Metals – FX- Indices – update – 9 Dec 2018


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

Gold/USD

LT trend are supportive of a firm trend change. Hourly being down and high risk we wait for a slightly lower entry point at any level as soon as hourly trend turns Up and raise allocation to 80%. (We remain cautious and stay with 60% gold allocation)
Gold/USD Month Week Day Hour
Dec 7 close 1248 (1222)
Trend Direction Up (Up) Up (N) N (Up) Down
Risk Weight 25-35 (20-25) 70-75 (65-70) 75-80 (70-80) 90-95
Allocation 80% (60%)

Silver/USD

With LT trends Up and Hourly down in higher risk we wait for Hourly to turn up again and increase holding to 60%. As soon as Silver starts taking a lead again in the metals space we shall increase further. (LT risk still down Dec 7. No change in allocation. For a serious trend change in the Metals space Silver usually takes a lead. That has not happened yet)
Silver/USD Month Week Day Hour
Dec 7 close 14.65 (14.14)
Trend Direction Up (Down) Up (Up) Up (Up) Down
Risk Weight 10 (05-15) 30-40 (25-30) 70-75 (50-55) 80-90
Allocation 60% (40%)

Gold/EUR

As Daily in higher risk and turning down with LT strongly Up we remain very positive but could see weaker advance due to USdollar looking relatively weaker. As soon as Hourly turns back up we will increase to 80% allocation of core position. (More range trading expected. Technically, risk weight a bit more positive this week. No change in allocation)
Gold/EUR Month Week Day Hour
Dec 7 close 1095 (1078)
Trend Direction Up (Up) Up (Up) Down (Up) Down
Risk Weight 40-60 (20-40) 80-85 (75-80) 85-90 (70-75) 75-80
Allocation 80% (75%)

Silver/EUR

As soon as hourly turns back Up we want to increase allocation to 60%. (Weekly turned up whilst Daily turned down. This pair still looks range bound. No change in allocation)
Silver/EUR Month Week Day Hour
Dec 7 close 12.84 (12.29)
Trend Direction Up (Up) Up (Up) Down (Down) Down
Risk Weight 15-20 (15-20) 45-65 (40-45) 75-80 (50-55) 80-85
Allocation 60% (45%)

Gold/GBP

Fresh Dec data show a fairly strong LT Uptrend. With Daily and Hourly now in higher risk down trend we wait for the Daily to turn Up to increase allocation. As this may take a little while we keep Gold allocation vs GBP at 60%. (Both Daily and Weekly trends turned (Up). Risk weight favours a slight increase of allocation to 60% from 50%)
Gold/GBP Month Week Day Hour
Dec 7 close 982 (956)
Trend Direction Up (Up) Up (Up) Down (Up) Down
Risk Weight 40-65 (20-40) 75-85 (65-75) 80-85 (80-85) 75-85
Allocation 60% (60%)

Silver/GBP

As soon as Hourly trend turns back Up, irrespective of price level we wish to increase allocation to 60% (Trend and Risk weight look fairly neutral with a bias o Silver ownership. NO change in 50% allocation)
Silver/GBP Month Week Day Hour
Dec 7 close 11.49 (11.09)
Trend Direction Up (Up) Up (Up) Down (N) Down
Risk Weight 15-20 (10-15) 45-60 (35-40) 75-80 (65) 85-90
Allocation 60% (50%)

Gold/Silver Ratio

Weekly turned Down with monthly advancing 10 risk points. This now favours a slight overweight of Silver. Typically a Flat position is at least 80%-100% allocated to Gold and only 0-20% to Silver in a long term lock up. The new Dec picture would favor a slightly higher Silver content of 30%. Once the ratio starts its down turn in earnest the Silver content will be increased to max 50%. Historic risk favours a permanent Gold holding. (The 25 year high close around 86.00 and LT trend still up we still cannot call a top for the ratio even though tempting sometimes. As a result Silver can still not be seen as the leading metal. Owning Precious metals and probably from a higher base allocation seems evident because almost all LT Metals trends have a lower risk weight and/or in an uptrend. We remain flat, i.e no overweight for Gold or Silver) All time high: 1941 = 97, 1991 = 90
AU/AG Ratio Month Week Day Hour
Dec 7 close 85.12 (85.33)
Trend Direction Up (Up) Down (N) Down (Down) Down
Risk Weight 85-95 (75-85) 80-85 (80-85) 45-50 (60-65) 25-30
Allocation 30% AG

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

Euro/USD

We expect another range week but with Monthly trend risk now in sub 10% area the LT USDollar uptrend is getting exhausted. Transaction risk favours a full hedge of short EUR position at 100% within the policy risk horizon, typically 6 months or 12 months forward. (Another week of 1% rangebound sideways extension. Daily trend turned (Up) from (Down) but looking neutral. No change from last week)
EUR/USD Month Week Day Hour
Dec 7 close 1.1376 (1.1310)
Trend Direction Down (Down) N (Up) Up (Up) Down
Risk Weight 5-10 (10-20) 20-25 (20-25) 40-50 (50-55) 65-80
Allocation 100% hedge (70% hedge)

USD/Swiss franc

Without Divergences between immediate side by side timeframes, i.e. weekly vs daily, we like to see the hourly turning Up into a medium to high risk level. That would be the time to increase Long dollar risk to be fully hedged. (Last weeks range between 0.9930 and 1.00. With Daily trend turning (Down) the risk of upward pressure increase whilst Monthly and Weekly remain in higher risk territory. No Change in hedge allocation)
USD/CHF Month Week Day Hour
Dec 7 close 0.9895 (0.9970)
Trend Direction Up (Up) Down (Down) Down (Down) Down
Risk Weight 80-85 (75-85) 65-75 (70-80) 25-30 (20-25) 5-10
Allocation Get ready for 100% (70% hedge)

British Pound/USD

Cable also eyes like the dollar will soon have run its course. With strong 5 months support at the 1.27 level we favor an increase to be fully hedged on long dolar positions. At least 6 months exposure covered forward. (Cable closing on the lows within a 1.5% range. This pair appears to be moving towards a fully hedged short sterling position vs USDollar, but trend/risk position favors a max 70% hedge)
Cable Month Week Day Hour
Dec 7 close 1.2790 (1.2735)
Trend Direction Down (Down) Down (Down) Up (Down) Down
Risk Weight 5-10 (10-15) 10-20 (15-30) 25-30 (15-20) 30-35
Allocation 100% (70%)

British Pound/Euro

This pair moved lower last week but continues to look range bound without an major change of direction. As a result Short sterling positions vs EUR remains hedged at 60%. As risk still favours weaker sterling it is prudent to keep 40% unhedged. (GBP moved slightly lower this week. We remain to keep short GBP position vs EUR hedged at 60%)
GBP/EUR Month Week Day Hour
Dec 7 close 1.1160 (1.1255)
Trend Direction Down (N) Down (Down) Up (Down) Up
Risk Weight 40-50 (50-55) 40-50 (45-60) 15-20 (15-20) 10-15
Allocation 60% (60%)

Bitcoin/USD

The entire crypto space is under fire, from crypto currencies to ICO's with major (opportunity) losses for all participants. None of these markets can be trusted since they are so manipulated. Gambles only not for risk management. Volatility is simply to high to participate. With that final gap opening at 2828 getting nearer a drop below 3000 could trigger a wave of panic selling establishing a new and narrower volatile rane of around $1000 or so. At the same time we could see a $1000 bounce again as ST trends are low risk, but this is the kind of market that should not be bottom picked. (BTC rallied to close the Fri-Mon opening gap of the previous weekend at 4415 reaching a high of 4475. A trend can extend substantially in highly controlled markets and this LT trend is still down albeit risk weight is becoming lower) 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
Dec 7 close 3403 (4040)
Trend Direction Down (Down) Down (Down) Up (Down) (N)
Risk Weight 5-15 (10-15) 10-15 (10-20) 10-15 (20-25) 30
Allocation 0% (0%)

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

Dow Jones

Last week rally lost all of its gains again and with Dec LT trend now firmly established Down this index looks very high risk. No change in 0% allocation. (Last week's Daily Low risk pushed the market strongly higher with a near 1200 point recovery. This rally could now last a bit longer but will likely find strong resistance given the continued downtrend at the long end)
US30 Month Week Day Hour
Dec 7 close 24389 (25538)
Trend Direction Down (Down) Down (Down) Down (Up) Up
Risk Weight 55-75 (75-85) 20-35 (35-45) 30-45 (50-70) 5-10 (85-95)
Allocation 0% (0%)

Standard & Poor 500

A similar expected move which shows the nervousness across all global stock indices. The strong Down trend in LT timeframes is indicative of high risk present and momentum in downward direction can easily increase. No change in 0% allocation. (130 point recovery still showing the same high risk continuation as DJII. Rallies should be used to unwind remaining positions)
S&P500 Month Week Day Hour
Dec 7 close 2633 (2760)
Trend Direction Down (Down) Down (Down) Down (Up) Up
Risk Weight 45-65 (70-80) 20-30 (30-35) 30-45 (55-80) 5-10
Allocation 0% (0%)

Dollar Index

A weaker close into the new month confirms that the USD dollar up trend is getting exhausted. It may not be quite finished and more range trading possible. LT trend clearly sign of narrowing risk with a strong possibility of turning down early into the New year or even earlier. As this index represents dollar value against all majors our individual dollar risk allocations are being confirmed. (Despite a 30 pip higher close last week, the Daily trend turned down. With Weekly in higher risk downtrend and Monthly still up, the index still has upward momentum to finish)
USDIndex Month Week Day Hour
Dec 7 close 96.71 (97.20)
Trend Direction Up (Up) N (Down) Down (Down) Up
Risk Weight 85-90 (80-90) N (75-80) 50-60 (55-60) 25-40
Allocation 70% (70%)

Crude Oil

We prefer to remove all risk from this market again and go back to 0% allocation from 40% with a decent return on the position. Even though the weekly risk pattern shows a chance of prices turning up, both Monthly and Daily show a clear down to mixed picture. Last week's divergence does not appear to offer follow through, hence risk back to a flat position. (Price recovered early in the week towards 61.40 before turning down again. Weekly trend still down but diverging into a possible turn in oversold territory. Daily similar so we are happy to increase to 40% allocation)
Brent Month Week Day Hour
Dec 7 close 61.40 (59.46)
Trend Direction Down (Down) (Up) (Down) Down (Up) Down
Risk Weight 30-60 (60-80) 5-10 (5-10) 35-40 (10-15) 50-55
Allocation 0% (40%)

Posted in A - All Financial Blogs | 2020 Forecast.

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