Precious Metal Weekly – Central Banks Adamant

Media preview

Pace of change from the developed economies are taking headlines ever since the beginning of 2015. US Federal Reserve Chairwoman – Yellen wants to bring about normalisation into the economy and often cited the intention to do so depending on the economic data. Meanwhile, her counterpart at the BOE – Carney has not budged away to mention the gradual increase by the bank as early as next year. The US will have the first stab at it and the Fed do sound confident despite at times portraying an indecisive decision. Now that we are entering September, dollar bulls have lined up for the good news to happen despite a fall in the % of analyst view that Miss Yellen will do the rate hike. Fischer’s comments at this week Jackson Hole also suggest that the US will see inflation soon which should allow a gradual interest rate hike.

So what does this all mean to precious metals? One would have thought that the prospect of a rising inflation could mean higher gold prices. Historically, the chart above paints a stark difference – if we look at 1990s and early 2000, a gradual rising rate does not bring much benefit to gold. In fact, the yellow metal has a rather dull unchanged price action. It is only at the extreme economic events of 1970s and 2008s do we see an explosive rise in the price of gold. Notice, we now have a divergence given the 2 different economic events that central banks have to deal with. During 1970s economic crisis – a rising rate and gold prices come hand in hand to battle with rising inflation. While the 2008s financial crisis has brought inflation down to its knees as global demand sapped and not only we have to acknowledge the global economy is oversupplied but was and is battling with deflation.

If we learn anything from history, the global financial crisis of 2008 is an unprecedented one – yet it has the resemblance of 1929 in some ways. Please note that we bear no intention to always post a negative view of the global economy but rather shed a light into what often the other side of the arguments. Fair to say it is a precautionary view on what may happened if the sh*t do hit the fan. Our argument remain balanced on the view that Central banks will not let this happen, thus market complacency can remain high which further explain why global debts will continue to spiral out of control.

β€œUnderstandably, the global debt will and need to continue higher in the hope that it will β€œeventually” trickle-down to the rest of the economy. Central banks are fast running out of option and tools to revive the ailing global economy but the resistance must go on. It will not surprise us that during Miss Yellen tenure as the Fed chairwoman – that she will consider another quantitative easing AGAIN!”

The month of September is often turbulent yet there are opportunities lying abound – one has to look for it but do thread the market cautiously as we have the VIX index at the high as we enter into the new month.

Related image

Dollar Technical Outlook

Well, it was a massive reallocation of dollar after 4 weeks of selling. We saw a massive recovery in the dollar index as we head into the end of the month. Almost wiping out the entire negative vibe – bullish engulfing candle from last week is a testimony not to mess with the dollar bull. The other message that it is sending is that the rate hike is imminent and positioning for this is in process and one must not discount that we could still see higher prices next week. However, please take note of the seasonal charts below as it paints a potential warning for the strong dollar.

Weekly

Daily

We have a higher low and with price action trading in a larger ascending triangle pattern – we cannot rule out a test on the upper trend line at 12050 – 12100 levels where we would look to short the index. One has to respect the purple descending trend line as well since it worked as a strong resistance on the dollar index.

β€œTechnically, the dollar index should find some relief buying as it has reached an important juncture. Price action has spiked out of the megaphone pattern and this means more trouble ahead. A retest on the break out level may be the least of a dead cat bounce but never discount that it could revived IF talk of rate hike is back on the table.”

USDX saisonal

Gold Technical Outlook

Gold did pullback as mentioned in last week commentary:

β€œWe are now looking for a pullback in the price of the yellow metal after an impressive run. Tension and uncertainty in the market with the selloff in the dollar index has certainly helped gold to rocket higher. However, we cannot ignore the fact that we are near resistance zones and potential reversal zone.”

The weekly chart says it all here as price action hit resistance on the red trend line – price found 20 wma as resistance after the first and second try but later found support at 1120 levels which si the 50% fib retracement move from the low 1061. We are impressed with the corrective move on gold prices and this is a healthy market that is pulling back technically. We are not ruling out a retest lower for support and If price bounced off the 1100 level then we could be in store for that inverse head and shoulder.

However, we have to be cautious too as the daily chart is potentially forming a head and shoulder pattern as well.

Position Valid Date Price Action Stop Loss Target Results
LONG 31st – 4th Sept 1080 – 1090 Order Placed 1080 1180
SHORT 31st – 4th Sept 1140-1145 Order Placed 1150 1085

Gold saisonal

Silver Technical Outlook

So we have a hit and miss on our expectation on this volatile metal – as usual the price action on Silver is often exacerbated and the industrial metal suffer as the Chinese economy reflected a much heavier slow down. It was also a technical move as Silver found a strong double bottom as buyers step in at 13.90 levels which held the sell off last November 2014. We could argue that this is the floor for the white metal so sellers beware – while pullback looks as a decent medium term investment. Weekly RSI has bullish divergence, China managed to avoid severe depression as of now – extra stimulus has been pumped in – seasonal demand for end of year should kick in – bargain hunters should take advantage of this.

β€œWe have seen the yellow metal has a 2nd green week on the candlestick – more often than not – pullback is due. Watch the daily Silver chart as the RSI is heavily diverging here and it could be an early sign that we see pullback both in gold and silver next week. Key level of support will be the 20 DMA again and we will not be surprise to see price break below and buyers need to step in then.”

Trade: Long order filled and stop hit. Buy on any pullback and hold for much higher prices into the end of September.
Position Valid Date Price Action Stop Loss Target Results
Long 24th – 28th 14.80 Closed 14.60 16.00 -0.20
Long 31st – 4th 14.00 -14.30 Order Placed 13.90 16.00

Weekly

Silber saisonal

Platinum Technical Outlook

Daily chart has a resistane at 1030 levels and early next week could see Platinum retesting it. Failure to break above means further consolidation and a pullback may be the best option before mounting a serious run higher. With prices still trading above the 20 dma, we felt that there is further room higher for now. It is important for the bulls not to have prices break below 970 levels.

Trade:
Position Valid Date Price Action Stop Loss Target Results

Daily

Platin saisonal

Palladium Technical Outlook

A weekly hammer candlestick and Palladium may have finally flushed out all the weak longs – the RSI is worth mentioning as we may finally have a clear run higher from here on. Technically the chart is damaged but we cannot ignore the potential bullish reversal price action here. A retest lower is still possible before we see an major recovery.

β€œWe have the bounce in Palladium but the sudden gapped lower left many questioning about this bounce. Price action went close to our target zone but for now, we may well get to our previous weekly zone of 577 levels.”

Position Valid Date Price Action Stop Loss Target Results
Long 24th – 28th 577 Closed 567 680 -10

Weekly

Palladium saisonal

This article is written according to the author’s views and by no means indicates investment purpose. Opinions expressed at Sharps Pixley Ltd are those of the individual authors and do not necessarily represent the opinion of Sharps Pixley Ltd or its management, shareholders, affiliates and subsidiaries. Sharps Pixley Ltd has not verified the accuracy of any claim or statement made by any independent writer and is reserved as their own and Sharps Pixley Ltd is not accountable for their input. Any opinions, research, analysis, prices or other information contained on this website, by Sharps Pixley Ltd, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. Sharps Pixley Ltd will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The data contained on this website is not necessarily real-time or accurate.

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China Still Healthy? – Inter Market Analysis

Risk On

  • Asian market stabilised higher as the week ends
  • UK 2nd quarter growth steady at 0.7%
  • Oil ripped higher – other commodity currencies pair benefited – dollar stepped back with potential pullback
  • Abenomics looking like a failure – inflation target missed – additional stimulus needed
  • PBOC to cut rates again in December
  • Euro zone sentiment edges to new four year high in August

Risk Off

  • Political instability in Turkey continues
  • Money pours out of EM at rate unseen since Lehman
  • Italian business confidence declines amid concerns on recovery
  • Fed up investors yank cash from almost everything – Bloomberg
European Equity continue to struggle higher despite what look like a stabilised marketΒ  views – China doing whatever it can – market suggest that it remains weak and investors are not sure if end of the month is a good time to chase – brand new month in September – fresh funding

Extra Stimulus has yet to kick in but wary of the build up to Santa rally

Multi Time Frame Analysis

USD index

Daily

4 hour

Every trader will be wondering what is in store for the dollar as we enter September – the month where many expect no rate hike after the fall out in China. We have to take note that the last 3 days recovery in the dollar does seems a tad worrying as the weekly chart painted a full bullish engulfing candle. We favour a pullback here on the dollar while the 4 hour dollar chart shows a potential bull flag as price is consolidating.

German Bund

Daily

4 hour

Bund gave the signal yesterday that it may consolidate higher first – Dax pullback slightly this morning to find support. Going forward, a break out of the wedge will give Bunds the next directional play. We expect higher Bunds first as long as the 4 hour 200 ma holds.

Eur/Usd

Daily

4 hour

Has Euro found the support it much needed at the current price action? 4 hour chart seems to suggest it is slightly bear flagging and could well retest lower. Weekly chart on the Euro remains very ominous to say the least. Daily chart has Euro trading well above its 20 dma and a retest for support is possible.

German Dax

Daily

4 hour

Dax was very close to the target we set for a retest with a high of the day at 10394.8 and we saw the pullback as expected. The main question now is this going to be a deep pullback or we could see dip buying come to the rescue again on any weakness. Bearing in mind that today Is end of the month so short covering for higher Dax cannot be ruled out.

Gold

Daily

4 hour

At this moment, we are not sure if there is a potential Head and Shoulder on gold and if we do then we could see further weakness to retest previous low. Price action is taking comfort as it trade above the 20 dma but any trade below that then lower prices is expected. The 4 hour chart is showing tell tale sign of a bear flag and any break below 1120 could send gold looking for support.

Silver

Daily

4 hour

Daily chart has an inside day which could indicate there is a potential reversal but often we prefer to take a long trade if Silver can trade and close above the 20 dma as well. The 4 hour chart has the price action stalled at 38.2% retracement.

Rescued by China & Dudley – Inter Market Analysis

Risk On

  • China state pension fund expected to invest in equity markets
  • Asian market stabilises and into green territory first time this week – no Limit Down
  • Spanish consumers propel economic growth in 8 years
  • Ukraine wins debt reliefs despite fighting continues
  • Strongest rally in US equities – rumours of hedge fund covering large amount of shorts
  • Dollar index resumed higher – US GDP under scrutiny
  • VIX or the fear index sold at the end of trading day
  • Talk of delaying September rate hike has calmed the market

Risk Off

  • With China stabilising its market ahead of its National day – everything seems rosy
  • Note the snap back rally in equities are fast hitting resistance – Euro into support
Huge rally has certainly put a dent – after several attempts of higher lows. Remain cautious on any potential bear flag or a wave 4 out of 5 – any more concern about Chinese stock market could easily take prices lower again.

Extra Stimulus has yet to kick in but wary of the build up to Santa rally

Multi Time Frame Analysis

USD index

Daily

4 hour

Dollar daily has a potential inverse cup and handle pattern. With the RSI diverging heavily away from price action, it was a matter of time for the bulls to exit and we have the selloff completion with another higher low. Meanwhile, the 4 hour chart suggests the dollar index is coming to resistance which is confirm by the daily as it stop advancing above its 20 dma and there is a potential IHS on this pullback. After a 2 day massive rally, pullback will be healthy for the dollar.

German Bund

Daily

4 hour

As mentioned yesterday, weakness in Bunds continues which saw a big relief rally in German Dax. Meanwhile, 4 hour chart shows Bunds coming to support at 200 ma and RSI has a bullish divergence. With that in mind, we expect Bunds to test higher in the short term and a pullback in Dax.

Eur/Usd

Daily

4 hour

We have the pullback and Euro long will need to find support in this market. Unwinding the long trade ahead of US GDP is a decisive call – while the pullback remains corrective and in a tightening wedge formation. A retest of 1.12 is possible and then it needs to bounce hard. With the dollar index coming to resistance then a break out of this wedge will offer a strong directional play.

German Dax

Daily

4 hour

The market started strongly yesterday – ignoring the limit down in China but as US open, traders start dumping Dax – potentially forcing weak longs out and allowing US traders to get a piece of the action if they were to drive this higher. It seems that the US took control and dictated the tempo after Europe close. This morning, we gapped higher as the Chinese stock market had a late rally before the news of using Pension funds money into equity was released. Daily chart suggest we are into resistance here but not ruling out a test of 400 levels though we envisage a break lower first. Note that any break below 10 000 means retest of previous low, higher low or new low!

Gold

Daily

4 hour

Should the global equities confidence return, we could see lower gold price. Current price action has gold on make or breaks level – while the VIX index is much lower than previous high – any concern about the market could easily send the yellow metal higher. We are not ruling out a retest lower while the short term upside potential looks capped at the moment unless 1170 is taken out.

Silver

Daily

4 hour

What was support now resistance – Silver prices suffered new bout of selling pressure on the back of poor global outlook on economic growth. Unless we see uptick in industrial demand, discounted price at current level will have bargain hunters entering again. However, lower prices remains the way forward and any rebound to 20 dma are selling opportunities.

Jittery Global Market (Transitory?) – Inter Market Analysis

Risk On

  • PBOC provide more liquidity into the market – Tuesday rate cut has not provided enough cushion
  • Priced in negative news – revised expectation of world growth have gone underway
  • Potential talk of QE rumour thrown the market higher

Risk Off

  • VIX or the fear index remain alleviated – global uncertainty remains a concern
  • Lack of dip buying in the current market despite stimulus could be β€œtransitory”
  • Rate hike tantrum as market reassessed future growth in this weak economy
  • Dead cat bounce indeed as traders lose interest in holding
Dead cat bounce, potential end of month short covering, profit taking, positioning of new month, fund flows – watch out as the VIX remains high-though there is certain alleviation of safe haven trade

Extra Stimulus has yet to kick in but wary of the build up to Santa rally

Multi Time Frame Analysis

USD index

Daily

4 hour

We maintain the same outlook on the dollar index as a potential dead cat bounce. Today close will be important since the index could hit resistance and any turnaround from the resistance will determine the next play.

German Bund

Daily

4 hour

Bunds closed below 20 dma and attempts to retest breakout level have failed. With that in mind, we are not ruling out that Dax could move higher on lower bunds – confirming the bounce in European equities in the short term. We could look to add on short Bunds on a retest of the break.

Eur/Usd

Daily

4 hour

Could the dollar index come into resistance soon? Euro is into support but any breakout of dollar strength could unwind the long euro trade for a pullback.

Point here is that there are too many shorts and it is an overcrowded trade – safe haven play has also beset Euro as the place to be. Is this done yet? Well we think a pullback here is healthy but the consensus remains that there are more squeezing to do and one should not be surprise to see a 1.18 to 1.20 euro back in play. As for equities, we remain steadfast this correction is not over yet.

German Dax

Daily

4 hour

Any recovery rallies are squashed – investors lack confidence to hold on long trades – confirming the biased that risk off could continue here on global equities. Expect more turbulent trading – some sort of dead cat bounce before we take another peek of previous low or even lower.

Gold

Daily

4 hour

Gold continue to pullback healthily – finger cross we are not about to see an impulsive selling. This further confirms that the market corrects and may have rooms for higher prices. Only a break below 1090 will invalidate this. Going to the end of the week and month, this profit taking process is normal – a break above 1170 will spur more short covering activity.

Silver

Daily

4 hour

With poor outlook on the global economy, price action suffered a volatile recovery then sell off. Daily RSI divergence gave a clear sell signal and the current outlook has a potential view of much lower prices to come.

Devastation Over For Now – Inter Market Analysis

Risk On

  • Ignore China limit down as Short covering goes underway in Europe and US equities
  • Taiwan come to rescue with NT 500 billion Financial Stabilization Fund for the first time in four years
  • Oversold play in the market after several limit down scenarios – Europe opened higher with German final GDP q/q came in line
  • End of month profit taking and positioning of new funds
  • Japan Hamada says BOJ must ease further if Q3 GDP fails to grow
  • USDJPY managed to claw back higher – US dollar found support should apply pressure on commodity currencies and Euro (unwinding safe haven trade)
  • VIX is trading much lower – Bunds selling off (see analysis below)

Risk Off

  • Concern about Chinese growth engine linger but looks to have dissipated
  • Alarms about financial crisis or lack of liquidity in the market place put deal making under threat (but this is not 2008)
  • De Beers β€œcuts diamond prices” on weak demand – luxury sector hard hit
  • BHP says full year profit slumps 52%
  • Devaluation spreads to Pakistan Rupee
  • All negative vibe priced in now but margin calls and dead cat bounce is still in the cards
Dead cat bounce, potential end of month short covering, profit taking, positioning of new month, fund flows – watch out as the VIX remains high-though there is certain alleviation of safe haven trade

Extra Stimulus has yet to kick in but wary of the build up to Santa rally

Multi Time Frame Analysis

USD index

Daily

4 hour

Sell-off in the equity market and the dollar looks to have finally abated. However, we are not ruling out a dead cat bounce of a potential wave 4 out of 5 – meaning more downside to come as we approach September. Daily chart show a potential fractal – thus not ruling out a bounce in the dollar index followed by a retest of previous low or creating new low. This could well fit in with an expectation of a rate hike in September or some sort of disappointment of any hike. The odds are favouring a strong dollar in this short term bounce.

German Bund

Daily

4 hour

As per last week analysis – Bunds made a blow off top and close negatively – allowing us to position for the downside move. We added DAX on the 4 hour chart to confirm the potential turnaround and any retest of the breakout line is another opportunity to short. A close today below the 20 dma confirms a bearish view that Bunds could pullback further.

Eur/Usd

Daily

4 hour

Analysing is all about increasing the odds of winning in your trades and as in the case of Euro spiking to 1.17 before a blow off top is not something everyone anticipated – except those shorts who are rushing for an exit. Point here is that there are too many shorts and it is an overcrowded trade – safe haven play has also beset Euro as the place to be. Is this done yet? Well we think a pullback here is healthy but the consensus remains that there are more squeezing to do and one should not be surprise to see a 1.18 to 1.20 euro back in play. As for equities, we remain steadfast this correction is not over yet.

German Dax

Daily

4 hour

Dax registered a low of 9340 – confirming the end of the QE induced trade – bringing a lot of wealth managers into question – especially those banks that were busy pushing out brochure that one should invest in Europe as they are QE induced. They have a point though but investors often lack the knowledge and tend to suffer the most. Dax shall undergo a bounce – may even go higher than what we envisage but the damage done means there could be more pain ahead first before a Santa rally.

Gold

Daily

4 hour

Despite further selloff in equities and a weaker dollar index, gold failed to break above 1171 and that means bulls gave up which ends the period of short covering. As long as 1171 holds, we see a pullback in Gold – similar fate as the EUR/USD as both of them play a safe haven role. Pullback is healthy as we have not seen any impulsive selling. Instead, this looks like very co-ordinated steps for a healthy market to correct before potentially heading higher. We cannot rule out a retest of previous low or even a break lower than 1080.

Silver

Daily

4 hour

Is this the end of the dead cat bounce that we envisaged after the double bottom? It could well be since silver made an impressive attempt higher but find resistance at 15.66 levels and since then broke lower due to the nature of an industrial metals. With poor outlook on the global economy, price action suffered a volatile recovery then sell off. Daily RSI divergence gave a clear sell signal and the current outlook has a potential view of much lower prices to come.

Never Underestimate China, Vix & Gold – Precious Metal Weekly

Global market sell-off begins with various scenarios that played out timely in August 2015 – growing fear and loss of confidence of a sustainable economic growth, escalating currency wars, threat of global deflation and many more. Going back to all our past weekly report, we remain adamant that the global recovery is a fragile one and over the last few months we have seen such complacency taken to a brand new level. Pampered market such as this needs a hard landing every now and then but we have to take note that the previous equity sell-off in the US are saved with promises of more helicopter money (see chart below). With such precedence, one can only wonder if we will see the same setup for Great Britain, Japan, China and every other tom, dick and harry that have launched QE programmes of their own.

The stars are aligned that kick start the sell-off with early signs that the VIX and developed market equities initially remained utterly complacent and unabated. As they often say, sell-off does not happen in one flush – rather it was a build-up step by step distribution process. Last week, we have seen the VIX index exploding higher after a short span of docile period. Technically, it has a double bottomed and series of market event has certainly create the need to buy such insurance. There is no way of telling that it has reached a top – we do not have a crystal ball for that. In fact, the only observation that we can make it that often we need to see another high on the VIX – sort of a blow-off top formation.

Recent political tension between North and South Korea only increase uncertainty as shots were fired. Tsipras resigned and further uncertainty into Greece debacle will no doubt play an overcast role in the coming months. Turkey Lira plunged as Erdogan faced with internal battles and potential terrorist situation. Price wars in the global oil market continue, adding pressure on other industrial metals to suffer. Producers are forced to consider limiting their investments, worries of potential cuts are looming while future earnings are revised lower to discount the recent economic and political situation at best. We cannot catch a break here on outlining what we would call a week of mayhem as it could not get any worse.

β€œUnderstandably, the global debt will and need to continue higher in the hope that it will β€œeventually” trickle-down to the rest of the economy. Central banks are fast running out of option and tools to revive the ailing global economy but the resistance must go on. It will not surprise us that during Miss Yellen tenure as the Fed chairwoman – that she will consider another quantitative easing AGAIN!”

Take heed of the last 2 graphs as they play a big role in explaining the divergence on what financial media portrayed of an economic recovery to the actual economic situation that we have been explaining for months. The world is oversupply, complacent, pampered and very much ignorant. Price crash such as the above means the industry has to change and such changes will happen over the next few years.

Daily

The AB=CB has played out to perfection and as per last week commentary (see below) we envisaged the dollar to have a dead cat bounce followed by a sell off to the following target of 11900. It has never been an easy read on the dollar index but someone is selling big and there is real fear that 2015 (take note we did not mention September or December here) may not happen after all. Technically, the dollar index should find some relief buying as it has reached an important juncture. Price action has spiked out of the megaphone pattern and this means more trouble ahead. A retest on the break out level may be the least of a dead cat bounce but never discount that it could revived IF talk of rate hike is back on the table.

β€œWe may have buy the rumours and sell the fact scenario again – meaning that we could see the dollar kick off on a strong foot next week but a sell off could play out here. The bearish candlestick on the weekly is so dominant but we will wait for a retracement first to 12020 – 12040 levels before we see further selling to target the 50% Fib retracement where strong support are seen at 11900 area (see the weekly chart black arrow).”

Gold Technical Outlook

We are now looking for a pullback in the price of the yellow metal after an impressive run. Tension and uncertainty in the market with the selloff in the dollar index has certainly helped gold to rocket higher. However, we cannot ignore the fact that we are near resistance zones and potential reversal zone. If we do break out above 1200 and close above – then shorts are in heap of troubles (short covering rally will kick in then). Please take note that the bigger picture of a bear market in gold has not changed at all. Thus, we cannot discount another sell off. Only a close above the 20 WMA will get us excited again. We only highlighted one potential IHS formation but there are many possibilities lying around for IHS.

Position Valid Date Price Action Stop Loss Target Results
LONG 10th – 14th Aug 1105 Closed 1090 1135 +30

Silver Technical Outlook

Last week commentary was spot on though we missed the entry to long Silver at 14.70 by 4 points. The break above 20 DMA and retest of the breakout level was a healthy sign of a bounce. Buyers are ready to take prices higher but take note the price action remains volatile. We have seen the yellow metal has a 2nd green week on the candlestick – more often than not – pullback is due. Watch the daily Silver chart as the RSI is heavily diverging here and it could be an early sign that we see pullback both in gold and silver next week. Key level of support will be the 20 DMA again and we will not be surprise to see price break below and buyers need to step in then.

β€œSilver put in a positive week after closing above the 20 dma that is the signal to enter long. In the short term, we see pullback to retest for support at the breakout zone and potentially at the 20 dma again. Only a close below the 20 dma will changed our view – but this pullback could prove to be a buying opportunity. At the start of next week, we envisage weakness in silver after putting in a double top on the daily chart.”

Trade: Our order missed by a few pips but we will maintain the order as we see a pullback on Silver to retest for support at previous breakout level or at least the 20 dma again.
Position Valid Date Price Action Stop Loss Target Results
Long 24th – 28th 14.80 Order Placed 14.60 16.00

Weekly

Daily

Platinum Technical Outlook

Platinum prices may pullback too after an impressive run up to break past the psychological level of $ 1000.00. A test of support at 20 dma has given confidence on this bounce – while a break out of the Bollinger band and above 50 dma may well be sign of bull exhaustion. We may well see higher prices still but watch out for a deeper pullback.

Trade:
Position Valid Date Price Action Stop Loss Target Results

Weekly

Daily

Palladium Technical Outlook

We have the bounce in Palladium but the sudden gapped lower left many questioning about this bounce. Price action went close to our target zone but for now, we may well get to our previous weekly zone of 577 levels.

β€œPalladium price action played out as we envisaged and the weekly chart is showing a bullish divergence on the RSI with a potential double bottom formation. A short term bounce is expected initially to target 634 – 663 levels.”

Position Valid Date Price Action Stop Loss Target Results
Long 24th – 28th 577 Order Placed 567 680

Weekly

This article is written according to the author’s views and by no means indicates investment purpose. Opinions expressed at Sharps Pixley Ltd are those of the individual authors and do not necessarily represent the opinion of Sharps Pixley Ltd or its management, shareholders, affiliates and subsidiaries. Sharps Pixley Ltd has not verified the accuracy of any claim or statement made by any independent writer and is reserved as their own and Sharps Pixley Ltd is not accountable for their input. Any opinions, research, analysis, prices or other information contained on this website, by Sharps Pixley Ltd, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. Sharps Pixley Ltd will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The data contained on this website is not necessarily real-time or accurate.

Bloody August – Inter Market Analysis

Risk On

  • UK tax receipts swell – show first July surplus
  • Eurozone business growth unexpectedly accelerated on the back of price wars to increase new orders
  • Japanese flash manufacturing PMI shows growth – benefited from a weaker yen

Risk Off

  • China factory slowdown revive fear of a slowdown in the global economy
  • Syriza rebels form new Greek party – Tspiras resigning – Germany wants the new elected party to honour bailout
  • German consumers starting to worry about the health of the economy – survey
  • Global stock market suffer – Europe shares biggest weekly fall – China defended 3500 again but grim reading on data does no good
  • Twitter shares tumble back to IPO price
  • Dollar weakness continues – sell off in equities also see weakness
After FOMC statement – equities failed to break previous high sent a strong message that the market is not ready – profit taking and selling in the summer trading season (low volume) exacerbate the condition. All negative news priced in but the selling may not be over yet.

Extra Stimulus has yet to kick in but wary of the build up to Santa rally

Multi Time Frame Analysis

USD index

Daily

4 hour

We have reached the lower end of the megaphone pattern and in the short term expect price action to consolidate here with possibility of further weakness. The structural damage remains while the daily chart shows a potential area for a double bottom structure. We could be near a potential reversal zone unless we break out of this megaphone pattern. With the Fed likelihood of raising interest rate – the dollar could remain strong. Take note that sell off in dollar depict sell off in the equity market.

German Bund

Daily

4 hour

This could well be the end of the Bund advance – it hit our zone of interest and reverses sharply. The daily RSI are stalling and diverging – cracks are showing that it may have come to point of exhaustion soon. We may have the deeper pullback in the next few weeks.

Eur/Usd

Daily

4 hour

Euro spiked and currently consolidating near the high while the chart shows potential pullback, we will not discount the possibility of retest higher. The final move higher could be an exhaustion pattern to signal a potential reversal at play. We have the daily 200 ma as potential reversal zone and this is only invalidated if price break above 1.14 levels.

German Dax

Daily

4 hour

Dax just got thumped and we did warn about the danger on a higher Euro that does not seem to signal a bottom is in for the German Dax. The poor economic data from China only add oil to the burning fire – Dax retraced overnight to 10055 before it bounced higher as Europe opens. For now this is damage control situation and we cannot rule out a retest of 10055 again. Only a break above 10585 levels could help indicate the bottom is in.

Gold

Daily

4 hour

Gold spiked to touch the 100 dma before retracing lower to a low of 1148 – benefiting from a weaker dollar. As mentioned before, we will keep an eye on the dollar for a potential double bottom or support that may end the current gold rally. Yes, it is just a speculative view that gold may retrace to form a RHS of an Inverse Head and Shoulder. It is early days but any view of a dollar revival then expect bears to claw its way lower on gold.

Silver

Daily

4 hour

We were hoping for a firework rally on silver but the poor Chinese data has certainly dampened the mood to rally higher. Note that the daily chart has an RSI that is diverging – equivalent to the 4 hour chart. Meanwhile, the 4 hour chart has a potential of forming an IHS though we view this as unlikely. For Silver to break higher, it need to find support at 15.16 and bounce hard. Failure to do so could mean a retest lower for a double bottom at 14.73 levels.