Metals – FX- Dow- S&P – 16 August 2019

GOLD: Gold vs US Dollar, Euro and GBP

Gold/USD Price Live, Weekly risk position analysis relative to Hourly, Daily, Weekly and Monthly data
(Previous week in brackets)

Gold/USD Month Week Day
Close 16 August: 1511 (1496)
Trend Direction Up (Up) Up (Up) Up (Down)
Risk Weight 80-90 (80-90) 85-95 (85-90) 80-90 (90-95)
Allocation 100% (100%)

Three risk weight time frames are getting to overbought levels and all three are in uptrends. Experience tells us that an uptrend is not finished until it actually is and the overall risk profile still favours a full investment because price may still move substantially further to our advantage whilst the LT trend is still up and whilst we have a cushion to the downside including a 100$ drop. Of course a weekly update may come a few days late or early for position changes, although on balance it won't make much difference in the long term. No change for now.

(Our base long position which started Sept/October 2018 is up some 20+%. Risk weight is high in all time frames with the ST Daily having turned down on Friday. Because other asset classes remain under higher risk pressure and given the cushion on the present Gold holding we'd like to see a longer term bearish divergence type of reversal before bowing out. Gold currently offers strong protection in any overall portfolio and even though ST Daily is at 90 turning down the Hourly level shows a potential bullish divergence vis a vis Daily at the 20 level. Taking profit on this single asset class with all other classes still at higher risk could prove dear in the long run. No Change.
Speculators may have an opportunity here to exit 50% and return to full investment at a later time)


Gold/EUR Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

Gold/EUR Month Week Day
Close 16 August: 1364 (1335)
Trend Direction Up (Up) Up (Up) Up (Down)
Risk Weight 85-95 (85-95) 85-95 (85-90) 85-95 (90-95)
Allocation 100% (100%)

Being only 2% away from the all time high this market starts to look a little heavy and may be drawn down earlier in the event of more serious USDollar currency weakness. The price cushion is still attractive enough the stay with the position and a quick downswing may also establish bullish divergence between daily and weekly (weekly shows high potential bearish divergence between higher price tops and lower risk weight tops. This pair looks a little more toppish and we need to be on alert the coming week. No change for now.

(This pair shows a very similar risk weight as AU/USD. The same reasoning applies. In less volatile or uncertain market conditions we would trade this market more aggressively. For now we prefer to stay with the current position until the Longer term time frames give definitive signals that the Uptrend is finished. A strong cushion gives low risk staying with the trend whilst trends don't finish until they do which can be at substantially higher price levels. The all time high at 1386 is a level at which we are watching the technical status of this pair)


Gold/GBP Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

Gold/GBP Month Week Day
Close 16 August: 1244 (1243)
Trend Direction Up (Up) Up (Up) Down (Down)
Risk Weight 85-95 (90-95) 90-95 (90-95) 85-90 (90-100)
Allocation 60% (60%)

This pair looks even more toppish and may still not be finished. In overall portfolio we have only been at 60% invested (profitably) and will remain so until a new opportunity arises. No change.

(The week of Aug 5-9 saw Gold reach an all time high vs GBP breaking 1183 decisively. The risk profile has been misleading, We have remained underinvested at 60% relative to all other Gold pairs which is nothing but an opportunity loss. The risk picture has not changed and if anything is rather high. We would first look for a Timeframe divergence materializing before going fully invested, if at all. Hence, no change for now)


SILVER: Silver vs US Dollar, Euro, GBP and Gold/Silver ratio

Silver/USD Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

Silver/USD Month Week Day
Close 16 August: 17.11 (16.89)
Trend Direction Up (Up) Up (Up) Up (Down)
Risk Weight 45-65 (45-65) 80-90 (80-85) 75-85 (80-85)
Allocation 100% (100%)

Silver went sideways this week after a 3,5% drop from the previous week and subsequent recovery into the low 17's. Still bullish risk outlook LT so No Change.

(Silver again resumed its uptrend last week and the LT Monthly timeframe still shows great price potential before reaching an serious high risk level. Strong price advanced usually will quickly create overbought risk weight levels. If anything we could see a leveling out creating a bullish divergence between ST and MT risk weight levels. No change to remain fully invested)


Silver/EUR Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

Silver/EUR Month Week Day
Close 16 August: 15.42 (15.07)
Trend Direction Up (Up) Up (Up) Up (Up)
Risk Weight 60-75 (60-75) 80-90 (80-85) 80-90 (75-85)
Allocation 100% (100%)

Silver/EUR is still in a LT and MT uptrend which are key investment indicators in markets with clear direction. No change for now.

(This pair rallied last week pausing in the 15.00-15.30 range. Real price resistance does not come in until the April 2017 high of 17.56. We expect that level to be reached because the monthly risk weight level offers plenty room for strong price advance which may proceed quickly to the July 2016 high of just under 19.00. No change)


Silver/GBP Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

Silver/GBP Month Week Day
Close 16 August: 14.08 (14.03)
Trend Direction Up (Up) Down (Up) Down (Down)
Risk Weight 60-80 (60-80) 85-90 (85-95) 75-85 (85-90)
Allocation 100% (100%)

Silver/GBP looks to show more sideways and corrective motion with hourly moving down and into bullish divergence within a day or so. The LT uptrend favours No Change.

(The slight underinvestment opportunity loss of Gold vs GBP was compensated largely by the continued advance of Silver. Following these strong rallies markets can easily pause and they usually do. The break of a 3 year downtrend last June gives an interim price objectve of 15.97 and 21.90 thereafter. LT price uptrends can extend dramatically during eventful periods. The objectives are real potential and we remain firmly with the current position)


Gold/Silver Ratio Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

GOLD/SILVER Ratio Month Week Day
Close 16 August: 88.30 (87.83)
Trend Direction Down (Down) Up (Down) Down (Up)
Risk Weight 70-85 (75-85) 30-40 (35-50) 50-60 (20-35)
Allocation 50/50 AU/AG (50/50 AU/AG)

The Risk picture resembles that of Oil in a shorter term time frame. The big drop 5 weeks ago followed by a sideways correction. The LT Risk weight has much room to drive this ration towards equilibrium. The speed at which this happens is completely unknown yet as we would need to sede a very strong down move first. How this will unfold could be surprising. No change.

(The Gold/Silver ratio will at some point reach equilibrium. The minimum objective for that would be around 50 and could end at much lower and even historic extreme levels of 30 or lower. Staying with our 50/50 spread is a no brainer technically)


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

EUR/USD FX Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

EUR/USD Month Week Day
Close 16 August: 1.1089 (1.1197)
Trend Direction Up (Up) Up (Down) Down (Up)
Risk Weight 10-15 (10-20) 20-30 (20-30) 40-55 (70-75)
Allocation 100% (100%)

A $ top 3 weeks ago followed by a near 2% rally and another near 2% drop last week. A dollar high is clearly developing in a technical sense and being long dollars is the wrong risk approach at this time. No change.

(We've been strongly defending the risk of a lower US dollar in due course. Last week's rapid dollar decline proves the incredible battle between longs and shorts. Risk weight simply requires a higher alert on dollar weakness. Hence our presumed lower risk weight on a fully hedged (6 to 12 months out depending on FX policy) long dollar transaction exposure)


USD/CHF FX Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

USD/CHF Month Week Day
Close 16 August: 0.9773 (0.9721)
Trend Direction Down (Down) Down (Down) Up (Down)
Risk Weight 40-50 (35-50) 15-25 (20-30) 25-30 (10-20)
Allocation 100% (100%)

$/Swiss is looking undecided ST again. As the LT risk weight trend is down we stay with a full long dollar hedge.

(Same picture as above and no change as regards US$/CHF. The recent rally of CHF against other currencies however may pause sometime soon as risk weight is getting rather overbought for CHF. Something to monitor closely)


Cable GBP/USD FX Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

GBP/USD (Cable) Month Week Day
Close 16 August: 1.2143 (1.2021)
Trend Direction Down (Down) Up (Down) Up (Down)
Risk Weight 5-15 (5-15) 0-10 (0-10) 15-30 (5-15)
Allocation 100% (100%)

A very oversold Cable condition in all timeframes caused this market to rally a little last week. All the bad political news is out so its game on. We remain technically positive and expect a much higher risk of a Cable rally. No change to stay long dollar fully hedged fwd.

(GBP has quickly moved into the Nov 2016 most recent lows and based on the above risk weight levels looks extremely oversold. Typically something will happen into the opposite direction although large speculators may try to push longs into total liquididation. Risk weight does not support that kind of action in our experience. The all time low is 105 which corresponds to the period of an extremely overbought and unwarrented dollar hiogh against all major currencies at the time which was quickly followd by a 30% fall of the US$ within 2 years. No change)


USdollar Index Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly price data

USD Index Month Week Day
Close 16 August: 98.20 (97.03)
Trend Direction Down (Down) Down (Up) Up (Down)
Risk Weight 80-90 (75-85) 65-75 (60-70) 45-60 (20-30)
Allocation 100% (100%)

The index risk weight still does not look favourable although it rallied 1% after the 2% drop 2 weeks ago. Technical risk demands a fully hedged long dollat transaction risk exposure. No change.

(Last week showed further resistance to a stronger dollar which weakened another 1%. ST, the USD may find another little bottom, but the entire upward pressure period between Aug 2018 and today shows continued Bearish divergence in the MT time frame. This is significant by lack of other stronger ST indicators. Technically we appear to be in a secular bear market since the 103.80 high in January 2017)


GBP/EUR FX Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

GBP/EUR Month Week Day
Close 16 August: 1.0948 (1.0730)
Trend Direction Down (Down) Up (Down) Up (Down)
Risk Weight 15-30 (10-30) 5-15 (0-10) 25-50 (0-10)
Allocation 100% (100%)

Tnhe fairly sharp reversal we expected did materialize last week with a near 2,5% rally. GBP is tricky given the political scene and Brexit jitters. Looking beyond fundamentals to technical risk only the LT down trend has not quite finished but ST and MT have turned up. Managing currency risk is not a high spec game and one must be act risk averse when these technical tools giver potential warning. Yes we can be wrong but cost of goods sold will deal with a 5% adverse move.

(We have now reached the exact lows recorded in October 2016 and August 2017. ST and MT Risk weight is at a level where a sharp reversal soon is a higher risk than the opportunity loss of a transaction hedge risk against the cost of goods sold. Hence we stay with our fully hedged GBP and against the current ST trend. No change)


BTC Bitcoin Price, Weekly risk position analysis based on Daily, Weekly and Monthly data

BITCOIN BTC/USD Month Week Day
Close 16 August: 10330 (11880)
Trend Direction Up (Up) Up (Up) Up (Up)
Risk Weight 60-70 (65-75) 55-65 (55-65) 25-30 (80-90)
Allocation 0% (0%)

Having seen a lovely 40% diminishing to 25% trading range for about 10 weeks now this market remains very high risk. Pure speculation and cannot yet be part of a serious investment portfolio without sense of proper regulation. No change.

(Last week saw another 10% swing in both directions which is continuing into the weekend. Given the wide trading spreads this market hardly offers real speculative opportunity Short term except for hard line believers. No change)

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, Brent crude oil

Dow Jones Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly price data

US30 (Dow Jones) Month Week Day
Close 16 August: 25886 (26287)
Trend Direction Up (Up) Down (Down) Down (Down)
Risk Weight 80-85 (80-90) 55-70 (70-85) 25-30 (40-50)
Allocation 0% (0%)

There is some bullish divergence developing ST but this major Index still looks extremely high risk. So, No change.

(One can simply say that real weakness has not kicked in. The market still hovers around all time highs and is seeking new direction. LT bearish divergence remains the key to not being invested because risk weight is too high and can turn up or down from one week to the next. That is a bad trend risk to participate in. We stay out and have been out since September 2018)


S&P 500 Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly price data

Standard & Poor 500 Month Week Day
Close 16 August: 2888 (2918)
Trend Direction Up (Up) Down (Down) Down (Up)
Risk Weight 85-90 (85-90) 60-75 (75-85) 30-40 (45-55)
Allocation 0% (0%)

The forces that keeping carrying this index higher every month are completely counter intuitive technically. We believe that the risk as calculated from a price chart is simply too high to participate. A ST and MT downtrend with LT being up is a function of the seemingly unnatural 'it makes sense' to borrow cheap and buy stocks' attitude. No change.

(Last October's high where we turned bearish could arguably be seen as the 'real' technical high, whilst the July 25 all time high (thus far) was a highly speculative BTFD move into the unexpected rate move by the Fed. We would expect to see a secular bear market develop but this cannot be verified until some years from now. Weaker economic data from West to East will keep influencers on high alert. We don't like this market technically. No change)


Brent Crude oil Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly price data

Brent Month Week Day
Close 16 August: 58.64 (58.42)
Trend Direction Down (Down) Down (Down) Down (Up)
Risk Weight 30-40 (30-40) 15-20 (15-25) 30-35 (10-15)
Allocation 0% (0%)

With all time frames now in Downtrend, No change.

(Clearly, risk weight in all time frames is approaching oversold conditions. We believe that the secular bear market has not finished. Strength of Gold may well provide some support for Oil whereas Oil has weakened substantially vs Gold in recent months. For now we prefer not to be invested as the LT trend and risk weight is still pointing down. Weaker economic data typically does not support stronger key commodity markets)

Posted in A - All Financial Blogs | 2020 Forecast.

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