the view from the bridge · 2017-10-29 · the gold conspiracy theorists have been partially...

The View from the Bridge

Chart Book

April 29th 2016

1 | P a g e Charts courtesy of www.fullertreacymoney.com

Market Technical Analysis – April 29th 2016

Summary

In equity markets the rally from the selloff in February is beginning to run out of momentum and

many exhibit similar patterns of lower high and lower lows along with a falling 200-day moving

average.

This suggests that we are due for a correction, possibly quite a sharp one or a period of

consolidation at the very least.

Interest rate markets are “confused”, echoing the statements from the three main central banks,

where policy announcements have met with unintended consequences – NB Japan.

Currencies are similarly hard to read, but the dollar index is on the verge of breaking down and a

sustained move above €1.15 (the euro is the largest constituent of the index) will confirm further

dollar weakness.

Gold, silver and the precious metals mining complex have had a stunning start to the year and in the

short term we expect some consolidation of the gains. The bullion banks have been unsuccessful so

far in reigning in the upside progress – perhaps as a result of Deutsche Bank’s admission of guilt in

fixing the gold fix – but it is still in their power to “manipulate” the market lower with injudicious use

of paper gold futures. Many are pointing to the very long bullish position held by large speculators–

as per the Commitment of Traders (CoT) report as a bearish sign, but if we are indeed in a new bull

market, which the charts are suggesting, then that is exactly what one would expect at this early

stage.

Clive Hale – the View from the Bridge – www.viewfromthebridge.co.uk

The views expressed are my own and not intended to be a recommendation to engage in any

trading activity.

http://www.viewfromthebridge.co.uk/


6400 is proving a tough barrier to break on the upside but there is now support at 6200 which was

previous resistance plus the 200 day MAV at the same level. Below this level the rally since February

will be just that – a rally, but no clear indication yet

The mid cap rally has got stuck at the 17000 level yet again and does appear to be running out of

steam with the market back below a falling 200 day MAV,


Small caps are looking a little more positive but we need to see a new high above 4800 soon.

A sharp rally for the banks that has closed the oversold position but again no clear sign that the bear

market is over.


The first sign of a chink in the armour? The IPD has turned down, albeit only by a few pips, for the

very first time since 2009.


The momentum in the rally since February is definitely slowing. The central banks are sending very

mixed messages and we are expecting a retracement to the falling 200 day MAV at the very least

Volatility has picked up again and frequently presages further market weakness.


When the Dow makes a high the Transport index normally follows. Non confirmation is another

bearish indicator


The mid cap indices continue to lag

Value stocks are relatively good value…


Apple and Amazon have pulled the market in different directions but a series of lower highs and

lower lows plus a resumption in the downtrend of the 200-day MAV is not encouraging for tech

overall.


A very volatile week for the Nikkei and the yen following the BoJ meeting which did not give the

market the comfort it was expecting ie more QE; a ploy that has consistently failed, but to which the

markets are seemingly addicted.

A strong bounce from the February lows, but lower highs, lower lows still below a falling 200-day

MAV are not encouraging. Draghi’s bazooka is firing blanks. Falling German industrial production,

the reappearance of the Greek tragedy, not to mention European concern over Brexit are all

weighing heavily.


The European banks have had a rebound but are still one of the weakest links.

Lower highs, lower lows falling MAV


Same story here.

Italian economy slipping towards recession again…


A strong rebound from the February lows. Many stocks in this region are on cheap valuations but the

market has not signalled a recovery yet.

Ditto Emerging Markets that are still concerned over the direction of the dollar.


That’s some rally given the political shenanigans!

Still lower highs…


26000 has been support / resistance for some time now but the MAV is still heading down

Some sterling intervention, but the trend is still down


The trend in yield is still down…

…and in terms of price…still up!


It’s not that expensive to get a mortgage, but rates can rise and fall with some alacrity, especially if /

when the Fed want to reign in a housing bubble ex the fact that they are adamant that they can

never see bubbles coming…

You got 8% in 1990. Some of us remember the 1970s…you got 16% back then!!


In Japan it costs you to hold them!

Will the 30 year go negative? If the BoJ throw enough money at it – yes!


t

Nearly negative!

Seriously negative!


What would Italian sovereigns yield in a “normal” interest rate environment?

The PBoC has been massaging down rates here too


The line in the Forex sand - $1.40. A vote for Brexit and parity is on the cards if this level goes.

Sterling the weak man of Europe courtesy of the Brexit opinion polls


More doveish noises from the Fed has pushed the dollar index down to critical support


The euro is the largest constituent of the dollar index. This chart is the inverse of the index but looks

almost identical as it should. A break above €1.15 would signal further dollar weakness.

The Chinese have a very long history of currency intervention…

The trend of the dollar / yuan is very firmly up ie the Chinese currency should continue to weaken

against the dollar as it already has against the euro and the yen.


A five wave rally to the upside might presage higher prices but i9n the short term a correction back

to the $40 level is likely.

The gold conspiracy theorists have been partially vindicated by Deutsche Bank’s admission that they

have been fixing the gold fix (along with some of the other fixers allegedly). There will be little

regulatory change but the real news that has propelled gold upwards is the opening of the gold

market in Shanghai nominated in yuan not dollars. This move looks to be over extended so

anticipate a pull back soon.


Gold mining shares are a geared play on bullion and are up nearly 230% since January. The 250 level

is strong resistance so expect a pull back or consolidation at the very least. BUGS by the way is not

pejorative it stands for Basket of Unhedged Gold Stocks.


The Atlanta Fed’s first take on US GDP for Q2 is at the bottom of the consensus forecast range at

1.8%. They were eventually close to spot on with Q1 GDP – 0.6% - so we will see how Q2 unfolds

with some interest. The Q1 forecast kicked off at 2.6% and the first official “estimate” released by

the BEA at the end of April was 0.5%

It has not been plain sailing for the US economy for some time….

the view from the bridge · 2017-10-29 · the gold conspiracy theorists have been partially...

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