Metals – FX- Indices – update – close 17 May 2019

On 10 May, 2019 we removed the Hourly risk weight as this intra-day indicator only serves to fine-tune entry/exit timing of Short Term activity. Often the action would need completion in out of timezone hours. Instead we will simply alert on this possible timing in the Short Term (Daily) analysis.

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

Gold/USD Month Week Day
Close 17 May: 1277 (1285)
Trend Direction Down (Down) Down (Up) Down (Down)
Risk Weight 60-65 (60-70) 15-20 (15-25) 55-70 (65-75)
Allocation 75% (75%)

The Precious Metals space is getting harder to predict short to medium term due to the manipulative price behavior causing technical reversals even in MT timeframes and now changing from week to week. The triangular formation in play since the Nov 2015 low now shows support at 1190 and resistance at 1360. Because this formation is bullish by nature we strongly recommend to stick with the low risk weight position.

(The Weekly MT trend and risk weight looks to have a potential major bearing on future price travel. Reason is that the Weekly risk weight has fallen sharply relative to the January high and the mid 2018 lows whilst turning up. This is a potentially very bullish picture. If Gold breaks and closes above the MT resistance line at 1360, Gold's allocation relative to total assets should be increased as well. For now no change but seeking to increase again to 100% if the scenario unfolds)


Silver/USD Month Week Day
Close 17 May: 14.38 (14.72)
Trend Direction Down (Down) Down (Up) Down (Down)
Risk Weight 25-40 (30-40) 10-15 (10-20) 15-30 (40-55)
Allocation 75% (75%)

Exact same story for Silver, which still suffers due to the immense futures short positions driving physical holders nuts. Yet Silver at near or below production cost levels is trading at or near historic multi-century lows as evidenced by the Gold/Silver ratio. Silver therefore is also a strong hold based on relatively low risk weight in all time frames. Once the move gets underway we would expect to recommend a much larger than 'wealth preservation' type hold (10% of total free assets) of Gold and Silver combined. No change.

(Last week's rally towards 15.00 was followed by another attempt to push Silver down losing 50% of the advance. Silver investors require a long breath which eventually will pay off as the metal will not just lose liquidity at these sub production cost levels, but will eventually return to long equilibrium relative to Gold. This makes Silver an even stronger protection against possible inflation. No change)


Gold/EUR Month Week Day
Close 17 May: 1143 (1143)
Trend Direction Down (Down) Up (Up) Down (Down)
Risk Weight 70-80 (70-80) 15-25 (15-25) 60-75 (55-70)
Allocation 75% (75%)

Dollar strength drove the price higher initially last week before turning down on Thursday.The Bullish flag folrmation may not be finished and see the price lower again initially. The weekly MT risk weight shows strong divergence versus the Sept/18 price low at 1011. We stay with the allocation.

(The September 2018 LT low was reached with very low risk weight and a price level well above the previous LT low in Jan 2014. Similar to Gold vs US$ the weekly flag formation and a fair amount of risk weight divergence vs Monthly LT leans more towards an upcoming rally which should take the price to new 2 or 3 years highs. We will increase the allocation back to 75% at opening Monday morning)


Silver/EUR Month Week Day
Close 17 May: 12.88 (13.10)
Trend Direction Down (Down) Down (Down) Down (Down)
Risk Weight 40-50 (40-55) 05-20 (15-20) 15-25 (30-40)
Allocation 75% (75%)

Price formation down is still not finished but risk weight suggests a reversal in the not too distant future. The allocation is relatively small in terms of % total assets and we remain on a no change course.

(A break and close above 13.65 will turn this market bullish. Daily Stochastic, RSI and MACD confirm the building of a ST bottom. Price may even drop just below 13.00 but we stay with our 75% allocation)


Gold/GBP Month Week Day
Close 17 May: 1003 (988)
Trend Direction Down (Down) Up (N) Down (Up)
Risk Weight 65-70 (65-70) 20-30 (20-25) 80-90 (55-65)
Allocation 75% (75%)

Divergence between ST daily and MT weekly may push the price down a little further. The stronger price formation due to a weaker pound generally is reason maintain the Gold holding vs GBP.

(The zig zag price pattern continued, this time in favor of Gold again. The weekly indicators are, just like the other Gold pairs, pointing towards a near term rally. No change)


Silver/GBP Month Week Day
Close 17 May: 11.29 (11.35)
Trend Direction Down (Down) Down (Down) Down (Down)
Risk Weight 30-45 (30-45) 10-20 (15-20) 45-50 (35-45)
Allocation 75% (75%)

The downtrend in all time frames is not favorable for speculators, but wealth preservation holders should feel comfort with the position given that the formation also has a more bullish pattern with MT risk weight in oversold territory.

(Silver held better this week due to general Sterling weakness. Risk does not appear strongly in favor of Silver vs GBP, still seeking firm direction, but given the position of Silver vs EUR and US$ we stay with the 75% allocation)


GOLD/SILVER Ratio Month Week Day
Close 17 May: 88.44 (86.80)
Trend Direction Up (Up) Up (Up) N (Up)
Risk Weight 85-95 (85-95) 80-90 (75-85) 85-95 (65-80)
Allocation 50% AG (50% AG)

Risk weight in all time frames remains in the overbought ranges. As long as Silver trades at these levels a long term hold attitude is the best possible protection. If Silver is driven or manipulated at all time lows vs Gold, we may increase the ratio hold to 75% Silver vs 25% Gold.

(Silver against closed at a new multi decade low by a small margin and is just 4% below the 1991 all time high for this ratio at 91. At these already extreme levels and relatrively high risk weight in all time frames we are happy to stay with the 50/50 allocation)


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

EUR/USD Month Week Day
Close 17 May: 1.1155 (1.1230)
Trend Direction Down (Down) Up (Up) Down (Up)
Risk Weight 0-10 (5-10) 15-25 (15-25) 35-50 (55-70)
Allocation 100% (100% hedge)

The USD continues to try and break into the higher ground reached between 2014 and 2016. The technical picture is NOT in favor of such forecast move. The downward slope of the symmetric zigzag price formation supports more dollar weakness in the MT than the opposite. No change in the risk picture in spite of frustrating mild EUR weakness.

(Trend and risk weight continue to support holding on to fully covered long dollar exposures)


USD/CHF Month Week Day
Close 17 May: 1.0100 (1.0110)
Trend Direction Up (Up) Down (Down) Up (Down)
Risk Weight 80-90 (80-90) 65-75 (75-85) 15-25 (40-55)
Allocation 100% (100%)

Daily divergence vs MT and LT may push the price up a bit again. The Risk picture however supports continued hedge of long dollar exposures.

(No change)


GBP/USD (Cable) Month Week Day
Close 17 May: 1.2705 (1.2990)
Trend Direction Down (Down) Down (Down) Down (Down)
Risk Weight 30-35 (30-35) 30-40 (35-45) 0-10 (40-55)
Allocation 70% (70%)

Cable took an expected further dive, but risk weight in all time frames is showing ST support. We may lower the hedge allocation to 50% if the ST risk weight quickly moves into a higher zone. For now we remain with the 70% hedge on long dollar exposures.

(Cable appears to continue hovering around the 1.30 level. The long dollar hedge based on risk weight is a choice to simply remove risk of a dollar depreciation. Both risk weight and trend favor a lower allocation of 50%, but as the US$ looks slightly more vulnerable against other majors, we stick with the 70% hedge on short Cable transaction exposures)


GBP/EUR Month Week Day
Close 17 May: 1.1390 (1.1570)
Trend Direction Down (Down) Down (N) Down (Down)
Risk Weight 65-80 (75-80) 50-65 (60-70) 0-10 (30-45)
Allocation 50% (50%)

GBP is likely to rally ST due to oversold ST risk weight level. The MT outlook however remains poor for GBP and we stay with a 50% hedge on long or short exposures in this spread.

(Logically the perceived weaker GBP than other majors vs USD would show in the GBP/EUR spread and it does. This pair looks to continue hovering within a 1% range at current levels. We simply advise a 50% hedge on long or short exposures)


BITCOIN BTC/USD Month Week Day
Close 17 May: 7358 (6375)
Trend Direction Up (Up) Down (Up) Down (Up)
Risk Weight 15-35 (15-30) 85-90 (85-95) 60-70 (90-95)
Allocation 0% (0%)

8350 was the high reached following a further high speed rally early last week. The low volume weekend moves remain highly suspect of manipulation with full 10-15% ranges more common than not. After Friday's 15% drop and this weekend's reverse of 10% up, this highly speculative, high risk, environment is not for responsible investors.

(Following Fridays close BTC jumped another 10%+ during the weekend at well over USD 7,000. This market is controlled by just a few parties or even one and seems to be rallying gold diggers to support the ever present overhang of long BTC positions that simply cannot be sold for compliance (integrity of source of funds) related reasons. It is small volume and outside normal trading hours. The rally is great for 'old' long position provided holders have a facility to trade back to fiat, which often isn't the case. We do not participate in this high risk controversial crypto commodity)

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
Close 17 May: 25764 (25942)
Trend Direction Up (Up) Down (Down) Up (Up)
Risk Weight 80-85 (80-90) 65-80 (80-90) 30-35 (25-35)
Allocation 0% (0%)

This index technically looks very vulnerable still, but appears totally managed by mainstreet propaganda and near free credit driving high volume high reward investment bank activity of stock repo's. We stay out.

(The DJII still looks vulnerable although last weeks drop and Friday's turnaround may push the index a little higher early in the week based on a bit of bullish divergence between ST (Daily) and MT or LT. Risk weight and trend on MT supports a zero risk policy. No change)


Standard & Poor 500 Month Week Day
Close 17 May: 2860 (2881)
Trend Direction Up (Up) Down (Down) Up (Up)
Risk Weight 80-90 (80-90) 75-90 (90-95) 30-40 (25-35)
Allocation 0% (0%)

Same as INDU.

(Friday was an outside low and close and would support a further rally into the week or even a bullish reversal. However, the price to risk weight bearish divergence in the LT (Monthly) timeframe must not be ignored whilst the Weekly risk and trend favor a zero risk approach. No change)


USD Index Month Week Day
Close 17 May: 98.01 (97.32)
Trend Direction Up (Up) Down (Down) Up (Down)
Risk Weight 90-95 (85-95) 70-80 (75-80) 50-70 (25-40)
Allocation 100% (100%)

The index again reaches resistance levels showing continued higher highs with lower corresponding risk weight. This divergence pattern is a concern that the USD is peaking and a 100% hedge cover is the right course of action.

(The Weekly trend turned down whilst the Daily shows bottoming action. The USDollar still shows to seek a top technically. Hence Risk favors a fully hedged long dollar exposure vs the basket of other major currencies)


Brent Month Week Day
Close 17 May: 72.17 (70.86)
Trend Direction Up (Up) Down (Down) Up (Up)
Risk Weight 50-55 (45-55) 70-75 (70-85) 55-70 (20-30)
Allocation 0% (0%)

The trend and risk weight picture is still mixed and does not give a clear direction. We have no choice but to stay on the sidelines for this commodity.

(Technically risk weight and trend are neutral and slightly bullish very short term. In order to participate and invest in oil again we require a no brainer bullish picture which we have not seen yet. MT (Weekly) is in a downtrend whilst Monthly hesitates. Not favourable. No change)

Posted in A - All Financial Blogs | 2020 Forecast.

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