Metals – FX- Indices – update – 13 Jan 2019

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


Gold/USD

LT trend and risk weight are the major force still. Both Daily and Weekly risk weight only topped once following a major trend change. Risk is that this market has (much) further to go. No change in full allocation to Gold vs 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)

Gold/USD Month Week Day Hour
11 Jan close 1287
(1285)
Trend Direction Up (Up) Up (Up) Down (Down) Down
Risk Weight 35-50 (25-40) 90-95 (85-90) 75-80 (85-90) 10-20
Allocation 100% (100%)

Silver/USD

Past week's correction was minor and weak. We stay will full allocation to silver.

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

Silver/USD Month Week Day Hour
11 Jan Close 15.55
(15.70)
Trend Direction Up (Up) Up (Up) Down (Down) Down
Risk Weight 20-30 (20-30) 85-90 (75-85) 75-85 (90-95) 15-30
Allocation 100% (100%)

Gold/EUR

Last week's correction may be over fairly soon joining the LT trend again. We remain fully allocated.

(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/EUR Month Week Day Hour
11 Jan Close 1123
(1127)
Trend Direction Up (Up) Down (Down) Down (Down) Down
Risk Weight 60-75 (60-75) 90-95 (90-100) 50-55 (90-95) 65-70
Allocation 100% (100%)

Silver/EUR

We remain fully allocated. Last week's minor correction is a small divergence away from Weekly and strongly supported by LT uptrend.

(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)

Silver/EUR Month Week Day Hour
11 Jan Close 13.60
(13.78)
Trend Direction Up (Up) Up (Up) Down (Down) Down
Risk Weight 30-40 (30-40) 85-90 (80-90) 65-75 (90-95) 35-55
Allocation 100% (100%)

Gold/GBP

Last week's action in rather nearing divergence between ST and MT/LT. We will stay with full allocation to Gold vs 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)

Gold/GBP Month Week Day Hour
11 Jan Close 1003
(1009)
Trend Direction Up (Up) Down (Down) Down (Down) Down
Risk Weight 60-80 (60-80) 80-90 (85-95) 35-45 (75-80) 0-5
Allocation 100% (100%)

Silver/GBP

Silver vs GBP as against Gold has retraced but is not yet showing any real tiredness coming off the Nov Lows. Remain fully allocated.

(Similar to Gold/GBP. We stand 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)

Silver/GBP Month Week Day Hour
11 Jan Close 12.15
(12.35)
Trend Direction Up (Up) Down (Up) Down (Down) Down
Risk Weight 30-45 (30-50) 85-90 (85-90) 65-70 (85-90) 0-5
Allocation 100% (100%)

Gold/Silver Ratio

Last week's rally appears fairly weak. The bias remains for Silver to strengthen more than Gold, i.e the Ratio to continue its newly established LT downtrend.

(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)

AU/AG Ratio Month Week Day Hour
11 Jan Close 82.75
(81.90)
Trend Direction Down (Down) Down (Down) Up (Down) Down
Risk Weight 75-85 (70-85) 20-45 (45-60) 15-20 (5-15) 40-55
Allocation 50% AG (50% AG)

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

Euro/USD

USD bias remains weak overall. Some MT pressure against the EUR, but that will prove temporary. Long dollar positions must be fully hedged.

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

EUR/USD Month Week Day Hour
11 Jan Close 1.1470
(1.1400)
Trend Direction Up (Up) Up (Up) Down (Down) Down
Risk Weight 10-15 (10-15) 35-45 (25-35) 80-85 (30-45) 5-15
Allocation 100% (100% hedge)

USD/Swiss franc

As the LT trend just changed to down any ST and MT lift is an opportunity to full cover any long dollar positions.

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

USD/CHF Month Week Day Hour
11 Jan Close 0.9835
(0.9905)
Trend Direction Down (Down) Down (Down) Up (Up) Down
Risk Weight 70-80 (75-80) 30-45 (45-60) 20-30 (35-45) 50-60
Allocation 100% unch

British Pound/USD

Short GBP/Long USD positions must be 100% covered. Any short term GBP weakness, which can easily be driven by Brexit issues is an opportunity to establish fully hedged positions and even for the maximum possible transaction risk time frame. This pair almost tells the story of a No Deal extended membership obligation or even No Brexit outcome being positive for Cable.

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

Cable Month Week Day Hour
11 Jan Close 1.2840
(1.2690)
Trend Direction Up (Up) Up (Up) Up (Down) Down
Risk Weight 10-15 (10-15) 25-40 (20-30) 90-95 (50-60) 80-90
Allocation 100% unch

British Pound/Euro

GBP did gain weight last week, but from a pure risk point of view it is wise to remain half covered on any transaction risk exposure time frame. Our bias however, looking at trend and risk weight favors GBP.

(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)

GBP/EUR Month Week Day Hour
11 Jan Close 1.1200
(1.1175)
Trend Direction Down (Down) Up (Up) Up (Up) Down
Risk Weight 35-45 (30-45) 20-30 (15-15) 60-65 (55-60) 95-100
Allocation 50% (50%)

Bitcoin/USD

The very recent ST and MT rally never finished and turned down with prices last week. This is not a normal market and as long as LT trend remains down even though low risk weight in all time frames, the fact that there is a gap to be filled lower down keeps us out of this market. This market is manipulated and one cannot count on high liquidity for more serious size investors.

(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.

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
11 Jan Close 3600
(3790)
Trend Direction Down (Down) Down (Up) Down (N) Down
Risk Weight 0-10 (0-10) 10-15 (10-15) 10-20 (40) 15-20
Allocation 0% (0%)

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

Dow Jones

Strong rally again last week. The technical picture very much points towards a correction in a major downtrend. This is not a risk to start a fresh long position that has serious potential. We stay out.

(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)

US30 Month Week Day Hour
11 Jan Close 23995
(23433)
Trend Direction Down (Down) Up (Up) Up (Up) Up
Risk Weight 45-60 (45-60) 20-35 (10-20) 90-95 (45-50) 65-75
Allocation 0% (0%)

Standard & Poor 500

Same strong rally last week. The technical picture very much points towards a correction in a major downtrend. This is not a risk to start a fresh long position that has serious potential. We stay out.

(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)

S&P500 Month Week Day Hour
11 Jan Close 2596
(2532)
Trend Direction Down (Down) Up (Up) Up (Up) Up
Risk Weight 40-55 (35-55) 20-35 (10-20) 90-95 (40-50) 75-80
Allocation 0% (0%)

Dollar Index

We could see a bit of range and up for the USD, but the main trend is LT and MT = Down.
No long dollar positions as that risk is high.

(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)

USDIndex Month Week Day Hour
11 Jan Close 95.65
(96.20)
Trend Direction Down (Down) Down (Down) Up (Up) Up
Risk Weight 85-90 (85-90) 45-65 (65-75) 10-20 (35-40) 80-85
Allocation 100% unch

Crude Oil

This market is showing divergence between daily and Weekly whilst the LT trend is down. The strong rally of the past two weeks has not removed the major risk position which is for this market to first finish the LT downtrend. We don't know at which level that may be, which could be at current levels at a later date or much lower levels. And that is where risk tells us to stay out.

(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)

Brent Month Week Day Hour
11 Jan Close 60.55
(57.40)
Trend Direction Down (Down) Up (Up) Up (Up) Down
Risk Weight 15-35 (15-35) 10-20 (5-10) 90-95 (40-50) 15-20
Allocation 0% (0%)

Posted in A - All Financial Blogs | 2020 Forecast.

Leave a Reply