Metals – FX- Indices – update – 11 Nov 2018


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

Gold / USD

A midweek accelerating USD was the major influence on PM. With weekly turning down the risk weight requires allocation to be reduced to 60% again. (USD movement vs majors determined direction during the week. A strong dollar caused early weakness in metals during the past week with a reversal in second half. Weekly is moving into higher risk territory but still strong and up. October closed up on monthly. With Daily and hourly neutral we maintain 80% allocation)

Gold/USD Month Week Day Hour
Nov 9 close 1210
(1232)
Trend Direction  Up (Up) Down (Up) Down (N) N
Risk Weight 20-25 (20-25) 75-80 (70-80)  30-40 (50) 45
Allocation 60% (80%)

Silver / USD

The downside risk short term appears limited. Weekly turning down looks interim and for now stay with the minimum 40% allocation. (Same picture for silver reacting to USD strength early in the week and reversing  sharply Thursday Friday. From risk perspective Silver does not yet give strong indication. We raise allocation to 40% as daily and weekly are in an uptrend and monthly turning Neutral at low risk weight)

Silver/USD Month Week Day Hour
Nov 9 close 14.12
(14.71)
Trend Direction  Down (N) Down (Up)  Down (Down) Down
Risk Weight 10-15 (15)  30-35 (35-40)  25-40 (40-50) 15-20
Allocation  40% (30%)

Gold / EUR

ST indicative of sideways range. With weekly divergence developing we will reduce allocation to 60% upon Hourly turning down from higher risk level (Monthly risk weight widened in uptrend showing potential strength. Weekly continues uptrend. With daily and hourly in short term downtrend we maintain allocation)

Gold/EUR Month Week Day Hour
Nov 9 close 1066
(1075)
Trend Direction Up  (Up) N (Up) Down (Down) N
Risk Weight  20-30 (20-35) 70-75 (65-75) 30-40 (60-70) 5-10
Allocation  75% (75%)

Silver / EUR

Allocation unchanged at 45%. USD move pushed silver lower and whilst MT still downside risk, ST and LT should balance this to a sideways risk.(Monthly trend change happened with weekly firming and daily turning back up. Increase allocation to 45% from 35%)

Silver/EUR Month Week Day Hour
Nov 9 close 12.45
(12.91)
Trend Direction Up (Up)  N (Up)  Down (Up) Down
Risk Weight  15-20 (15-25) 45-50 (45-50) 25-30 (55-60) 20-25
Allocation 45% (45%)

Gold / GBP

Not unexpected, this pair may swiftly fill the gap at 925. Daily reaching low risk is likely to see a reversal up again. Coming week close watch whether to reduce 70% allocation. (With Monthly now in firmly established uptrend from low risk weight and Weekly continuing strong uptrend, the down ward change in Daily is no reason to change the 70% allocation. Still risk of swift reaction to near 925 but smaller position only as intraday type trading)

Gold/GBP Month Week Day Hour
Nov 9 close 930
(951)
Trend Direction Up (Up) Down (Up) Down (Down) Down
Risk Weight 15-25 (20-35) 65-70 (65-80) 5-15 (55-70) 30-35
Allocation 70% (70%)

Silver / GBP

Lower risk picture all round. May increase to 70% if daily trend turns Up. (Change of Monthly trend confirmed with Weekly continuing uptrend from low risk base. If Daily turns back up following hourly we increase allocation to 70%)

Silver/GBP Month Week Day Hour
Nov 9 close 10.87
(11.33)
Trend Direction N (Up) Down (Up) Down (Down) Down
Risk Weight 10-15 (15-20) 35-40 (35-45) 10-15 (50-60) 35-40
Allocation 50% (50%)

Gold / Silver Ratio

Ratio reaching higher risk but not finished. No allocation change. (We now need the weekly to change trend direction to give silver clear overweight. This could be a mid week event or ratio weakness can create another divergence short term. It is not yet clear, thus risk allocation remains flat at this moment)
All time high: 1941 = 97, 1991 = 90

AU/AG Ratio Month Week Day Hour
Nov 9 close 85.20
(83.51)
Trend Direction Up (Up) Up (Up) Up (Down) Down
Risk Weight 75-85 (75-85) 75-85 (70-80) 65-70 (60-65) 50-55
Allocation Flat

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

Euro / USD

Strong dollar finish may continue early in week. Overall picture becoming lower risk LT. No allocation change. (USD strong early in the week and reversing back end. Monthly and Weekly look to want to run out of steam at low risk weight whilst daily turned up. Long dollar positions should be hedged 70%, short dollar positions 30%. If Daily diverges vs Weekly in coming week the allocation may temporarily be reduced again)

EUR/USD Month Week Day Hour
Nov 9 close 1.1335
(1.1384)
Trend Direction Down (Down) Down (Down) Down (Up) Up
Risk Weight 10-20 (10-20) 15-25 (25-35) 30-40 (15-20) 20
Allocation 70% hedge
(40% hedge)

British Pound / USD

Risk and trend show more sideways range action. No allocation change.(Brexit mania is influencing the USD common relationship. More volatility expected in both directions. We prefer to move the allocation of a hedge against short cable back to 70%)

Cable Month Week Day Hour
Nov  close 1.2960
(1.2955)
Trend Direction Down (Down) Down (Down) Down (Up) N
Risk Weight 10-20 (10-20) 40-45 (40-55) 75-80 (25-40) 5-10
Allocation 70% (60%)

USD / Swiss franc

No change even though trend still up but at higher risk. (Monthly trend direction turned back up, Weekly becoming higher risk whilst both Daily and Hourly in higher risk weight down trend. No change. Long dollars should be hedged at 70%)

USD/CHF Month Week Day Hour
Nov 9 close 1.0050
(1.0025)
Trend Direction Up (Up) Up (Up) Up (Down) Down
Risk Weight 75-85 (75-85) 85-90 (80-85) 75-80(75-90) 20-25
Allocation 70% hedge
(70% hedge)

British Pound / Euro

Short Sterling positions should be covered 70%, up from 60%. (Brexit jitters. After early weakness a 2% reverse on Oct 31. That reverse however looks weakish with weekly still in downward trend. Stay with 60% hedge on short sterling positions)

GBP/EUR Month Week Day Hour
Nov 9 close 1.1435
(1.1382)
Trend Direction Up (Up) Up (Down) Down (Up) Up
Risk Weight 55-65 (55-60) 85-90 (65-75) 60-70 (45-70) 5-10
Allocation 60%
(50%)

Bitcoin / USD

With weekly turning up this market could rally. A small 20% allocation long is a speculative consideration. (Daily trend turned up fairly sharply but without much price change. Weekly also turned up at the same risk weight level. Spec territory only. With hourly in higher risk weight range, weekly trading trend places with previous week and monthly still in same weak downtrend one simply cannot risk a long position at this stage)

Potential gaps to fill at 4330 and 2828.
If this market is poised to turn from extremely overbought (Dec 2017) to oversold, it doesn't appear to be finished.

BTC/USD Month Week Day Hour
Nov 9 close 6420
(6432)
Trend Direction Down (Down) Up (Up) Up (Up) Up
Risk Weight 15-25 (20-25) 25-30 (20-25) 50-55 (40-50) 25-35
Allocation 20% spec (0%)

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

Dow Jones

The Weekly turned up but Daily is diverging at high risk and syncs with Monthly. Hourly may push prices a little higher at opening, but market remains high risk. No change. (Whilst the monthly remained slightly up on Oct 31, we currently see a down trend. Weekly is still down and the reversal from the low 24k's on 29 Oct is developing too rapidly. This may continue into the the week but carries higher risk. Not worth putting on even a short term smaller long position based on this risk weight picture. No change in allocation)

US30 Month Week Day Hour
Nov 9 close 25989
(25270)
Trend Direction Down (Down) Up  (Down) N (Up) Up
Risk Weight 80-85 (75-85) 30-40 (25-35) 90-95 (50-65) 20-30
Allocation 0% (0%)

Standard & Poor 500

High risk daily risk divergence with Weekly risk weight which trend did turn up (temporarily it may turn out). Monthly down trend appears firmer. Same risk as DJII. (Exactly similar picture again as DJII. Monthly was Neutral on Oct 31 and is now down in a divergence position versus the highs beginning of 2018. It shows that the stock market is losing momentum quickly and carries a high level of risk. No change in allocation although a further short term technical rally may develop early in the week. US elections are of short term influence only)

S&P500 Month Week Day Hour
Nov 9 close 2781
(2723)
Trend Direction  Down (Down) Up (Down) Up (Up) Up
Risk Weight 70-85 (75-85) 25-35 (25-35)  85-90 (50-65) 25-40
Allocation 0% (0%)

Dollar Index

No change, 70% hedge for long dollar positions. For hedging a more conservative approach is desired when risk weight is over 80 in LT time frames. (Even though Trends are up long term, the broader dollar index is shows slowing momentum in Monthly with Weekly possibly diverging because Daily continues down and Hourly high risk short term. Long dollar positions across the index spectrum should be covered 70%, up from 60%)

USDIndex Month Week Day Hour
Nov 9 close 96.90
(96.50)
Trend Direction Up (Up) Up (Up) Up  (Down) N
Risk Weight 80-90 (80-90) 75-85 (65-75) 55-65 (65-80) 60-55
Allocation 70% (60%)

Crude Oil

Daily low risk weight may push prices higher early in the week creating possible divergence with weekly and monthly down trends. Patience seems the best before jumping into this market again seriously. Any small percentage short term speculative long position must be treated with great care. No change in 0% allocation. (Monthly bearish divergence on risk weight is now a fact. With Weekle down and Daily in Very low risk expect a short term rally that is unlikely to drive a major turn back up for this market. Given increased volatility and daily very low risk a 20% allocation could be taken short term but this might need to be reversed intra week. Hence no change in our weekly update model)

Brent Month Week Day Hour
Nov 9 close 69.90
(72.65)
Trend Direction Down (Down) Down (Down) Down (Down) N
Risk Weight 70-80 (70-85) 20-40 (40-55)  5-10 (0-5) 40
Allocation 0% (0%)

Posted in A - All Financial Blogs | 2020 Forecast.

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