Metals – FX- Indices – update – close 24 May 2019

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

Gold/USD Month Week Day
Close 24 May: 1285 (1277)
Trend Direction Down (Down) Up (Down) Up (Down)
Risk Weight 60-65 (60-65) 15-25 (15-20) 25-40 (55-70)
Allocation 75% (75%)

Gold traded in a narrow range around 1275 last week breaking to upside on Thursday. With ST and MT trends turning up again with low risk weight we feel comfortable with the present allocation. No change. A break at daily close of 1300+ is a call to increase back to 100%.

(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)

Silver/USD Month Week Day
Close 24 May: 14.53 (14.38)
Trend Direction Down (Down) Down (Down) Up (Down)
Risk Weight 25-40 (25-40) 5-10 (10-15) 20-25 (15-30)
Allocation 75% (75%)

Since February we have seen a steady price erosion with lower highs and lower lows. This trend may not yet have finished but risk weight levels and for reasons mentioned last week holding once breath and position is the best risk position in our view. Once the turn is in it may follow through quickly. No change.

(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)

Gold/EUR Month Week Day
Close 24 May: 1145 (1143)
Trend Direction Down (Down) Up (Up) Up (Down)
Risk Weight 70-80 (70-80) 20-25 (15-25) 30-35 (60-75)
Allocation 75% (75%)

An early close above 1163 would drive risk weight and trend in a stronger positive mode and reason to increase the allocation back to 100%. The bullish flag pattern in ST and MT time frames may eventually drive towards a higher basic allocation of Gold within the total portfolio, which is now primarily in cash. No change for now.

(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)

Silver/EUR Month Week Day
Close 24 May: 12.98 (12.88)
Trend Direction Down (Down) Down (Down) Up (Down)
Risk Weight 45-50 (40-50) 05-10 (05-20) 25-30 (15-25)
Allocation 75% (75%)

Narrowing risk weight percentages and very low MT risk in downtrend may draw or has already drawn this pair into a fresh bottom at the beginning of the week. Holding Silver is therefore a low risk proposition. A month-end break above 13.40 calls for full allocation again. No change for now.

(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)

Gold/GBP Month Week Day
Close 24 May: 1009 (1003)
Trend Direction Up (Down) Up (Up) Up (Down)
Risk Weight 65-75 (65-70) 30-50 (20-30) 80-90 (80-90)
Allocation 75% (75%)

The drop early in the week towards 994 found support along with the general uptick for gold. Brexit jitters and political events in the UK should have no bearing. The trend and risk weight picture remains bullish enough to remain with this allocation. A MT close above 1030 calls for full allocation.

(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)

Silver/GBP Month Week Day
Close 24 May: 11.43 (11.29)
Trend Direction Down (Down) Up (Down) Up (Down)
Risk Weight 30-45 (30-45) 10-20 (10-20) 60-70 (45-50)
Allocation 75% (75%)

Without much price change the market has turned more bullish ST and MT. It looks like the sideways to down range found bottom early May. A MT close above 11.55 calls for an increase to 100% allocation subject to solid trend and risk weight position. No change for now.

(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)

GOLD/SILVER Ratio Month Week Day
Close 24 May: 87.97 (88.44)
Trend Direction Up (Up) Up (Up) Down (N)
Risk Weight 85-90 (85-95) 85-95 (80-90) 70-75 (85-95)
Allocation 50/50 AU/AG (50/50 AU/AG)

The LT risk weight is narrowing to 85-90 with MT 5 points higher. A top is getting closer on this basis. A close below 85.50 and trend reversal of MT and LT calls for an increase to 70% Silver.

(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)


EUR/USD Month Week Day
Close 24 May: 1.1200 (1.1155)
Trend Direction Down (Down) Up (Up) Up (Down)
Risk Weight 5-10 (0-10) 20-25 (15-25) 30-40 (35-50)
Allocation 100% (100% hedge)

USD topping action is clearly visible and technicals show evidence of significant market manipulation. Low risk weight with narrowing LT to 5-10 is potentially bearish for the USD. The USD should be weaker already but appears to find support on every drop. We stay with a full long dollar exposure 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)

USD/CHF Month Week Day
Close 24 May: 1.0010 (1.0100)
Trend Direction Up (Up) Down (Down) Down (Up)
Risk Weight 80-85 (80-90) 50-65 (65-75) 10-20 (15-25)
Allocation 100% (100%)

A minor uptick early last week was follow by a 1% drop since Wednesday. As MT weekly is now strongly down, the ST daily low risk weight may only show temporary support for the dollar. We remain on full hedge on long USD exposures.

(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)

GBP/USD (Cable) Month Week Day
Close 24 May: 1.2700 (1.2705)
Trend Direction Down (Down) Down (Down) Up (Down)
Risk Weight 25-35 (30-35) 15-30 (30-40) 5-10 (0-10)
Allocation 70% (70%)

The downtrend in MT and LT risk still in play. This is a concern even though risk weight levels are low. It is more a difficult to predict GBP issue than a USD issue and therefore the correct risk assumption is to stay with a 70% long dollar hedge.

(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)

GBP/EUR Month Week Day
Close 24 May: 1.1340 (1.1390)
Trend Direction Down (Down) Down (Down) Up (Down)
Risk Weight 65-75 (65-80) 25-50 (50-65) 0-10 (0-10)
Allocation 50% (50%)

GBP, having shown weakness throughout May, now shows an oversold risk condition in the ST timeframe. The weekly MT timeframe risk has dropped by some 15% and widened giving room for narrowing risk spread on a slightly higher price. As as the primary trend is down, although losing momentum short term, we stay with a 50% hedge on long GBP or long EUR exposures.

(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)

Close 24 May: 7973 (7358)
Trend Direction Up (Up) Up (Down) Down (Down)
Risk Weight 35-60 (15-35) 85-95 (85-90) 70-80 (60-70)
Allocation 0% (0%)

Last week's vollatility decreased somewhat with a 'mere' 8% price range. With ST and MT risk becoming high with potential bearish divergence outcome, old longs must consider a 9000+ price to be an excellent exit until this market comes to peace with itself. Very tricky 'controlled by few' market. No change.

(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)

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 24 May: 25585 (25764)
Trend Direction Up (Up) Down (Down) Down (Up)
Risk Weight 80-85 (80-85) 40-65 (65-80) 30-40 (30-35)
Allocation 0% (0%)

The ST daily turned down following weakness end of the week with minor recovery on Friday 24.There is a ST and MT downtrend in force with LT monthly looking to possibly turn down at month-end close and in a bearish divergence position. That is technically weak, hence we do not change our risk outlook. No position.

(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)

Standard & Poor 500 Month Week Day
Close 24 May: 2826 (2860)
Trend Direction Up (Up) Down (Down) Down (Up)
Risk Weight 80-90 (80-90) 60-75 (75-90) 25-30 (30-40)
Allocation 0% (0%)

Again a similar analysis applies to the S&P500, although Apple stock weakness gave this index a bit more pressure in the ST. Clear bearish divergence developing on LT Monthly, for which we need another weeek to get confirmation. NO change.

(Same as INDU)

USD Index Month Week Day
Close 24 May: 97.60 (98.01)
Trend Direction Up (Up) Down (Down) Down (Up)
Risk Weight 85-95 (90-95) 70-75 (70-80) 65-80 (50-70)
Allocation 100% (100%)

A fairly strong rally of the $index on Thursday followed by a strong reversal into Friday caused the ST trend to turn down again. Market players are clearly still very divided, but the near overbought LT picture indocates a higher vulnerability for the Greenback. We recommend a fully hedged dollar long exposure.

(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)

Brent Month Week Day
Close 24 May: 72.17 (72.17)
Trend Direction Up (Up) Down (Down) Down (Up)
Risk Weight 45-55 (50-55) 60-70 (70-75) 30-45 (55-70)
Allocation 0% (0%)

The mid April low was broken with price hovering around that 69.25 level.We could see a bullish divergence reaction, however the hourly now indicates possible further price pressure. We see no reason to change our No Investment, NO risk stance.

(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)

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Posted in A - All Financial Blogs | 2021 Forecast.

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