Metals – FX- Indices – update – close 3 May 2019

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

Gold/USD Month Week Day Hour
Close 03 May: 1279 (1286)
Trend Direction Down (Down) Down (Down) Up (Up) Down
Risk Weight 60-70 (65-70) 10-20 (15-20) 25-30 (20-30) 70-80
Allocation 75% (75%)

No change from last week although the call to re-enter came a little early. Friday's rally from Thursday's May 2nd risk weight divergence low should again have set support for Gold around current level.

(We return to 75% allocation from 50%. The general technical picture after last week's further expected drop and recovery to current levels on Friday is more bullish with a touch of uncertainty. The rapid drop of weekly risk weight (still in downtrend) and a relative strong price hold well above last year's low are the primary reasons for re-allocating. The stronger USD dollar last week was the driving force for initial weakness across hard assets and other commodities)


Silver/USD Month Week Day Hour
Close 03 May: 14.88 (15.05)
Trend Direction Down (Down) Up (Down) Up (Up) Down
Risk Weight 30-40 (35-45) 10-20 (10-15) 25-30 (25-40) 75-85
Allocation 75% (75%)

The Thursday May 2nd low also shows risk weight bullish divergence on the Daily time frame. In spite of a tyring string of downward movements in Silver the past three months this market is actually showing evidence of strong support around current levels. The weekly time frame trend turned Up on Friday 3rd May one full dollar above the October 2018 low. No change.

(The silver technical picture remains a near perfect copy of gold and we return to a larger allocation at 75%)


Gold/EUR Month Week Day Hour
Close 03 May: 1141 (1152)
Trend Direction Down (Down) Down (Down) Down (Up) Down
Risk Weight 70-80 (75-85) 15-25 (30-35) 40-50 (45-60) 50-65
Allocation 50% (50%)

The risk picture looks more bullish now too for Gold vs EURO. We will re-allocate into full position if a Daily close above 1155 is set and the trend turns Up again. No change in 50% allocation for now.

(The Gold/EURO spread does not show quite the same strength which is due to a strong dollar and an even more rapid price recovery to 1152 this past week. We are looking to increase the allocation again but not quite yet)


Silver/EUR Month Week Day Hour
Close 03 May: 13.28 (13.49)
Trend Direction Down (Down) Up (Up) Down (Up) Down
Risk Weight 45-55 (50-60) 15-25 (15-20) 25-30 (45-65) 70-80
Allocation 75% (75%)

Initial weakness last week set a 4 month low ending slightly stronger with a risk weight divergence on Daily time frame. This is a bullish signal and should give intermediary support to price. No change.

(Silver/Euro looks stronger after early weakness and a stronger recovery second half of the week. We prefer to increase our allocation again to 75%)


Gold/GBP Month Week Day Hour
Close 03 May: 970 (994)
Trend Direction Down (Down) Down (Up) Down (Up) Down
Risk Weight 60-70 (65-75) 15-25 (25-30) 10-25 (45-65) 0-10
Allocation 75% (75%)

This pair is in the process of finishing a short term downtrend and was hit last week as a result of the relatively strong Pound vs USD. The setup is for a rally starting soon and we recommend no change to the 75% allocation to Gold within the maximum Gold allocation model.

(The risk weight development in different time frames looks more neutral but leans towards a fresh Medium term price rally. We prefer to return to 75& allocation only one week after last week's drop from 100% to 50% allocation)


Silver/GBP Month Week Day Hour
Close 03 May: 11.29 (11.65)
Trend Direction Down (Down) Up (Up) Down (Up) Down
Risk Weight 30-45 (40-50) 15-20 (10-20) 10-25 (55-70) 40-50
Allocation 75% (75%)

Our re-allocation was too early. The 2% drop last week was a sudden change of trend due to a strong GBP vs USD, the reason for which could be several. Yet this market too appears to be closer to a bottom and we recommend no change in the 75% allocation within the gold class.

(The same image applies to Silver/GBP. We return to a larger allocation at 75%)


GOLD/SILVER Ratio Month Week Day Hour
Close 03 May: 85.40 (84.78)
Trend Direction Up (Up) Down (Down) Down (Down) Up
Risk Weight 80-90 (75-85) 75-85 (80-85) 65-75 (30-40) 5-15
Allocation 50% AG (50% AG)

Few typical commodity markets have shown more resilience than this ratio as it reached a new 15 year high but again moved back into the range of the past 60 days. As all markets return to their equilibrium some day, staying with the 50/50 allocation within the metals space.

(No change except we lean towards a larger allocation Silver than Gold up to max 60%, although we keep it formally at 50/50)


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

EUR/USD Month Week Day Hour
Close 03 May: 1.1200 (1.1140)
Trend Direction Down (Down) Down (Up) Down (Down) Up
Risk Weight 5-10 (5-10) 15-20 (15-20) 35-45 (10-15) 90-95
Allocation 100% (100% hedge)

The Euro rose last week before dropping away on again Friday closing in mid range. Risk weight levels really favors a full hedge of long dollar exposures. No change.

(The USDollar rose 1% across the board last week. Just like staying out of equities and Oil, this market may still surprise based on stronger than expected official economic growth. The technical picture however is not at all favourable for USDollars, hence we remain with full hedge on USD long exposure. This is a time to not only consider currency trading risk from operations but also longer term translation and economic exposures. No change, 100% hedge)


USD/CHF Month Week Day Hour
Close 03 May: 1.0160 (1.0190)
Trend Direction Up (Up) Up (Up) Down (Down) Down
Risk Weight 85-90 (80-90) 80-85 (75-85) 70-80 (85-90) 0-10
Allocation 100% unch

Risk weight levels favor a fully hedged long dollar exposure. No change.

($/Swiss again is touching the highs of the relatively narrow 7% trading range that has been in place since early 2015. The picture is no different and current levels dedmand a serious look at translation as well as economic exposures with a longer term bias. No change)


GBP/USD (Cable) Month Week Day Hour
Close 03 May: 1.3168 (1.2904)
Trend Direction Down (Down) Down (Down) Up (Up) Up
Risk Weight 30-40 (30-40) 40-45 (40-50) 65-80 (5-15) 90-100
Allocation 70% (70%)

In spite of last week's strong rally GBP still looks a little higher risk than other majors and we hold our 70% long dollar hedge recommendation.

(Sterling still looks a little weaker than other majors in our risk weight models. We stay with 70% hedge on short Cable exposures and wait for further indications to consider Long term hedge on translation and economic exposures)


GBP/EUR Month Week Day Hour
Close 03 May: 1.1755 (1.1565)
Trend Direction Up (Up) Up (Down) Up (Up) Down
Risk Weight 80-85 (70-80) 65-70 (60-70) 85-95 (30-40) 85-95
Allocation 50% (50%)

Strong GBP/USD resulted in a similar rally vs EUR trading at the highs of the last 60 days. Risk weight levels are also high and we stay with our 50% hedge either side.

(Sterling still looks a little weaker than Euro but risk direction is not clearly defined by the technical spectrum. No change)


BITCOIN BTC/USD Month Week Day Hour
Close 03 May: 5770 (5258)
Trend Direction Up (Up) Up (Up) Up (Up) Up
Risk Weight 15-25 (5-15) 85-95 (85-95) 70-85 (65-70) 75-90
Allocation 0% (0%)

10% rally again shows the incredible volatility of a controlled crypto asset. This market is now entering the low end of the range that has been hovering around 6,000 since Febr 2018 and still 70% off the highs with continued high risk weight levels in ST and MT time frames. Crypto will start to play a much more significant role in financial markets in the not too distant future, but we expect BTC to tank once more before it finds more serious support again. No change.

(Bottom line is that this market is for young speculators and older opportunists. They may win the day if the monopolist elite loses the game, but they lack long time market experience. No change, be smart, stay out. We are actively eyeing blockchain developments offering tokens with hard or softer asset backing and interesting smart contracts that can generate a real return on investment. The distributed ledger technology has major advantages which goes way beyond Bitcoin and other doubtful crypto assets)

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.


INDEX: US30, S&P500, Dollar Index, Brent crude oil
US30 Month Week Day Hour
Close 03 May: 26505 (26543)
Trend Direction Up (Up) Down (Down) Down (Down) Down
Risk Weight 80-90 (70-90) 90-100 (95-100) 45-60 (65-75) 85-95
Allocation 0% (0%)

High risk weight in ST to LT timeframes continues to send warning signals as it has done for the past year. Hawkish guidance is no reason to change a position if technical market risk is highly evident in MT and LT time frames. No change.

(The Equity markets around the globe have shown incredible resilience and strength against our risk parameters. We have stayed out, losing opportunity. The technical picture however calls for extreme caution and we simply do not participate as long as that risk level remains high. If gravity no longer seems to apply, one must be extremely cautious. Better safe than sorry. No change)


Standard & Poor 500 Month Week Day Hour
Close 03 May: 2945 (2939)
Trend Direction Up (Up) Down (Up) Down (Down) Down
Risk Weight 80-95 (70-90) 95-100 (95-100) 50-65 (80-90) 85-95
Allocation 0% (0%)

S&P obviously has similar characteristics. No change here either although any minor divergence between ST and MT is was has been causing the BTFD movements again. Risk remains very high and risk is what we prefer to avoid.

(No different for S&P or other major indices around the globe which all have very similar characteristics driven by continued Central bank supply of credit at very low rates. No change, high risk)


USD Index Month Week Day Hour
Close 03 May: 97.48 (98.05)
Trend Direction Up (Up) Up (Up) Down (Up) Down
Risk Weight 85-95 (85-95) 80-85 (80-85) 50-60 (85-90) 0-10
Allocation 100% (100%)

The dollar rally wants to continue but shows hesitation every time we see a new high.
This drive the risk weight to remain relatively high and therefor requires a fully hedged long dollar position. Slipping above the 9 months trading range the past two weeks, the dollar fell back again last week, rallied and dropped on Friday May 3rd seeking direction.
Short term we can see another attempt to rally into the low 98.00 but risk remains high, hence no change.

(A near 1% rally of the index now appears to the developing a divergence of price to risk weight in MT(Weekly) and ST(Daily) time frames. Any further USD advance is not impossible but highly suspect. The most recent history where the US world currency defied gravity was during the strong 1984 into 1985 rally. It was driven way above normal transaction volumes and got tanked big time once markets finally realised the economic imbalanceas. The technical picture in such circumstances can only determine risk and will almost always lose opportunity, but only until the market turns)


Brent Month Week Day Hour
Close 03 May: 70.78 (71.57)
Trend Direction Up (Up) Down (Down) Down (Down) Up
Risk Weight 45-55 (40-50) 80-90 (90-95) 20-25(65-80) 50-55
Allocation 0% (0%)

Triple divergence in Daily timeframe eventually drove the oil space lower last week and 7% below the high of April 25. Technically we must remain highly suspicious of the rally this year and cannot yet recommend a low risk position into this market. No change.

(A large move up in line with recent short term trend was followed by the a big drop on Friday 26 April. Oil remains a high risk investment and a downward Long term bias. We may be wrong but risk weight across time frames calls for extreme caution)

Posted in A - All Financial Blogs | 2020 Forecast.

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