Metals – FX- Indices – update – 23 Dec 2018

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


Gold/USD

We are raising allocation to Gold to 100% of the Portfolio allocation maximum within a diversified portfolio. This maximum is of course a matter of personal preference. That preferred allocation to gold can now be increased to further limit any major exposure to the banking sector due to a relatively and uncomfortably higher cash level. (Any medium term to short term weakness is strongly defended by the LT uptrend. No divergence and allocation holds)

Gold/USD Month Week Day Hour
Dec 21 close 1256 (1245)
Trend Direction Up (Up) Up (Up) Down (Down) Up
Risk Weight 25-35 (25-35) 80-90 (80-90) 75-80 (75-80) 15-20
Allocation 100% (80%)

Silver/USD

The increase to 80% allocation of Max silver percentage of total Precious metals preference was triggered last week. We now increase again and immediately to 100%. Even though Silver has not taken a lead in the recent price advance of precious metals, its technical behavior actually follows gold. The silver allocation (see also the Ratio) risk is both technical and fundamentally defensive at this moment. (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)

Silver/USD Month Week Day Hour
Dec 21 Close 14.61 (14.67)
Trend Direction Up (Up) Up (Up) Down (Down) Down
Risk Weight 10-15 (10-15) 50-70 (50-70) 70-80 (75-85) 5-15
Allocation 100% (80%/60%)

Gold/EUR

Short and medium Term (Daily and Weekly) are now approaching high risk weight levels but still in uptrend. As LT shows a very strong Uptrend, that LT drives the entire space. In terms of risk we favor Euro now vs Dollar. Because other major asset classes are now in established LT downtrends, the gold allocation can be increased to 100% of the preferred maximum asset allocation to Gold within a Precious metals portfolio. (Remain at 80% allocation. Risk is still up with strong LT trend established. MT a little toppish but LT driving force)

Gold/EUR Month Week Day Hour
Dec 21 Close 1105 (1095)
Trend Direction Up (Up) Up (Up) Up (N)
Risk Weight 40-60 (40-50) 90-100 (90-95) 85-90 (85)
Allocation 100% (80%)

Silver/EUR

We follow the Gold space and wish move the Silver allocation in EUR portfolio's up to 100% by London fix time on Dec 24. We could see a little bit of initial weakness on Monday, but the risk profile favors a maximum Silver allocation vs EUR. Also see Gold/Silver ratio. (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%)

Silver/EUR Month Week Day Hour
Dec 21 Close 12.84 (12.91)
Trend Direction Up (Up) Up (Up) Down (Down) Down
Risk Weight 15-20 (15-25) 65-80 (65-80) 60-70 (85-90) 50-60
Allocation 100% (60%)

Gold/GBP

This pair also seems to follow the Dollar and EUR picture, hence we also increase to max gold allocation of 100% in this portfolio with immediate effect. (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)

Gold/GBP Month Week Day Hour
Dec 21 Close 992 (986)
Trend Direction (Up) Up (Up) Up (Down) Down
Risk Weight 40-65 (40-65) 85-95 (85-90) 80-85(70-80) 35-45
Allocation 100% (80%)

Silver/GBP

Same as pairs above. We increase to 100% of allocation maximum. Also see Gold/Silver ratio. (The risk scenario may develop into a strong bullish Silver trend early next year. Remain at 60% allocation established last week)

Silver/GBP Month Week Day Hour
Dec 21 Close 11.56 (11.62)
Trend Direction Up (Up) Up (Up) Down (Down) Down
Risk Weight 15-25 (15-25) 70-90 (70-90) 75-85 (85-90) 20-30
Allocation 100% (60%)

Gold/Silver Ratio

ST and MT last week did close higher which was expected. The range trading trend has not yet finished and we keep silver allocation at 30%. 70% Gold and 30% Silver. (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) All time high: 1941 = 97, 1991 = 90

AU/AG Ratio Month Week Day Hour
Dec 21 Close 85.60 (84.90)
Trend Direction Up (Up) Down (Down) Up (Up) Down
Risk Weight 85-95 (85-95) 75-80 (70-80) 50-60 (25-30) 60-70
Allocation 30% AG (30% AG)

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

Euro/USD

Still range bound with USDollar attempting to finish the reaction to what already seems an established dollar downtrend since 2016. It probably will take little to start driving the dollar towards the late 2017 peak of 1.2500+. 100% hedge for Dollar longs. Dollar shorts should only cover on cash basis. No forward hedge. (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)

EUR/USD Month Week Day Hour
Dec 21 Close 1.1370 (1.1350)
Trend Direction Down (Down) Up (Up) Down (Down) N
Risk Weight 5-10 (5-10) 20-25 (15-25) 55-65 (40-45) 0-10
Allocation 100% (100% hedge)

USD/Swiss franc

Same story for US dollar exposures as for EUR. (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)

USD/CHF Month Week Day Hour
Dec 21 Close 0.9920 (0.9925)
Trend Direction Up (Up) Down (Down) Down (Up) Down
Risk Weight 80-90 (80-90) 65-70 (65-70) 30-40 (50-60) 65-80
Allocation 100% unch

British Pound/USD

With or without Brexit. Cable looks even warmer than Dollar/Swiss. Same full hedge on Short cable positions and cash cover only for long cable exposures. (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 Month Week Day Hour
Dec 21 Close 1.2640 (1.2620)
Trend Direction Down (Down) Up (Up) N (Up) Down
Risk Weight 5-10 (5-10) 10-15 (10-15) 40-50 (30-40) 5-15
Allocation 100% unch

British Pound/Euro

No change in hedge allocation. This market can go anywhere short term. No clear risk direction although GBP shows bottoming action due to price risk divergence (= equal price lows coupled with higher risk weight lows. (Little change in the overall risk profile. Short GBP/long EUR exposures to remain 60% hedged)

GBP/EUR Month Week Day Hour
Dec 21 Close 1.1110 (1.1120)
Trend Direction Down (Down) Down (Down) N (Up) Down
Risk Weight 40-50 (40-50) 15-30 (20-30) 25-30 (30-35) 55-70
Allocation 60% (60%)

Bitcoin/USD

Bitcoin already has shaped its volatile reaction from the recent low and may show further rapid action/reaction in price. LT still in downtrend with daily already showing potential bearish divergence. Use strenght to unload positions if not done already a very long time ago. Better blockchain alternatives to crypto currencies will arrive sometime in 2019. (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) 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 21 Close 3840 (3555)
Trend Direction Down (Down) N (Down) Down (Up) N
Risk Weight 5-20 (5-15) 5-10 (10-15) 75-80 (10-20) 25-30
Allocation 0% (0%)

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

Dow Jones

Same as last week. There may be some bottom picking as there always is when short term indicators reach oversold weight area's. With the LT downtrend so strongly in place any shorter term time frames may easily continue in oversold conditions whilst prices tank. Rallies should be used to unwind positions not vice versa. (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)

US30 Month Week Day Hour
Dec 21 Close 22445 (23550)
Trend Direction Down (Down) Down (Down) Down (Down) Down
Risk Weight 45-70 (50-70) 5-20 (5-20) 0-10 (15-20) 0-10
Allocation 0% (0%)

Standard & Poor 500

Same as DJII. (LT downtrend firmly established. Any ST and MT pause from low risk weight position will be temporary)

S&P500 Month Week Day Hour
Dec 21 Close 2416 (2550)
Trend Direction Down (Down) Down (Down) Up (Down) Down
Risk Weight 35-65 (40-65) 0-15 (5-15) 0-10 (10-20) 0-10
Allocation 0% (0%)

Dollar Index

Same as last week. Long dollar positions fully hedged within the general transaction risk time frame like 6 months or 12 months. Short dollar exposures only covered on cash basis. (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)

USDIndex Month Week Day Hour
Dec 21 Close 96.95 (97.15)
Trend Direction Up (Up) N (N) Down (N) Down
Risk Weight 85-95 (85-95) 80-85 (80-85) 35-40 (65) 85-95
Allocation 100% unch

Crude Oil

This is now a tricky market for speculators. LT trend is strongly established but the the move has came stronger than anyone expected. One could easily see some strong reactions to the short term pressure in Oil. Our method of Risk measurement is better method for asset allocation purpose than any other kind of price prediction outlook based on fundamental analysis or technical models like EW or Cycles. This market should not be touched until LT and, MT and ST find some kind of balance. Bottoms do not exist suddnely without good reason and that creation of a bottom takes time. Markets do not turn overnight if a LT trend is ongoing. We do not predict price or time because it is not relevant. Our risk weight and trend direction only tells us the LT and ST trends at this very moment. It means that a LT bottom may be in only after a very long period of price discovery at the current $50's handle but also at much lower levels like $30 or much lower still. (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'!)

Brent Month Week Day Hour
Dec 21 Close 53.50 (58.90)
Trend Direction Down (Down) N (N) Down (Down) Down
Risk Weight 25-60 (30-60) 5-10 (5-10) 5-10 (40-50) 30-40
Allocation 0% (0%)

Posted in A - All Financial Blogs | 2020 Forecast.

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