Metals – FX- Indices – update – close 19 April 2019

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

Gold/USD Month Week Day Hour
Close 19 April: 1276 (1290)
Trend Direction Down (Down) Down (Down) Up (Down) N
Risk Weight 65-70 (65-70) 10-20 (25-45) 5-10 (35-45) 55-65
Allocation 50% (50%)

In light of most major classes displaying a very high risk technical position it is tempting to turn back to full PM allocation. Because MT and LT trend direction is still down the intra week or month price development is still uncertain and thus we prefer to await a break upward return to a 100% allocation.

(Our aim is always to only participate in a Low risk longer term play environment and right now we are almost fully in cash. The PM space is both interesting and frustrating for many, especially if allocation weight is relatively high. Dec 2015-Jul 2016 was a firm rally from a strong low risk bottom. Since that time Gold/USD has traded in a narrowing but wide 20% sideways range. In Elliott terms perhaps a complex ABCDE wave 2. The current shorter term risk is for the market to weaken a little further. Without trying to predict a low print price objective (maybe between 1200-1260) This market is working towards a new low that is more likely than not to precede a major rally. This is a technical observation. Gold being a Tier1 asset of 'Trust' may well start playing a role in this observation)

Silver/USD Month Week Day Hour
Close 19 April: 14.99 (14.95)
Trend Direction Down (Down) Down (Down) N (Down) Up
Risk Weight 35-45 (35-45) 10-20 (15-30) 25-30 (20-35) 60-65
Allocation 50% (50%)

Silver is clearly moving towards a strong risk weight support zone, i.e low(er) risk.
Similar to Gold the low risk play is to await a turn in the MT and LT trend and a possible break of the ST resistance line, which may even be imminent.

(The picture for Silver is very similar to Gold, except for a weaker tendency since the 2016 high. With Silver now trading at or near cost of production it will be a good strategic hold. We stay with a minimum allocation waiting for a stronger entry point)

Gold/EUR Month Week Day Hour
Close 19 April: 1136 (1133)
Trend Direction Down (Down) Down (Down) Up (Down) Down
Risk Weight 70-85 (70-85) 30-40 (35-45) 10-15 (35-50) 70-85
Allocation 50% (50%)

Similar risk as USD vs AU. Resistance trend line is at 1160 today. Risk to return to full allocation seems low but we prefer to await a break of trend resistance to re-enter that other 50% of the position.

(Euro Gold is now in a ST, MT and LT downtrend. Impossible to say how long this will last. For EUR based investors it is critical to maintain a minimum allocation as insurance because ST and MT risk weight is moving lower fairly rapidly)

Silver/EUR Month Week Day Hour
Close 19 April: 13.33 (13.24)
Trend Direction Down (Down) Down (Down) Down (Down) N
Risk Weight 50-60 (50-55) 10-20 (20-35) 15-20 (20-35) 75-85
Allocation 50% (50%)

EUR/AG also shows a lower risk price level due to the rapid fall of weekly MT risk weight since the 14.25 high print. A break of the daily resistance line with a close above 13.50 would be a good re-enty point unless this event coincides with a ST very high risk weight.

(EUR/Silver is also rapidly moving into low risk weight territory. Price action is indeed down but not alarming. A minimum allocation should be kept)

Gold/GBP Month Week Day Hour
Close 19 April: 982 (987)
Trend Direction Down (Down) Down (Down) Down (Down) Down
Risk Weight 65-75 (65-75) 20-30 (25-30) 15-20 (55-65) 75-85
Allocation 50% (100%)

LT and MT direction still holds a risk of lower prices ST. A close at 1000 or higher would be a trigger to full re-allocation.

(The risk weight spectrum now favors reducing the position to a minimum of 50% of the chosen allocation)

Silver/GBP Month Week Day Hour
Close 19 April: 11.54 (11.43)
Trend Direction Down (Down) Down (Down) Up (Down) Up
Risk Weight 40-50 (35-50) 10-20 (10-20) 40-50 (30-40) 75-80
Allocation 50% (50%)

GBP/AG held 1140 on close and our reduction to 50% on April 12 was premature even though we saw an intraday low of 1133 on April 15. The risk weight between timeframes is fairly neutral and thus stay with a 50% allocation.

(Same as last week. A daily close below 11.40 is reason to (temporarily) reduce the allocation to 50%. Price is close to trigger level and unfortunately the technical risk is for a slightly larger than expected temporary price erosion. Sustained relative weakness for a slightly longer period will most likely find price support in across time frames low risk weight)

GOLD/SILVER Ratio Month Week Day Hour
Close 19 April: 84.80 (85.94)
Trend Direction Up (Up) Down (Up) Down (Up) Up
Risk Weight 75-85 (75-85) 85-90 (85-90) 15-35 (70-80) 5-15
Allocation 50% AG (50% AG)

The ratio dropped 2% last week, but divergence may push it up again as it has done for the past 4 months. The MT and LT high risk weight determines maintaining a healthy distribution of 50% gold and 50% silver in a wealth preservation PM portfolio.

(As long as Silver remains historically weak with relatively high risk weight indicators, one should stay with the 50/50 allocation mix)


EUR/USD Month Week Day Hour
Close 19 April: 1.1240 (1.1297)
Trend Direction Down (Down) Up (Down) Down (Up) Up
Risk Weight 5-15 (5-15) 15-20 (15-20) 50-65 (45-60) 45-55
Allocation 100% (100% hedge)

The nearly 1% drop last week and subsequent bounce may bring about another bit of weakness in the short term. The low risk weight in LT and MT time frames still deserves max caution with long dollar exposures, so no change.
The Dollar came of it's highs again as expected. No change in hedging strategy as risk weight across time frames is for the USD to continue to find heavy resistance on every rally)

USD/CHF Month Week Day Hour
Close 19 April: 1.0135 (1.0020)
Trend Direction Up (Up) Up (Up) Up (Down) Up
Risk Weight 80-90 (80-85) 65-80 (60-70) 90-100 (85-90) 45-50
Allocation 100% unch

Same with $Swiss. Every attempt above par meets with strong selling High ST and LT risk weight demand a fully hedged long dollar exposure.

No change in being fully hedged on long dollars exposure, even though the hovering around the 1.0000 level may continue for a while longer.

(A mixed picture still requires long dollar exposures to remain fully hedged)

GBP/USD (Cable) Month Week Day Hour
Close 19 April: 1.2977 (1.3025)
Trend Direction Up (Up) Down (Down) Down (N) Up
Risk Weight 30-35 (30-40) 50-65 (60-70) 10-25 (30-40) 10-20
Allocation 70% (100%)

Direction is still very uncertain. As the US dollar generally keeps meeting resistance we prefer to remain hedged on long dollar positions for about 70%.

(The picture looks a little weaker for GBP. Rather than waiting for a stop at 1.2770 we reduce our long dollar hedge recommendation to 70% from 100%)

GBP/EUR Month Week Day Hour
Close 19 April: 1.1550 (1.1555)
Trend Direction Up (Up) Down (Down) Up (Down) Up
Risk Weight 70-80 (75-80) 70-75 (70-80) 10-20 (15-25) 30-40
Allocation 50% (50%)

No change in 50% hedge on long or short exposures relative to typical industry horizon of transaction currency risk . Short term GBP looks a little stronger right now with bullish divergence between ST and MT/LT risk weight.

(No change in 50% hedge on Long or short GBP/EUR transaction exposures)

BITCOIN BTC/USD Month Week Day Hour
Close 19 April: 5258 (5048)
Trend Direction Up (Up) Up (Up) Up (Down) Down
Risk Weight 5-15 (5-15) 85-95 (80-90) 65-70 (70-80) 45-50
Allocation 0% (0%)

The 10% swing between high and low the last three weeks makes trading near impossible. Smart people stay out especially with the larger bearish divergence in play between MT and LT risk weights.

No change. This manipulated low volume market is the primary cause for the large price swings.

(A relatively large 20% rally materialized the past week. Highly speculative upward pressure can easily expand, but this remain a very high risk price point with evident divergence between MT AND LT risk weight)

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 19 April: 26560 (26412)
Trend Direction Up (Up) Up (Up) Down (Up) Down
Risk Weight 75-85 (75-85) 95-100 (90-100) 85-90 (70-80) 15-30
Allocation 0% (0%)

This market is defying gravity. The bulls are winning and good luck to them. Risk weight however is not in their favor and we will not get emotional and make the mistake of entering a position when ST, MT and LT risk weight are at overbought levels and either have (ST Daily or can easily (Mt and LT) turn down again.

(The DJII is still looking (very) high risk. Market for punters not LT investors.
No change, No position)

Standard & Poor 500 Month Week Day Hour
Close 19 April: 2905 (2907)
Trend Direction Up (Up) Down (Up) Down (Up) Down
Risk Weight 70-85 (75-85) 95-100 (95-100) 75-80 (90-100) 20-30
Allocation 0% (0%)

S&P shows a similar image and last weeks comment did develop more price resistance. No change.

The S&P shows even higher risk weight especially ST and MT. Market for punters only not LT investors.
No change, No position.

(The same reason and picture applies to S&P even though all times frames are up. The high price to high risk weight technical picture favors a very careful investment approach for equities)

USD Index Month Week Day Hour
Close 19 April: 97.37 (96.85)
Trend Direction Up (Up) Up (Up) Up (Down) Up
Risk Weight 85-95 (85-90) 75-85 (70-80) 40-50 (45-55) 60-70
Allocation 100% (100%)

Last week's 0.5-0.75% rally in general uptrend is likely to meet price resistance again this week. MT and LT high risk weight still requires maximum caution and long dollar exposures to remain hedged.

(The USD peaked again as it has done so many times since rally that started early 2018. Momentum appears to slow making the risk of a sharp drop much higher. Against the basket of US's major trading partner currencies we stay fully hedged on long dollar exposures)

Brent Month Week Day Hour
Close 19 April: 71.97 (71.55)
Trend Direction Up (Up) Up (Up) Up (Up) Up
Risk Weight 40-50 (40-50) 95-100 (95-100) 90-95 (90-95) 90-95
Allocation 0% (0%)

Pricing of Barrels oil seems only affected by short term news, the latest being US/Iran related import stop. Risk weight neverteless still points in the other direction. This is frustrating in a way as there is opportunity loss, but risk prevails. No change.

(No change in the general risk weight picture which remains high and thus a larger drop in price can be expected any time soon)

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