Metals – FX- Indices – update – 6 Jan 2019

Precious Metals: Gold & Silver vs US Dollar, Euro, GBP, Ratio


Gold/USD

Daily Gold turned down in high risk weight area. This is not unexpected, however the strong LT is still the dominant force to be respected. No change as yet. For those interested to play Platinum. That market appears to want to break its downtrend and could soon explode to the upside and quickly retrace a multi-year divergence versus Gold and Palladium. A 30% switch from Gold to Platinum as a LT hold looks like a no brainer.

(Stay long with the strong LT trend and an advancing lower risk weight. With Weekly and Daily in higher risk weight territory it is entirely possible that this pair may slow or even retract a bit, but the trend is Up and there is no divergence of any kind that would suggest an end. Besides it looks like Silver is finally taking a lead which could positively affect Gold and also Platinum)

Gold/USD Month Week Day Hour
4 Jan close 1285 (1281)
Trend Direction Up (Up) Up (Up) Down (Up) Up
Risk Weight 25-40 (25-40) 85-90 (85-90) 85-90 (85-90) 55-65
Allocation 100% (100%)

Silver/USD

Silver has a similar look as Gold ST but with an even stronger LT advance to complete. No change.

(Last week's risk increase to max position was right on time to benefit from a bit of a break in the Gold/Silver ratio. Otherwise a similar yet even stronger looking picture than gold going forward)

Silver/USD Month Week Day Hour
4 Jan Close 15.70 (15.33)
Trend Direction Up (Up) Up (Up) Down (Up) Up
Risk Weight 20-30 (10-20) 75-85 (65-75) 90-95 (85-90) 40-45
Allocation 100% (100%)

Gold/EUR

This pair does look a little more tired due to broader expected weakness in the USDollar. But with LT trend still up and without price to risk weight divergence it seems more opportune to stay with the position and ride out a potential further price reaction.

(Gold vs EUR looks a little more tired than vs USD. Without any sign of divergence, this pair also should experience further advance MT and LT)

Gold/EUR Month Week Day Hour
4 Jan Close 1127 (1119)
Trend Direction Up (Up) Down (Up) Down (N) Up
Risk Weight 60-75 (40-65) 90-100 (95-100) 90-95 (85-90) 15-25
Allocation 100% (100%)

Silver/EUR

ST correction may take place, but LT trend is up and risk for the most recent up-leg that started in November to last quite a while longer. No change in full allocation, although for every pair against gold and Silver one could read a decent percentage Platinum instead of Silver or Gold.

(Stay with full allocation. This market is far from finished)

Silver/EUR Month Week Day Hour
4 Jan Close 13.78 (13.40)
Trend Direction Up (Up) Up (Up) Down (Up) Up
Risk Weight 30-40 (15-30) 80-90 (75-85) 90-95 (85-95) 15-20
Allocation 100% (100%)

Gold/GBP

NO change for now, but we may lower allocation from 100% to 60% as soon as Hourly comes in line with Daily, i.e moves from low risk to high risk and turning down again. The divergence between Hourly and Daily may prevent an immediate decline and even force a quick rally. This market now does look weaker than the other metal pairs because there is fairly strong ST divergence between price and risk weight.

(We could see a bit of pause due to ST and MT high risk weight. Gold started an uptrend late 2015 and paused for a full 2 years until 3 months ago and is now breaking out its flag formation. We will need to see some kind of divergence between price and risk weight in both ST and MT time frames before a possible intermediate top can be considered. This may take quite a while to develop. Stay put with max allocation)

Gold/GBP Month Week Day Hour
4 Jan Close 1009 (1006)
Trend Direction Up (Up) Down (Up) Down (Down) Up
Risk Weight 60-80 (40-65) 85-95 (85-90) 75-80 (80-90) 0-5
Allocation 100% (100%)

Silver/GBP

Similar to Gold/GBP. We tand ready to reduce as soon as Hourly risk weight comes in line with Daily. This could be anywhere between 1/2 and 1 1/2 days.

(This month's action appears to complete a significant low risk weight in Long term time frame. ST high risk weight may pause the uptrend for a short while as in between 1 and 3 weeks of more range bound price activity, but the overall risk is to the upside. Stay with Max allocation)

Silver/GBP Month Week Day Hour
4 Jan Close 12.35 (12.08)
Trend Direction Up (Up) Up (Up) Down (Up) Up
Risk Weight 30-50 (15-30) 85-90 (80-90) 85-90 (80-90) 5-15
Allocation 100% (100%)

Gold/Silver Ratio

This is now formally a downtrend with LT Monthly turning from Up to Down. Speculators could allocate more silver than gold, although we are happy to stay with a 50/50 allocation or 30% of the total allocated to Platinum.

(Silver appears to break downward from its recent 8 week duration attempt to move lower. The break towards 83.00 with down trending risk weight indicates much further weakness in the ratio. Time to move Silver to 50% allocation of the PM space investment All time high: 1941 = 97, 1991 = 90)

AU/AG Ratio Month Week Day Hour
4 Jan Close 81.90 (83.56)
Trend Direction Down (Up) Down (Down) Down (Down) Down
Risk Weight 70-85 (85-90) 45-60 (60-70) 5-15 (10-40) 35-45
Allocation 50% AG (50% AG)

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

Euro/USD

LT trend direction changed from Down to Up as was expected. No change in strategy. Long Dolls fully hedged. Short Dolls cash basis cover.

(The narrowing risk weight range in monthly time frame supports to be fully hedged on long dollar exposure. Short dollar exposures only covered on cash basis)

EUR/USD Month Week Day Hour
4 Jan Close 1.1400 (1.1440)
Trend Direction Up (Down) Up (Up) Down (Up) Down
Risk Weight 10-15 (5-15) 25-35 (20-30) 30-45 (60-65) 70-80
Allocation 100% (100% hedge)

USD/Swiss franc

Same as Euro. Long dollar position fully hedged, Shorts as per spot expiry.

(Same risk analysis. $/Swiss long exposures fully hedged. Shorts covered cash only)

USD/CHF Month Week Day Hour
4 Jan Close 0.9905 (0.9840)
Trend Direction Down (Up) Down (Down) Up (Up) Down
Risk Weight 75-80 (80-85) 45-60 (60-65) 35-44 (35-40) 15-20
Allocation 100% unch

British Pound/USD

Same as EUR and CHF. Last week's ST scare cable drop was fully recovered and more likely to start a new trend up.

(No change. Short cable exposure fully hedged. Dollar purchases only on spot when due)

Cable Month Week Day Hour
4 Jan Close 1.2720 (1.2690)
Trend Direction Up (Down) Up (Up) Down (Up) Down
Risk Weight 10-15 (5-10) 20-30 (10-20) 50-60 (60-65) 85-95
Allocation 100% unch

British Pound/Euro

GBP looks a little stronger than EUR after the very weak New Year opening. However we recommend no change in 50% hedge either way because the LT trend is still down.

(Risk weight across time frames indicates a little weaker bias for Sterling again. We suggest a 50% hedge either way)

GBP/EUR Month Week Day Hour
4 Jan Close 1.1175 (1.1100)
Trend Direction Down (Down) Up (Down) Up (Down) Down
Risk Weight 30-45 (40-50) 15-25 (15-15) 55-60 (45-50) 90-95
Allocation 50% (50%)

Bitcoin/USD

If this were a less manipulated market we might look to some upside exposure if LT direction changes from a low risk weight reading. Weekly MT has turned up bt Daily is not showing a strong hand yet. This market will require some serious convincing that it still has a role to play in the financial industry. For now selling into a ST vs MT and LT diverging risk weight rally, for those still long BTWC, seems the better formula.

(If this market were mature and broadly traded with substantial liquidity, which it isn't, one could argue a case for temporary strength. However the LT time frame is till down and not finished. BTC shows the reverse image of Stock indices going into Oct 2018. Therefore: STFH and stay out!) 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.)

BTC/USD Month Week Day Hour
4 Jan Close 3790 (3838)
Trend Direction Down (Down) Up (Up) N (Up) Down
Risk Weight 0-10 (5-15) 10-15 (5-10) 40 (50-60) 65-75
Allocation 0% (0%)

INDEX: US30, S&P500, Dollar Index, Brent crude oil

Dow Jones

Strong rally after a weak New Year opening. But not convincing. Risk largely remains to the downside even with MT Weekly risk turning up from a relatively low risk level. Too early to call a serious intermediate bottom as we should first see price/risk weight divergence. No Change in 0% allocation.

(It is only 3 months since the All time high. Any strength facilitates selling if missed out on the earlier calls. This market only shows intermediate lows and has some way to go and not be touched until bullish price/riskweight divergence in Medium term time frames develops)

US30 Month Week Day Hour
4 Jan Close 23433 (23062)
Trend Direction Down (Down) Up (Down) Up (Up) Down
Risk Weight 45-60 (55-75) 10-20 (10-15) 45-50 (25-40) 80-90
Allocation 0% (0%)

Standard & Poor 500

S&P shows the exact same picture as DJII. Market re-attempts the BTFD strategy and may take the market a little higher. This is more likely to fail this time. NO change in 0% allocation.

(It is only 3 1/2 months since the All time high. Any strength provides an opportunity to sell if missed out on the earlier calls. ST to MT (daily and weekly) time frames show a bit of potential strength yet only lower lows thus far and no divergence of any kind. It will take a while before a more serious price low kicks in)

S&P500 Month Week Day Hour
4 Jan Close 2532 (2485)
Trend Direction Down (Down) Up (Down) Up (Up) Down
Risk Weight 35-55 (45-70) 10-20 (10-15) 40-50 (25-40) 85-90
Allocation 0% (0%)

Dollar Index

This Index looks weak LT and MT and should be expected to continue weak for some time to come. No ST Daily price to risk weight divergence either which increases the risk of a substantial move against the USD. It does not say the Dolar will move doiwn substantially, just that the risk of that happening is greater than the oppositie direction.

(Same as last week. Long dollar positions fully hedged within the general transaction risk time frame like 6 months or 12 months. Short dollar exposures only covered on cash basis)

USDIndex Month Week Day Hour
4 Jan Close 96.20 (96.40)
Trend Direction Down (Up) Down (Down) Up (Down) Up
Risk Weight 85-90 (85-90) 65-75 (75-85) 35-40 (30-40) 20-30
Allocation 100% unch

Crude Oil

The strong rally into the New Year did not come as a surprise, but this market will meet resistance due to the speed of the decline the past few months. Hence risk position remains at 0% allocation until volatility subdues. We manage risk and LT that remains to the Downside for now, although we are aware of the speed at which LT risk weight is diminishing. (In less than 3 months world oil prices have lost 62% the entire advance that started in late 2015. Arguably a Fibonacci target and we could see some volatile range trading. Participants in this market already feel serious pain. That puts a lid on much higher prices. This is not the time to invest in oil yet)
Brent Month Week Day Hour
4 Jan Close 57.40 (52.25)
Trend Direction Down (Down) Up (Down) Up (Up) N
Risk Weight 15-35 (25-60) 5-10 (5-10) 40-50 (15-25) 50
Allocation 0% (0%)

Posted in A - All Financial Blogs | 2020 Forecast.

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