Dear Member,
Here is this week’s big picture update.
GOLD
Fundamentals:
As expected, as all hell broke loose in the stock market last week, gold caught a bid, and started to firm up, preparing for a bounce.
Nevertheless, a bounce is all it will be as the trend remains down for the precious metals.
Technicals:
Commitment of traders reports from the previous week show the big players piling on more shorts during the recent bounce. This is typical behavior by the commercials taking the opposite side to the money managers and smaller speculative traders.
The technicals in gold are pointing to a bit more upside in the metal but not without a close above the $1,245 level.
SILVER
Fundamentals:
Despite gold’s recent bounce, silver remains weak. This may be partly due to the fact that copper was sold off heavily this past week along with other commodities, as deflation fears gather steam.
Technicals:
On a technical basis, silver has relieved some of the bearishness of the past few weeks, but it’s still not out of the woods. Only a closing back above the $18.65 level would we start to see some real movement to the upside, but it’s not likely at this time.
On the downside, a monthly closing below $16.75 will set the stage for the final lows in silver, down below the $15 level.
THE U.S. DOLLAR
Fundamentals:
The dollar is still the only game in town as the euro continues to implode and along with it, the euro-zone economy. I fully expect the European Central Bank (ECB) will soon be forced to deploy additional stimulus measures, further shaking the confidence in the single currency.
There are a whole host of other factors I’ve already mentioned as to why higher levels in the dollar will be seen into 2015 — but the net effect is as if the U.S. were a black hole sucking in all the dollars that are floating around the world that are escaping geopolitical fears and economic uncertainty.
I remain bullish the dollar, short- and intermediate-term, and long-term bearish.
Technicals:
A simple close back above the 86 level should confirm that another rally is underway. Near term the dollar must avoid a closing below 84 on the index to prevent a move down to as low as the 82 level. On the upside, a close above the highs of early October should see a breakout testing the 90 level. The dollar has managed to hold the monthly breakout channels on this latest move lower and should it hold the 84.50 – 85.00 level in the weeks ahead, much higher levels are possible thereafter targeting at least 100 in the index.
THE U.S. 30 YEAR BOND
Fundamentals:
It was a record week for the bond market, as prices surged (yields plummeted) as equities were collapsing.
Coupled with additional uncertainties and economic implosion in Europe, yields on the long bond collapsed from 3.4% to just under 2.7%, in one month, a whopping 31% decline.
Technicals:
The long bond has now punched through resistance at the 142 level in the cash index, setting up a retest of the next resistance zone at 146.
Support for the long bond now rests at the old highs at the 140 – 141 level and only a close back below those levels would mean lower prices (higher yields).
Overall, for all markets right now, the driving force is fear of deflation. Deflation in Europe, deflation in the U.S., deflation in commodity and equity prices and more. “Risk off” is the herd mentality, and I expect that to continue.
And as always, should you have any questions for me? Click here.
Best wishes,
Larry
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