfort so we propose a no change attitude for now.

Last week: Brent took a dive late last week and closed strongly down (5%) for the week. All time frames are now down signalling a risk of further undefined and unpredictable weakness. We must wait for a strong low risk weight indicator to enter this market again with a more serious asset allocation. No Change

Posted in A - All Financial Blogs | 2020 Forecast.