Metals – FX- Dow- S&P – 9 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 9 August: 1496 (1440)
Trend Direction Up (Up) Up (Up) Down (Up)
Risk Weight 80-90 (80-90) 85-90 (80-90) 90-95 (50-60)
Allocation 100% (100%)

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.

(Uptrend in all time frames. There may be resistance at 1470 in the Daily timeframe if that coincides with an overbought risk weight level. Risk in favor of maintaining full investment)


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

Gold/EUR Month Week Day
Close 9 August: 1335 (1288)
Trend Direction Up (Up) Up (Up) Down (Down)
Risk Weight 85-95 (85-95) 85-90 (80-90) 90-95 (70-80)
Allocation 100% (100%)

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 vs EUR looks a little vulnerable ST and is be expected to lose a bit more on Monday. The trigger is likely a weaker USD across the board going into the new week. As the MT and LT trends are still up and given the total asset risk position we stay with the LT trend. No change)


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

Gold/GBP Month Week Day
Close 9 August: 1243 (1183)
Trend Direction Up (Up) Up (Up) Down (Down)
Risk Weight 90-95 (90-95) 90-95 (85-95) 90-100 (80-85)
Allocation 60% (60%)

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.

(GBP weakness last week has driven the price of Gold higher against our risk profile. The present risk profile is no different with strong divergence in both ST and MT time frames. Similar to EUR but the weaker technical picture for Gold/GBPO gives risk preference to staying with just the 60% allocation. However, just like the US equity markets for the past 6 months the market can continue. It needs a tweet or two these days)


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 9 August: 16.89 (16.17)
Trend Direction Up (Up) Up (Up) Down (Down)
Risk Weight 45-65 (45-65) 80-85 (75-85) 80-85 (70-80)
Allocation 100% (100%)

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 dropped a little further than we expected, but the potential based on risk weight in all time frames makes silver the metal to hold in any portfolio. No change)


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

Silver/EUR Month Week Day
Close 9 August: 15.07 (14.55)
Trend Direction Up (Up) Up (Up) Up (Down)
Risk Weight 60-75 (55-75) 80-85 (75-85) 75-85 (75-85)
Allocation 100% (100%)

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.

(This pair looks mildly undecided and a little nervous. With a leading LT uptrend we prefer to stay with the position that was entered to full allocation from 60% just before year end with an avg entry of 13.25. No change)


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

Silver/GBP Month Week Day
Close 9 August: 14.03 (13.28)
Trend Direction Up (Up) Up (Up) Down (Down)
Risk Weight 60-80 (60-80) 85-95 (80-90) 85-90 (80-90)
Allocation 100% (100%)

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.

(This pair looks a little vulnerable as it did last week. We would now expect the ST to move into a divergence vs MT and LT if the market drops. The entry buffer makes the fully allocated risk position acceptable and we stay as is)


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

GOLD/SILVER Ratio Month Week Day
Close 9 August: 87.83 (88.81)
Trend Direction Down (Down) Down (Down) Up (Up)
Risk Weight 75-85 (75-85) 35-50 (35-50) 20-35 (20-35)
Allocation 50/50 AU/AG (50/50 AU/AG)

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.

(The ratio rallied further than we expected in a volatile space. We stay with the MT and LT direction which is down. This ratio, seeking LT equilibrium, will eventually be seen (well) below 60, the timing of which is impossible to predict. No change)


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 9 August: 1.1197 (1.1104)
Trend Direction Up (Up) Down (Down) Up (Down)
Risk Weight 10-20 (10-15) 20-30 (20-35) 70-75 (15-20)
Allocation 100% (100%)

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.

(Powell, ECB Whatever it takes, Potus tweets and Millenial traders. In spite, Technical Risk remains in favor of a fully hedged Long Dollar exposure)


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

USD/CHF Month Week Day
Close 9 August: 0.9721 (0.9812)
Trend Direction Down (Down) Down (Down) Down (Down)
Risk Weight 35-50 (40-55) 20-30 (25-30) 10-20 (50-70)
Allocation 100% (100%)

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.

($/CHF keeps bouncing off that par level. CHF is still seen as a safehaven. The $ rally that started 2 weeks was wiped out in two days this week. We stay with a fully hedged Long Dollar exposure)


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 9 August: 1.2021 (1.2150)
Trend Direction Down (Down) Down (Down) Down (Up)
Risk Weight 5-15 (5-15) 0-10 (5-10) 5-15 (5-15)
Allocation 100% (100%)

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.

(GBP is clearly under pressure from political events. If there are fundamentals justifying this, they certainly are not confirmed by technical risk weight. We believe US$ strength is still temporary and simply demands a fully hedged Long dollar exposure)


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

USD Index Month Week Day
Close 9 August: 97.03 (98.10)
Trend Direction Down (Down) Up (Up) Down (Down)
Risk Weight 75-85 (80-85) 60-70 (55-70) 20-30 (75-85)
Allocation 100% (100%)

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.

(The 1.2% $ rally last week reversed on Thursday ending on a low for the week. The risk picture remains weak and long Dollar exposures should be fully covered elininating transaction risk against short term woes)


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

GBP/EUR Month Week Day
Close 9 August: 1.0730 (1.0928)
Trend Direction Down (Down) Down (Up) Down (Up)
Risk Weight 10-30 (10-30) 0-10 (5-10) 0-10 (15-20)
Allocation 100% (100%)

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.

(The technical picture remains unchanged. Brexit jitters rule market sentiment. Hedge policy however is best served against the odds of a one way street for GBP. Price hovers around the lows of the last 3 years whilst the LT low sits at 102.00. Risk weight at these low level with ST and MT attempting to turn up demand a full hedged short GBP transaction exposure)


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

BITCOIN BTC/USD Month Week Day
Close 9 August: 11880 (10521)
Trend Direction Up (Up) Up (Down) Up (Up)
Risk Weight 65-75 (65-70) 55-65 (55-65) 80-90 (60-75)
Allocation 0% (0%)

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.

(A strong week with another 10% rally. Highly speculative and fully controlled. For speculators only, not risk managers. We are monitoring the crypto market which appears to be building some momentum. The key issue is internationalisation and merchant services by allowing a compliance controlled exchange between an increasing number of crypto currencies, security and utility tokens as well as fiat currency. 2019 is likely to see this being realized which could see this space advance with a very substantial increase in number of account holders from millions to tens of millions. Major exchanges like Binance, Bitpanda in Europe and others may well become the biggest players in the not too distant future. Bitcoin, Ether and smaller crypto's may start to play a more important role, once the new exchanges become our bankers of the future)

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 9 August: 26287 (26485)
Trend Direction Up (Up) Down (Down) Up (Down)
Risk Weight 80-90 (80-90) 70-85 (80-90) 40-50 (10-30)
Allocation 0% (0%)

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.

(Market weakness has only one cause. A tweet about a relatively tiny 300B of goods from China. At least according to Mainstream media. At these elevated levels real risk is the sheer weight of value that is difficult to turn into a low risk hold from any other asset class, except perhaps precious metals which typically are not part of an institutional portfolio, much to the surprise of many hardened and experienced financial analysts. The very high risk overbought condition from a technical perspective plays an equally important role for us. At some point BTFD can no longer be justified by Institutional investors. But as long as this market appears to be lead by commission driven traders who have never experienced a real downturn, timing can be frustrated as it has done a few times already this year. We continue to see a high risk equity environment for investors in all index markets. Some individual equities can still stand out as they always do. A real financial or fiscal bloodbath may be around the corner or well down the timeline. Who's to say. No change)


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

Standard & Poor 500 Month Week Day
Close 9 August: 2918 (2932)
Trend Direction Up (Up) Down (Down) Up (Down)
Risk Weight 85-90 (85-90) 75-85 (80-90) 45-55 (15-35)
Allocation 0% (0%)

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.

(S&P still show a very similar picture as it almost always does. No change)


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

Brent Month Week Day
Close 9 August: 58.42 (61.17)
Trend Direction Down (Down) Down (Down) Up (Down)
Risk Weight 30-40 (35-40) 15-25 (15-25) 10-15 (25-40)
Allocation 0% (0%)

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.

(A six month support broke last week with risk weight Down in all time frames. our risk management approach still does not allow a serious investment in OIL. No change since October of Last year. Only very short term and relatively small speculative longs may or may not offer some benefit. Still bad risk and no change)

Posted in A - All Financial Blogs | 2020 Forecast.

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