Metals – FX- Indices – update – 27 Oct 2018

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

Gold / USD

The relatively strong dollar seems to be responsible for holding back a slightly more rapid advance of Gold/USD. The strong weekly uptrend and an upturning Monthly trend normally also drives ST momentum. No Change in 80% bullish risk allocation. (Both weekly and Monthly trends are Up whilst daily has turned neutral. From a risk point of view this market can strongly advance or move sideways short term. If sideways it will take time for LT time frames to show a fresh turn down, hence no change in allocation)

Gold/USD Month Week Day Hour
Oct 26 close 1233
(1226)
Trend Direction  Up (Up) Up (Up) N (N) Down
Risk Weight 20-25 (20-25) 55-70 (40-55)  85 (80-85) 15-20
Allocation 80% (80%)

Silver / USD

Still very much a sideways market. November is likely to determine a change of trend and possible higher risk allocation. Given positive risk for gold we kepp allocation at 30%. (This pair still cannot make up its mind with daily turning down again. But with weekly still Up and Monthly in Low risk territory, no change in allocation as downside risk appears limited.)

Silver/USD Month Week Day Hour
Oct 26 close 14.65
(14.58)
Trend Direction  Down (Down) Up (Up)  Down (Down) N
Risk Weight 10-20 (10-20)  30-35 (25-30)  70 (50-60) 50-55
Allocation  30% (30%)

Gold / EUR

Strong weekly uptrend leaves primary risk for prices to still move higher ST. Divergence between hourly and daily should see prices higher beginning of the week. No allocation change. (Fairly strong market supported by USDollar strength. Hourly divergence from Daily and with weekly in a strong uptrend, the most we can expect is a pause in the uptrend with larger risk being higher prices. No change in allocation)

Gold/EUR Month Week Day Hour
Oct 26 close 1080
(1064)
Trend Direction Up  (Up) Up (Up) N (N) Down
Risk Weight  (10-20) 50-70 (35-60) 90-95 (90-95) 5-10
Allocation  75% (75%)

Silver / EUR

Monthly leaning towards a trend change. Hourly diverging from Daily. Weekly uptrend stronger. Increasing allocation to 35%. (No change in overall picture from last week. Still hovering around 2014 and 2015 lows. Downtrend change from 2016 yet to be confirmed)

Silver/EUR Month Week Day Hour
Oct 26 close 12.85
(12.66)
Trend Direction Down  (Down)  Up (Up)  Down (Down) Down
Risk Weight  15-20 (10-20) 35-45 (30-35) 80-85  (60-65) 10-20
Allocation 35% (25%)

Gold / GBP

Prices moved steadily higher last week closing on the low of the day on Friday after strong overbought ST. That strong overbought is now being alleviated following a 9 pound drop from highs. This may continue a bit into Monday after which the strong Weekly and stronger Monthly direction may show further advance. Possibility still that a quick 3% drop fills the 15 October gap open. No change in allocation at this moment. (Monthly frame at last week's close shows trend change and may now confirm the higher allocation since two weeks. No change in allocation due to low risk Weekly and Daily trend. This market may touch the 925-927 level before resuming uptrend due to gap opening Oct 15)

Gold/GBP Month Week Day Hour
Oct 26 close 961
(938)
Trend Direction Up (Up) Up (Up) N (Up) Down
Risk Weight  15-20 (10-15) 50-70 (35-50)  95 (85-90) 15-20
Allocation 70% (70%)

Silver / GBP

Strong up trend continued last week even though risk picture less rosy. We stay with 40% allocation as ST downtrend direction from a high of 11.50 not finished. (With Monthly still down, a slowing weekly uptrend and an intra-week high of 11.30 we prefer to reduce allocation back to 40%)

Silver/GBP Month Week Day Hour
Oct 26 close 11.41
(11.14)
Trend Direction Down  (Down) Up  (Up)  N (Up) Down
Risk Weight 10-15 (10-15)  30-35 (25-30)  90 (50-55) 30-40
Allocation  (40%)

Gold / Silver Ratio

At the start of a precious metals up trend vs USD, Silver more often than not takes a lead. That is still not the case and statistically makes the case for PM longs slightly weaker. Statistics however are what they are, just statistics. Even though the ratio is historically high it may remain high for a while longer. Although tempting to pick a top, No silver overweight as yet from a risk perspective. Both ST and MT trend direction needs to indicate exhaustion first. (The ratio peaked at 84.35 last week. With weekly turning up, Risk does not favor Silver overweight yet)
All time high: 1941 = 97, 1991 = 90

AU/AG Ratio Month Week Day Hour
Oct 26 close 83.87
(83.45)
Trend Direction Up (Up) Up (Up)  Up (N) Down
Risk Weight 65-75 (60-75) 65-75  (60-70)  80-85 (80-85) 10-15
Allocation Flat

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

Euro / USD

USD has pushed higher last week and still shows more strength than weakness from a risk perspective. Stay with being 40% hedged on long Euro/USD positions expecting a trend change within a one or two months as LT trends drop to oversold criteria. (Direction and risk weight indicates the USD is slowly losing momentum, but may still try to push a bit higher. No change in hedge allocation)

EUR/USD Month Week Day Hour
Oct 26 close 1.1400
(1.1510)
Trend Direction  Down (Down)  Down (Down) Down (Down) Down
Risk Weight 15-30 (20-30) 35-45 (40-50) 10-15 (25-30) 80-85
Allocation 40% hedge
(40% hedge)

British Pound / USD

Cable followed general dollar strength and may continue ST and LT. This is different from last week's risk position and we would reduce the short sterling hedge to 60% from 70%.  (Risk picture drives more range trading. A more rapid turn on daily and continued uptrend weekly no change from last week's allocation)

Cable Month Week Day Hour
Oct 26 close 1.2815
(1.3055)
Trend Direction Down (Down) Down (Up) Down (Down) Down
Risk Weight 15-20 (20-25) 50-60 (60-65) 5-10 (40-50) 65-75
Allocation 60% (70%)

USD / Swiss franc

This major cross moved up slightly in line with general dollar strength. Due to divergence between hourly and Daily risk weight a very ST a reallocation to 50% seems low risk. A move above par warrants moving back to 70% hedge on long USD positions. (Around the Par level has been resistance for a very long time. More sideway expected , but this market leans towards a stronger CHF longer term. No change. (Long USD/CHF hedged at 70%))

USD/CHF Month Week Day Hour
Oct 26 close 0.9960
(0.9950)
Trend Direction N (N) Up (Up) Down (N) Down
Risk Weight 70 (70)  70-80 (60-75) 75-80 (90) 0-10
Allocation 70% hedge
(70% hedge)

British Pound / Euro

Market briefly moved up to 1.1365 early in the week following renewed GBP pressure with weekly trend direction now down. ST GBP looks lower risk. Short GBP position increased to 60% hedge  (After crossing above 1.14 early in the week Cable was pushed down a full point at the end. Brexit jitters may keep this market in a range for a while longer. No change)

GBP/EUR Month Week Day Hour
Oct 26 close 1.1245
(1.1317)
Trend Direction Up (Up) Down (Up)  Down (Down) Down
Risk Weight 50-55 (50-55) 65-75 (70-80) 5-20 (55-65) 5-10
Allocation 60%
(50%)

Bitcoin / USD

Look at this hourly picture of manipulated prices.

The above picture from the previous week shows the manipulation which is cause for concern as liquidity is in the hands of very few larger players. Last week very little change inside a narrow price range. Although all time frames show a near oversold condition, the highest risk is for one of these times frames to extend downward due to liquidity concerns. We stay out of this asset class until a firm buying signal can be determined.

(Starting on Sunday 14/10 making a huge intra-hour move towards 7,700 at NY open on 15/10 then dropping back sharply with clear and failed attempts to hold it at the 7,000 level. It is/was Tether losing peg with BTC. Who's peg one wonders. Until these markets become very mature and consolidate on sound fundamentals, one should stay clear. Maybe a small speculative position could be taken if risk weight favors this and only short term, but not right now)
Potential gaps to fill at 5838, 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
Oct 26 close 6528
(6534)
Trend Direction Down (Down) Down (Down)  Down (Down) Down
Risk Weight 20-25 (20-25) 25-30 (25-30)  20-25 (30-35) 20-30
Allocation 0% (0%)

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

Dow Jones

No change; 0% allocation. All time frames breath more potential weakness. The strong downtrend on weekly and Monthly turning N means the risk of continuation is evident. Daily risk therefor could remain low for (quite) a while longer. Even minor long positions would be considered speculative. (Both major US Indices consolidated in a more narrow range. The daily turned up early in the week and down again at the close. Strong weekly downtrend and no divergences. NO change)

US30 Month Week Day Hour
Oct 26 close 24688
(25444)
Trend Direction N (Up) Down  (Down) Down (Down) Down
Risk Weight 80 (80-85) 25-50 (45-70) 10-15 (30-35) 50-60
Allocation 0% (0%)

Standard & Poor 500

The same DJII analysis is applicable to S&P as risk of a major or rapidly extended move down is still possible. If the Monthly trend is down on 31 Oct any ST long positions can only be seen as speculative based on clear  ST oversold risk conditions. That is not yet the case. (The exact same picture as DJII except the monthly has turned down 2 weeks ago. Strong weekly downtrend still favors complete exit)

S&P500 Month Week Day Hour
Oct 26 close 2658
(2768)
Trend Direction  Down (Down) Down (Down) Down (Down) Down
Risk Weight 80-85 (85-90) 20-40 (45-65)  10-15 (30-35) 45-55
Allocation 0% (0%)

Dollar Index

USD index continues to show short term bullish risk divergence vs MT and LT. Short dollar hedge allocation 60%(This index is clearly seeking direction. No change. It's the Central banker's hedge: 50% either way)

USDIndex Month Week Day Hour
Oct 26 close 96.30
(95.65)
Trend Direction Up (Up) Up (Up) Down  (Up) Down
Risk Weight 70-85 (70-80) 55-65 (45-55) 85-90 (60-70) 10-15
Allocation 60% (50%)

Crude Oil

Oil, like USD is building ST bearish divergence supporting MT risk of further downward move. No change in 0% allocation to this asset class. (Lots of media jitters. With weekly in strong downtrend, Monthly in high risk and daily reaching low risk, it is too early to consider a small allocation on the long side short term)

Brent Month Week Day Hour
Oct 26 close 77.70
(80.00)
Trend Direction N (N) Down (Down) Up (Down) N
Risk Weight 85-90 (90) 55-70 (65-80)  10-20 (10-15) 90
Allocation 0% (0%)

Posted in A - All Financial Blogs | 2020 Forecast.

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