Metals – FX- Indices – update – 3 March 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. We do not apply an agressive trading position in this weekly update unless the long term technical position demands it.
Gold recorded new all time highs against Scandies Aussie and CAD. The strength built in the PM markets since our virtual 100% allocation, and still led by Palladium, partly sets the parameters for largely holding the current positions.

Gold/USD

LT trend still prevails. Developing divergence between ST Daily and MT Weekly. Prognoses for a week of sideways price range action. No Change in full gold allocation.

(On Wednesday Gold temporarily peaked and diverged on daily risk. This creates a pause in this market and opportunity for a quick short term punt. LT monthly still in comfortable uptrend hence we remain with our original 100% allocation)

Gold/USD Month Week Day Hour
Close 1 March Price 1293
(1328)
Trend Direction Up (Up) Down (Down) Down (Down) Up
Risk Weight 65-75 (55-70) 80-90 (90-95) 25-40 (65-80) 0-10
Allocation 100% (100%)

Silver/USD

The relatively sharp drop is a deja vu event. We do not change our long position due to developing divergence between Daily and Weekly risk weight.

(So far 2 attempts this year to break this multi year resistance have failed. With Monthly risk still in comfortable low risk uptrend suggests it is a matter of time. When it happens this break could generate a quick turn in favor of silver. No change in allocation)

Silver/USD Month Week Day Hour
Close 1 March Price 15.19
(15.89)
Trend Direction Up (Up) Down (Down) Down (Down) Up
Risk Weight 40-50 (35-50) 70-80 (80-85) 20-30 (60-65) 0-5
Allocation 100% (100%)

Gold/EUR

LT Monthly trend turned down on the first trading day. Divergence between Daily and Weekly risk weight is reason to expect decent upward pressure and stay with allocation.

(We have decided to stay fully allocated until Daily Short term price to risk weight shows clear divergence. Price territory still offers much support to stay with the LT uptrend that started on Oct 2018)

Gold/EUR Month Week Day Hour
Close 1 MarchPrice 1138
(1170)
Trend Direction Down (Up) Down (Down) Down (Down) Up
Risk Weight 80-85 (80-90) 80-90 (90-100) 10-30 (70-80) 5-10
Allocation 100% (100%)

Silver/EUR

We expect upward pressure after rapid ST decline with divergence between ST Daily and Weekly. No change in allocation.

(The narrative here is similar to Gold vs Euro. The LT trend up that started in Nov last year prevails and still holds)

Silver/EUR Month Week Day Hour
Close 1 MarchPrice 13.36
(14.00)
Trend Direction Up (Up) Down (Up) Down (Down) Up
Risk Weight 50-60 (45-65) 75-85 (85-90) 10-25 (60-75) 0-10
Allocation 100% (100%)

Gold/GBP

All time frames are down. Risk weight divergence between MT and ST is no reason not to stay fully allocated.

(The ST picture looks a little weak, but there is no sharp divergence calling an intermediate top. We stay fully allocated (for now))

Gold/GBP Month Week Day Hour
Close 1 March Price 1015
(1015)
Trend Direction Down (Up) Down (Up) Down (Down) Down
Risk Weight 70-80 (75-90) 65-80 (80-85) 0-10 (55-70) 5-10
Allocation 100% (100%)

Silver/GBP

The present reversal technically looks to build another return to price strength.
We stay fully allocated.

(Daily price to risk shows a weak divergence fron a medium risk level. We stay fully allocated)

Silver/GBP Month Week Day Hour
Close 1 March Price 11.50
(12.17)
Trend Direction Down (Up) Down (Up) Down (Down) Down
Risk Weight 45-55 (45-65) 60-75 (75-80) 5-10 (50-65) 5-10
Allocation 100% (100%)

Gold/Silver Ratio

Silver again lead the weakness of the primary Precious metals this week causing the ratio to advance. Palladium and Platinum showed strong relative performance. Risk weight with exception of MT Weekly remains high and supports staying with a 50/50 ratio allocation.

(Hourly ST could drive the ratio a little higher again, but the MT weekly looks quite tired after 2 months of upward zigzag favoring silver. We stay 50/50 in the ratio.

Comment on Palladium/USD. On a log chart this pair looks rather extended and is in very high risk, speculative, territory. OThe LT Monthly is showing an unusual but also clear price to risk weight divergence. A quick break from this steep slope could drive the price down very rapidly toward the LT median of around 800. A price well above gold has no fundamental justification either as a hard asset or industrial use)

AU/AG Ratio Month Week Day Hour
Close 1 March Price 84.80
(83.21)
Trend Direction Up (Down) Up (Up) Up (Down) Down
Risk Weight 70-80 (65-75) 35-50 (25-35) 70-85 (45-60) 70-80
Allocation 50% AG (50% AG)

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

Euro/USD

No Change. Long dollar transaction risk to remain fully covered.

(The technical picture validates a weaker dollar, but the Euro finds it difficult to follow that natural price development due to low interest rate expectations. Further Euro weakness is likely to develop a divergence in the medium term weekly time frame driving fairly strong technical support. Long dollar positions to remain fully hedged)

EUR/USD Month Week Day Hour
Close 1 March Price 1.1365
(1.1340)
Trend Direction Down (Up) Down (Down) Down (Up) Up
Risk Weight 10-15 (10-15) 25-35 (25-40) 75-85 (10-15) 10-20
Allocation 100% (100% hedge)

USD/Swiss franc

Daily divergence vs Weekly could support the dollar temporarily.
Overall picture remains in favor of full cover of long dollar exposures.

(No Change. Keep long dollar exposure fully hedged)

USD/CHF Month Week Day Hour Close 1 March Price 0.9987
0.9990) Trend Direction Up (Down) Up (Up) Up (Down) Down Risk Weight 75-85 (75-85) 70-75 (65-75) 25-35 (25-40) 60-65 Allocation 100% unch

British Pound/USD

Last week we appeared early to call a 50% cover of long dollar exposures, but the technical picture is somewhat divided between ST long and short. We believe Cable is likely to again show pressure and we stay with the present allocation.

(A stronger cable as expected last week has driven a wide gap between low risk LT Monthly and high risk MT weekly and ST Daily rapid risk advance. Technically cable looks somewhat vulnerable and we are changing our hedge recommendation to 50% cover on long dollar exposures, from 100%)

Cable Month Week Day Hour
Close 1 March Price 1.3195
(1.3050)
Trend Direction Up (Up) Up (Down) Down (Down) Up
Risk Weight 30-40 (15-30) 70-75 (65-75) 80-90 (75-80) 10-20
Allocation 50% (100%)

British Pound/Euro

Mixed picture With relatively high risk and still strong LT uptrend. Short Sterling transaction exposures to remain 75% hedged.

(A similar picture develops as with Cable, although the LT Monthly still points upward in a stronger pattern. For now we stay with the 75% sterling hedge on shorts)

GBP/EUR Month Week Day Hour
Close 1 March Price 1.1605
(1.1500)
Trend Direction Up (Up) Up (Up) Down (Up) Up
Risk Weight 65-85 (50-65) 75-80 (75-80) 80-90 (85-90) 10-15
Allocation 75% (75%)

Bitcoin/USD

The BTC looks to hold its own for the time being. There is a known long position ready for distribution given the chance. More range trading expec ted with a slightly higher bias MT. We do not invest in this market.

(Last weeks strength has driven a bearish gap between ST and MT. High volatility likely to continue. Current risk is to expect weakness this coming week. We stay out of this market entirely but it's interesting to closely follow its further development)

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 1 March Price 3811
(3965)
Trend Direction Up (Down) Up (Up) Down (Down) Down
Risk Weight 0-5 (0-5) 20-30 (10-20) 30-40 (70-85) 30-40
Allocation 0% (0%)

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

Dow Jones

Mixed picture with ST and MT vulnerability, i.e downside risk. We stay uninvested until the market shows clear oversold conditions. The opposite is technicaly more evident at this moment.

(We are currently at the level where it became extremely high risk to participate in this index. The present technical picture shows high risk in Medium and Short term time frames.
If we could short we would, but against risk principle of ever being short a major asset class. So we stay out)

US30 Month Week Day Hour
Close 1 March Price 26026
(26031)
Trend Direction Up (Up) Up (Up) Down (Down) Up
Risk Weight 55-60 (55-60) 85-95 (80-90) 80-85 (90-95) 40-50
Allocation 0% (0%)

Standard & Poor 500

Every time frame is showing an uptrend. High risk in MT and ST is reason to stay our of this market. No change since October 2018.
(Same picture as Dow. No position)

S&P500 Month Week Day Hour
Close 1 March Price 2804
(2793)
Trend Direction Up (Up) Up (Up) Up (Down) Up
Risk Weight 50-55 (50-55) 85-95 (80-90) 80-90 (85-95) 65-80
Allocation 0% (0%)

Dollar Index

Mixed picture with LT down trend and high risk weight prevailing. We stay with fully covered long dollar positions.

(No change from last week. Dollar long exposures to remain fully hedges with exception of Cable as per above)

USDIndex Month Week Day Hour
Close 1 March Price 96.44
(96.50)
Trend Direction Down (Down) Up (Up) Down (Down) Up
Risk Weight 80-90 (80-90) 50-60 (50-60) 50-60 (50-60) 25-30
Allocation 100% (100%)

Crude Oil

Further consolidation expected with ST range trading around current price level.
We stay out until a clear oversold condition becomes evident.

(Technically expect a little bit of strength first trading coming week, Otherwise both Daily ST and Weekly MT are likely to develop strong joint divergence for another secondary round of weakness. We stay out of the oil market)

Brent Month Week Day Hour
Close 1 March Price 65.00
(66.90)
Trend Direction Up (Up) Up (Up) Down (Down) Down
Risk Weight 25-30 (25-30) 55-75 (55-75) 90-95 (90-95) 0-5
Allocation 0% (0%)

Posted in A - All Financial Blogs | 2020 Forecast.

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