Metals – FX- Indices – update – 17 Feb 2019

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


Risk awareness limits short term opportunity

Technicals show increasing risk in most asset classes. Where risk is unacceptably high we remain underinvested or Out.

Gold/USD

LT trend and slow rising risk weight prevails in absence of Weekly and Daily divergence.

(We stay fully invested with the Long term trend direction until a clear divergence signal between Risk weight and Price presents itself. Until such time the risk of rapid advance in current uptrend remains high)

Gold/USD Month Week Day Hour
Close 15 Febr Price 1321
(1310)
Trend Direction Up (Up) Up (Down) Up (N) Down
Risk Weight 55-70 (55-70) 90-95 (90-95) 60-65 (65-70) 85-90
Allocation 100% (100%)

Silver/USD

A 14 year support line broke in Aug 2018 at 15.67. That same line now sits at 16.11 and is likely to broken to the upside again due to a developing divergence between daily and Weekly supported by the Long term monthly trend with a low yet slow rising risk weight. We remain very positive on Silver vs USD.

(We stay fully invested with the Long term trend direction until a clear divergence signal between Risk weight and Price presents itself. Until such time the risk of rapid advance in current uptrend remains high)

Silver/USD Month Week Day Hour
Close 15 Febr Price 15.75
(15.75)
Trend Direction Up (Up) Down (Down) Down (Down) Down
Risk Weight 30-50 (35-50) 80-85 (80-85) 30-35 (50-55) 85-90
Allocation 100% (100%)

Gold/EUR

High risk weight across time frames is likely to result in a short term correction relatively soon. A 14 year supporting trend line was broken in Nov 2017 at 1100. That trend line is now short term resistance at 1180. If Daily trend turns south we will lower the position by 50%. If shortly thereafter a major divergence develops between Hourly (low risk weight) and Daily (high risk weight) at that time we will return to fully invested. The objective is to protect some profit in case this market turns down for a relatively longer period.

(Tempting to take profit on 30% as both Daily ST and Weekly MT are showing very high risk to turning down, but risk remains with LT and uptrend without confirmed divergence whilst hourly is showing bullish divergence vs daily. So we stay with the 100% long position)

Gold/EUR Month Week Day Hour
Close 15 FebrPrice 1170
(1157)
Trend Direction Up (Up) Up (Down) Up (Down) Up
Risk Weight 80-95 (80-95) 95-100 (90-100) 80-90 (90-95) 60-70
Allocation 100% (100%)

Silver/EUR

The price consolidation since one month continues. ST risk weight could develop a divergence vs MT. We stay with full silver vs Euro.

(We stay with the LT uptrend, but cannot exclude a correction. The current level still appears a consolidation in a longer term uptrend)

Silver/EUR Month Week Day Hour
Close 15 FebrPrice 13.95
(13.86)
Trend Direction Up (Up) Up (Up) Down (N) Down
Risk Weight 45-65 (45-60) 85-90 (85-90) 50-60 (80-90) 80-90
Allocation 100% (100%)

Gold/GBP

High risk weight in M, W and D time frames is not a reason to top pick this market. Even though ST Daily turned down there is no clear divergence calling a short term top. The 15 year chart pattern calls for a MT high above 1070. We stay with the current allocation at 100%.

(We stay with full investment until MT or ST show strong bearish divergence)

Gold/GBP Month Week Day Hour
Close 15 Febr Price 1022
(1016)
Trend Direction Up (Up) Up (Up) Down (Up) Down
Risk Weight 80-90 (75-90) 75-80 (70-80) 85-90 (90) 20-30
Allocation 100% (100%)

Silver/GBP

We stay with fully invested position as LT anhd MT trends prevail.

(Same as last week. No confirmation of LT trend changing even temporary because no sign of bearish divergence in MT or ST)

Silver/GBP Month Week Day Hour
Close 15 Febr Price 12.24
(12.18)
Trend Direction Up (Up) Up (Up) Down (Up) Down
Risk Weight 45-65 (45-65) 75-80 (75-80) 65-75 (75-80) 75-80
Allocation 100% (100%)

Gold/Silver Ratio

Strong performance of Gold vs Silver but the trend and risk weight levels suggests renewed strength for Silver. We stay at 50/50.

(No Change. In spite of relative weaker Silver that weakness is marginal and unlike the volatility seen in earlier periods of silver weakness. We stay with the LT down trend)

AU/AG Ratio Month Week Day Hour
Close 15 Febr Price 83.60
(83.25)
Trend Direction Down (Down) Up (Up) Down (Up) Down
Risk Weight 65-75 (65-75) 25-30 (25-30) 80-85 (60-70) 10-15
Allocation 50% AG (50% AG)

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

Euro/USD

A 4 month consolidation with a 1.1210 - 1.1625 range continues. Monthly LT and Daily ST risk weight indicate that the support level will likely hold followed by another rally which eventually should turn the dollar down into a longer term down trend. Risk is clearly for the dollar to weaken and we position accordingly.

(The Battle for a strong dollar continues, but every time the dollar strengthens it returns to relative low risk. Euro/USD is now in the lower quartile of the recent 3 months price range. We remain with a fully hedged long dollar position and short dollars covered on an as required basis)

EUR/USD Month Week Day Hour
Close 15 Febr Price 1.1290
(1.1315)
Trend Direction Up (Up) Down (Down) Down (Down) N
Risk Weight 10-15 (10-15) 40-50 (40-50) 10-15 (10-15) 80-90
Allocation 100% (100% hedge)

USD/Swiss franc

Dollar looks toppish vs CHF whilst bearish divergence Risk weight to Trend is an important parameter to remain fully hedged on long dollar positions whilst short dollar positions can safely be covered on due date.

(ST Daily showing bearish divergence having pushed Dollar up against the very upper range area over the past 9 months. We stay with fully hedged long dollar exposures)

USD/CHF Month Week Day Hour
Close 15 Febr Price 1.0050
(1.0065)
Trend Direction Down (N) Up (Up) Down (Down) Down
Risk Weight 75-85 (80) 60-70 (60-70) 75-85 (75-80) 10-15
Allocation 100% unch

British Pound/USD

Very short term weakness (Hourly) followed by a stronger Cable is the most likely risk scenario. Low risk weight monthly gives good support to stay with fully hedged short cable exposures.

(Another 1% drop in cable has developed a divergence between Daily SRT and Weekly MT whilst LT Monthly is in an unchanged uptrend. We stay with fully hedged short Cable exposures)

Cable Month Week Day Hour
Close 15 Febr Price 1.2885
(1.2865)
Trend Direction Up (Up) Down (Down) Down (Down) N
Risk Weight 15-25 (15-25) 65-75 (70-75) 10-15 (10-20) 85-95
Allocation 100% unch

British Pound/Euro

The LT Monthly uptrend with medium risk and low risk Daily uptrend favor a minimum of 75% hedge on short GBP.

(After previous week's 2% drop we've seen little real movement or direction. The general risk to trend picture favors staying with current LT uptrend and 75% cover for short Sterling exposures)

GBP/EUR Month Week Day Hour
Close 15 Febr Price 1.1400
(1.1380)
Trend Direction Up (Up) Down (Down) Up (Down) Down
Risk Weight 45-55 (45-55) 70-75 (70-75) 20-25 (25-35) 75-80
Allocation 75% (50%)

Bitcoin/USD

This volatile coin looks a little more favourable on Hourly and Daily but building divergence vs MT Weekly. We understand that a large amount of BTC is waiting to be disposed off. The difficulty being to realize some significant profits vs fiat currency, even at current level, using third party exchanges. It appears much more difficult to use BTC as a means of exchange for financial services, hence hard to predict where volume will develop again. Still high risk as a result.

(With Daily ST now clearly diverging for a bearish setup vis a vis Weekly MT and Monthly LT this remains a high risk play not to be touched)

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
Close 15 Febr Price 3601
(3435)
Trend Direction Down (Down) Up (Up) Up (Down) Up
Risk Weight 0-5 (0-5) 10-15 (10-15) 60-70 (75-80) 15-20
Allocation 0% (0%)

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

Dow Jones

The persistant rally can clearly be seen as a major opportunity loss. To date, LT risk called for staying out. We now see an inter-monthly change of LT trend with medium risk weight whilst Daily ST risk weight vs trend shows a 3rd bearish divergence putting much caution on ST direction. Because MT Weekly is in relative high risk territory this market must not be touched. Better safe than sorry against many odds unfortunately.

(The recent rally looks extremely suspicious technically whereas Daily ST is reading a possible third bearish divergence since the rally started around Christmas 2018. Stay out)

US30 Month Week Day Hour
Close 15 Febr Price 25883
(25400)
Trend Direction Up (Down) Up (Up) Up (Up) Up
Risk Weight 55-60 (50-60) 70-80 (70-80) 85-95 (75-80) 95-100
Allocation 0% (0%)

Standard & Poor 500

S&P is a near perfect copy of DJII. The persistant rally can clearly be seen as a major opportunity loss. To date, LT risk called for staying out. We now see an inter-monthly change of LT trend with medium risk weight whilst Daily ST risk weight vs trend shows a 3rd bearish divergence putting much caution on ST direction. Because MT Weekly is in relative high risk territory this market must not be touched. Better safe than sorry against many odds unfortunately.

(On the LT chart this rally looks very different from anything we have seen since 2009. Earlier intermediate bottoms always showed bullish divergence between LT Monthly risk weight and price. That was not the case at the recent bottom. This picture makes any ST or MT rally extremely suspicious. NO change, stay out)

S&P500 Month Week Day Hour
Close 15 Febr Price 2775
(2743)
Trend Direction Up (Up) Up (Up) Up (Up) Up
Risk Weight 45-55 (45-55) 75-80 (75-80) 90-95 (75-85) 90-100
Allocation 0% (0%)

Dollar Index

Future dollar weakness is best made visible looking at the MT Weekly dollar index with trend risk turning up in medium risk weight which generally creates a big bearish divergence setup and confirming the High risk weight LT trend downward. No change in 100% long dollar cover.

(The further 1% Dollar rally with some price weakness today does not look strong at all.
Very short term the dollar may stay a little stronger still but poised to weaken again due to a high risk weight Daily ST in combination with a high risk weight and down trending Monthly LT)

USDIndex Month Week Day Hour
Close 15 Febr Price 96.92
(95.65)
Trend Direction Down (Down) Up (Up) Down (Down) Up
Risk Weight 85-90 (85-90) 40-50 (40-50) 85-90 (85-95) 95-100
Allocation 100% unch

Crude Oil

In spite of strong performance last week price development still indicates a countertrend rally in a poptential LT downtrend that started early October. We do not short but stay out as initiated last year.

(Technically all systems are positive, but only just after a five week range between 60 and 63. The danger lies in the fact that there is no technical, trend or risk weight, indication that this market has really turned upwards. It could become a big missed opportunity, but the technical picture also suggests possible heavy resistance evidenced by a long hesitation with only slightly higher prices since the initial 62.00 price peak at year end. We stay out of this market)

Brent Month Week Day Hour
Close 15 Febr Price 66.39
(62.75)
Trend Direction Up (Up) Up (Up) Up (Up) Up
Risk Weight 25-30 (20-25) 45-55 (45-50) 85-95 (60-65) 95-100
Allocation 0% (0%)

Posted in A - All Financial Blogs | 2020 Forecast.

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