Metals – FX- Indices – update – close 7 June 2019

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

Gold/USD Month Week Day
Close 7 June: 1340 (1305)
Trend Direction Up (Down) Up (Up) Down (Up)
Risk Weight 65-75 (60-70) 35-60 (20-35) 85-90 (45-65)
Allocation 100% (100%)

Strong performance which appears to be general dollar weakness across all asset classes. Technical risk analysis says being long this market. No change.

(We are moving to 100% allocation and would even propose to increase the precious metals asset allocation to a higher and still comfortable level to individual investor's preference. ST and MT trend and risk favor pre-empting the LT monthly turning up during June based on much higher prices. Of course this market can again experience attempts to control a price increase or even stop it, but the picture is much more favorable following Fridays clear break of lower highs)


Silver/USD Month Week Day
Close 7 June: 14.98 (14.54)
Trend Direction Down (Down) Up (Down) Down (Up)
Risk Weight 25-35 (25-40) 10-25 (5-10) 75-80 (25-35)
Allocation 100% (100%)

Silver is a hard one to crack, but it continues to lean towards that moment of a major break upward. There are still short term technical pressures however with Daily showing some bearish divergence against weekly following last week's advance. We remain fully allocated based on the Medium Term Weekly turning rather bullish.

(Silver also looks to break the lower lows downtrend but still feels pressure from the LT and MT downtrends both with a low risk weighting. We consider Silver a low risk buy and hold at this level and propose a full allocation. If the uptrend is confirmed with a strong MT trend change, the total Silver allocation in a Precious metals portfolio can even be slightly higher than 50%. We move back to 100% allocation on Silver)


Gold/EUR Month Week Day
Close 7 June: 1181 (1167)
Trend Direction Up (Down) Up (Up) Down (Up)
Risk Weight 80-85 (75-80) 35-60 (25-45) 85-90 (55-75)
Allocation 100% (100%)

Our call to move back to fully allocated a week ago remains unchanged. Further dollar weakness can hold back a more rapid advance of Gold vs Euro.

(Gold/EUR broke the lower lows downtrend already on May 15 and closed above 1163 putting this pair in a positive technical mode and we raise to 100% allocation again)


Silver/EUR Month Week Day
Close 7 June: 13.21 (13.00)
Trend Direction Down (Down) Up (Up) Down (Up)
Risk Weight 40-45 (40-55) 10-25 (5-10) 75-80 (35-45)
Allocation 100% (100%)

We did see the expected rally last week and the technical picture remains positive. No change.

(Technically a close call, but an attempt for price to break up is in the making. We propose to a full silver allocation. Widening monthly risk weight with MT weekly turning up at low risk weight is positive. A close above 13.15 will confirm. We pre-empt this will happen as the general metals space looks firm)


Gold/GBP Month Week Day
Close 7 June: 1050 (1033)
Trend Direction Up (Up) Up (Up) Up (Up)
Risk Weight 75-90 (70-80) 65-85 (50-70) 85-100 (90-95)
Allocation 100% (100%)

The expected trend continued although Gold vs GBP looks further advanced than against other currencies. This could mean stronger GBP in the FX space in coming weeks. The technical picture still favors a full allocation to Gold.

(We closed above 1030 and move to 100% allocation. It is a bit of a close call on timing because the Daily and hourly are both in high risk weight territory. Hourly did turn down on Friday night thus an additional allocation could be monitored on Monday going into lunch)


Silver/GBP Month Week Day
Close 7 June: 11.75 (11.50)
Trend Direction Up (Down) Up (Up) Down (Up)
Risk Weight 35-40 (35-45) 25-45 (15-20) 75-85 (60-70)
Allocation 100% (100%)

Still bottoming action with a solid advance last week. No chan ge albeit a similar picture as against Gold due to a stronger eying GBP against USD.

(We saw an hourly close above 11.60 but closed lower thus not yet confirmed in Daily time frame. The technical picture however looks firm and relatively low risk and we expect this pair to turn higher again on Monday morning European time. We increase to 100% allocation)


GOLD/SILVER Ratio Month Week Day
Close 7 June: 89.07 (89.34)
Trend Direction Up (Up) Down (Up) Down (Up)
Risk Weight 90-95 (85-95) 90-95 (90-95) 75-80 (75-85)
Allocation 50/50 AU/AG (50/50 AU/AG)

No change. A proper change of trend is in the making although the relative silver weakness may not be quite over. The correct risk approach is to continue hold silver. This is a solid speculative long position in the long term based on low risk.

(The Daily risk weight on Friday's close shows bearish divergence. In spite of persistent silver weakness vs gold, patience eventually will prove itself. The technical picture actually shows this is a matter of time and not that much longer probably. No change in staying with 50% silver. A close below 85.50 would call for a more opportunistic ratio of 70% silver 30% gold. History learn that the Gold/Silver ration will return to the 50 level at least, the timing of which is impossible to predict but typically a few years. If shit hits the fan it could be much quicker)


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

EUR/USD Month Week Day
Close 7 June: 1.1330 (1.1157)
Trend Direction Up (Down) Up (Down) Up (Down)
Risk Weight 5-15 (0-10) 25-35 (15-25) 75-80 (20-30)
Allocation 100% (100% hedge)

Last week presented a break away rally which we have seen 3 of 4 times this year. The weekly close was the strongest in over one year and may indicate that dollar strength is fading. No change.

(All time frames are in down trend and we remain extremely cautious as regards the value of the USD. This pair again bounced off the 1.11+ lows on Friday and with risk weight in oversold territory a full long dollar exposure hedge is the correct approach to remove a` potentially larger transaction risk. No change)


USD/CHF Month Week Day
Close 7 June: 0.9867 (1.0005)
Trend Direction Down (Down) Down (Down) Down (Down)
Risk Weight 65-80 (80-85) 20-40 (40-55) 15-25 (35-45)
Allocation 100% (100%)

Swissy has been relatively strong the past weeks and may find some resistance. It however follows the general picture against a weaker US dollar. No change.

(With Monthly actually closing in a down trend we stay with a 100% hedge on long dollar exposures vs CHF. This market may continue to bounce around but we must not take the risk of a dollar turn at these generally higher dollar levels above par)


GBP/USD (Cable) Month Week Day
Close 7 June: 1.2725 (1.2620)
Trend Direction Down (Down) Up (Down) Up (Down)
Risk Weight 20-30 (25-35) 10-15 (5-20) 45-60 (5-10)
Allocation 100% (70%)

We anticipate a stronger pound against the USD and relatively strong against other majors. This is purely technical, even though the long term is still in a down trend and showing sign of being tired. MT weekly wants to turn bullish and we pre-empt the possibility of a further advance. As a result we increase the long dollar hedge to 100%.

(We have remained cautious regarding dollar strength although less so against GBP as the other majors. A new intra week or intra month low can easily be recorded but we would consider that a cable low is in the making. Very low risk weight on daily and weekly time frames means a 100% hedge is on the cards. For now no change)


GBP/EUR Month Week Day
Close 7 June: 1.1225 (1.1305)
Trend Direction Down (Down) Down (Down) Down (Up)
Risk Weight 50-65 (65-75) 0-15 (10-30) 10-20 (10-15)
Allocation 75% (50%)

In line with above comments, GBP trend, which has been weak looks to want to turn up. We increase the hedge on long EUR to 75%, i.e. we expect GBP to strengthen ag EUR relatively soon. This is bottom picking based on ST and MT relative oversold risk weight.

(No change for now. Here too, a GBP low is in the making at which time the question is increaser to around 75% or 100% hedge on short GBP exposures and the opposite for EUR)


BITCOIN BTC/USD Month Week Day
Close 7 June: 8029 (8555)
Trend Direction Up (Up) Down (Up) Up (Up)
Risk Weight 35-60 (35-65) 90-95 (90-100) 20-30 (70-80)
Allocation 0% (0%)

Look at the price volatility and ask if you wish to be part of this insanity. We don't take that risk.

(Long specs are on a roll. Good luck to them. Our call is for 'old longs' to exit at 9000+. This is a major opportunity in our analysis, but since we do not participate in this market our wisdom is relative. An outside daily range with lower close than previous day would be a signal to close longs. This market looks to become more volatile)

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 7 June: 25984 (24815)
Trend Direction Down (Down) Down (Down) Up (Down)
Risk Weight 75-80 (75-85) 30-35 (20-50) 65-85 (10-20)
Allocation 0% (0%)

An incredible recovery was manifest last week of the BTFD type. MT even showed a bullish reversal moving below the previous week lower and closing higher. As the risk remains high in LT time frame we stay away from this market until a valid technical entry point presents itself. Missing opportunity in this market still appears the better risk position. This has not changed since Q3 of 2018. No change, no position.

(May close meant a trend reversal in Monthly time frame with divergence. With all time frames in downtrend we remain at zero INDU asset allocation. There could be some ST bounce due to divergence between ST and LT, but the general risk eyes weak. No change)


Standard & Poor 500 Month Week Day
Close 7 June: 2873 (2752)
Trend Direction Down (Up) Down (Down) Up (Down)
Risk Weight 80-85 (80-85) 40-50 (40-60) 60-80 (5-15)
Allocation 0% (0%)

Similar massive BTFD recovery as INDU. The LT technical show continued high risk, thus no change.

(The 7% drop from the recent highs equals that of the Dow. S&P looks to show some exhaustion on downward pressure but the risk of a sharp fall is equally high. Risk is what matters and we must not bottom pick at this stage. No change)


USD Index Month Week Day
Close 7 June: 96.56 (97.60)
Trend Direction Down (Up) Down (Up) up (Down)
Risk Weight 85-90 (85-95) 55-70 (70-80) 15-20 (65-70)
Allocation 100% (100%)

The USD dropped 1,5% vs other majors. This trend looks to want to continue for some time to come. A fully hedged long dollar exposure is the only sensible risk position. No change.

(The Index was strong all week and lost the entire advance at Fridays close. Possibly a result of foreign equity based sales. We could see a little bounce again on Monday as hourly is rather oversold, but this must not influence transaction risk management. The MT weekly just turned 'trend up'. Both Monthly and weekly look technically heavy, hence no change to 100% long dollar exposure hedge)


Brent Month Week Day
Close 7 June: 63.24 (61.76)
Trend Direction Down (Up) Down (Down) Up (Down)
Risk Weight 40-50 (40-50) 20-40 (40-55) 10-20 (10-25)
Allocation 0% (0%)

The slight rally following last weeks strong price drop is not an indication of the a major trend change. We will not invest in this market as any ST strength is not met with a MT or LT low risk weight entry. No change since early Q4 2018.

(We have been out of this market since the 80+ highs last October considering the 4 months rally high risk. That is still the case and we anticipate further pressure and Monthly LT trend to turn down in June. Trying to seek a price entry point is considered poor risk taking since the MT and ST trends are strongly down still. Interesting market)

Posted in A - All Financial Blogs | 2020 Forecast.

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