Metals – FX- Indices – update – 17 Dec 2018


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

Gold/USD

Any medium term to short term weakness is strongly defended by the LT uptrend. No divergence and allocation holds. (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%)
Gold/USD Month Week Day Hour
Dec 17 close 1245 (1248)
Trend Direction Up (Up) Up (Up) Down (N) Down
Risk Weight 25-35 (25-35) 80-90 (80-90) 75-80 (75-80) 85-90
Allocation 80% (60%)

Silver/USD

Last week's increase happened swiftly. LT trends are driving force even with daily turning down in higher risk zone. As soon as hourly diverges into low risk area and turns up we will increase to 80%. Remain for now. (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)
Silver/USD Month Week Day Hour
Dec 17 Latest 14.67 (14.65)
Trend Direction Up (Up) Up (Up) Down (Up) Down
Risk Weight 10-15 (10) 50-70 (30-40) 75-85 (70-75) 80-85
Allocation 60% (40%)

Gold/EUR

Remain at 80% allocation. Risk is still up with strong LT trend established. MT a little toppish but LT driving force. (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)
Gold/EUR Month Week Day Hour
Dec 17 Latest 1095 (1095)
Trend Direction Up (Up) Up (Up) N (Down) Down
Risk Weight 40-50 (40-60) 90-95 (80-85) 85 (85-90) 85-90
Allocation 80% (80%)

Silver/EUR

The trend and risk profiles favor a further advance before this market may move sideways, possibly due to some dollar weakness. Allocation to stay at 60%. (As soon as hourly turns back up we want to increase allocation to 60%)
Silver/EUR Month Week Day Hour
Dec 17 Latest 12.91 (12.84)
Trend Direction Up (Up) Up (Up) Down (Down) Down
Risk Weight 15-25 (15-20) 65-80 (45-65) 85-90 (75-80) 65-75
Allocation 60% (60%)

Gold/GBP

Last week increased allocation to 80%. Even though MT looks higher risk, the LT advance is leading. No divergence to change risk profile away from substantially long Gold. (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%)
Gold/GBP Month Week Day Hour
Dec 17 Latest 986 (956)
Trend Direction Up (Up) Up (Up) Down (Down)
Risk Weight 40-65 (40-65) 85-90 (75-85) 70-80 (80-85)
Allocation 80% (60%)

Silver/GBP

The risk scenario may develop into a strong bullish Silver trend early next year. Remain at 60% allocation established last week. (As soon as Hourly trend turns back Up, irrespective of price level we wish to increase allocation to 60%)
Silver/GBP Month Week Day Hour
Dec 17 Latest 11.62 (11.49)
Trend Direction Up (Up) Up (Up) Down (Down) Down
Risk Weight 15-25 (15-20) 70-90 (40-60) 85-90 (75-80) 65-75
Allocation 60% (60%)

Gold/Silver Ratio

The sideways 1% range continued last week. ST and MT may seek a leg up again, but the uptrend is getting tired. Remain at 30% Ag vs 70% Au. (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) All time high: 1941 = 97, 1991 = 90
AU/AG Ratio Month Week Day Hour
Dec 17 Latest 84.90 (85.12)
Trend Direction Up (Up) Down (Down) Up (Down) Up
Risk Weight 85-95 (85-95) 70-80 (80-85) 25-30 (45-50) 45-50
Allocation (30% AG)

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

Euro/USD

Sideways narrow 0.3% range continued with morfe of the same expected. With monthly risk weight very low and other time frames on neutral risk this pair is likely to bottom (EUR) at a l;evel close to 10% above the 2015-2016 lows. 100% hedge for long dollar/short EUR exposures. (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)
EUR/USD Month Week Day Hour
Dec 17 Latest 1.1350 (1.1376)
Trend Direction Down (Down) Up (N) Down (Up) Down
Risk Weight 5-10 (5-10) 15-25 (20-25) 40-45 (40-50) 85-90
Allocation (100% hedge)

USD/Swiss franc

Even though we may see further upward pressure, even without much price change, Long dollar/short CHF position should be 100% hedged looking at the overall risk profile. The LT trend not yet turned but looks to get tired in a range bound market. (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)
USD/CHF Month Week Day Hour
Dec 17 Latest 0.9925 (0.9895)
Trend Direction Up (Up) Down (Down) Up (Down) Down
Risk Weight 80-90 (80-85) 65-70 (65-75) 50-60 (25-30) 10-15
Allocation 100%

British Pound/USD

Brexit issues may drive some volatility, but cable confirms the general picture of a much weakening dollar uptrend. Short GBP exposures should be fully hedged. (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 dollar positions. At least 6 months exposure covered forward)
Cable Month Week Day Hour
Dec 17 Latest 1.2620 (1.2790)
Trend Direction Down (Down) Up (Down) Up (Up) Up
Risk Weight 5-10 (5-10) 10-15 (10-20) 30-40 (25-30) 65-70
Allocation (100%)

British Pound/Euro

Little change in the overall risk profile. Short GBP/long EUR exposures to remain 60% hedged. (This pair moved lower last week but continues to look range bound without a major change of direction. As a result Short sterling exposures vs EUR remain hedged at 60%. As risk still favours weaker sterling it is prudent to keep 40% unhedged)
GBP/EUR Month Week Day Hour
Dec 17 Latest 1.1120 (1.1160)
Trend Direction Down (Down) Down (Down) Up (Up) Up
Risk Weight 40-50 (40-50) 20-30 (40-50) 30-35 (15-20) 40-50
Allocation (60%)

Bitcoin/USD

Crypto currencies and BTC started a rally which looks weak but can be volatile. Possible that 1000 odd dollar gain from the recent low. If a divergence between ST and MT and/or ST or MT vs LT develops, it is an opportunity to unload that undesired long position. (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) 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 17 Latest 3555 (3403)
Trend Direction Down (Down) Down (Down) Up (Up) Up
Risk Weight 5-15 (5-15) 10-15 (10-15) 10-20 (10-15) 80-90
Allocation (0%)

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

Dow Jones

The strong LT downtrend is clearly established and gives some room for pause but not for immediate divergence to take this market back into its 9 year uptrend. Stay out and not get excited with low risk ST and MT time frames, Daily and Weekly. 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)
US30 Month Week Day Hour
Dec 17 Latest 23550 (24389)
Trend Direction Down (Down) Down (Down) Down (Down) Down
Risk Weight 50-70 (55-75) 5-20 (20-35) 15-20 (30-45) 5-15
Allocation (0%)

Standard & Poor 500

LT downtrend firmly established. Any ST and MT pause from low risk weight position will be temporary. (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)
S&P500 Month Week Day Hour
Dec 17 Latest 2550 (2633)
Trend Direction Down (Down) Down (Down) Down (Down) Up
Risk Weight 40-65 (45-65) 5-15 (20-30) 10-20 (30-45) 10-20
Allocation (0%)

Dollar Index

The strong dollar which carried all of 2018 shows the same exhaustion in Index as against individual majors, as expected. Long dollar exposures against any basked of majors should be 100% hedged. (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)
USDIndex Month Week Day Hour
Dec 17 Latest 97.15 (96.71)
Trend Direction Up (Up) N (N) N (Down)
Risk Weight 85-95 (85-90) 80-85 (75-80) 65 (50-60)
Allocation (100%)

Crude Oil

This market looks high risk still with only minor speculative opportunity on the upside expected. Both trend direction and risk weight tell us to 'stay out'! (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)
Brent Month Week Day Hour
Dec 17 Latest 58.90 (61.40)
Trend Direction Down (Down) N (Up) Down (Down) Down
Risk Weight 30-60 (30-60) 5-10 (5-10) 40-50 (35-40) 5-15
Allocation (0%)

Posted in A - All Financial Blogs | 2020 Forecast.

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