Wrath of Emerging Market – Precious Metal Weekly Report

Flicking through the financial headline, we saw how contradicting and imbalance the view of the current economic climate. On one hand, we have FTSE 100 biggest 5 day gain since 2011 but contradicting economic data across the globe does not make any justice. Yes, the global equity market has reverted back to its old demon that bad news is good news! Such labelling is further justified by the fact that global central banks are in unison to do more stimulus and rate cuts to aid their ongoing fight to keep the economy afloat. The 2008 financial crisis is like a broken mirror that has its pieces patched up by some shoddy workman. Reminiscent of another setback is glooming and those pieces from the mirror are once again on the verge of falling out.

Next week economic data that one has to keep an eye on is Chinese inflation data, German Zew economic sentiment, UK average earning, US core retail sales and PPI numbers and Philly Fed manufacturing index. All in all, an important week to digest the post Fed FOMC meeting minute that suggest an initial dovish remark that justify the September no rate hike by the Fed members but also an underlying argument that they are very much data dependant and continue to see a rate hike by the end of 2015. We cannot stress how important that last remark was simply because the next few sets of data will be closely watch to determine if the Fed will finally embark on the path of normalisation. The current market sentiment remain on the path of no rate hike thus dovish and easy money continues but one has to bear in mind that we have already hosted through many bad to negative data. It can only get better from here (we wrote this statement despite knowing how sarcastic we have been) and this could well be the catalyst for the Fed members to pick on and determine a rate hike. The cost of no rate hike will be a credibility damage to Miss Yellen – since everything is so transitory – which has allowed the market to bully and dictate the next FOMC statement. It should have been the other way but we have seen how timid central banks have been to rock the boat as they say.

One may start to ponder at how sustainable is all this then to the global economy that is clearly struggling ever since May 2015? It was all looking plain sailing and rosy across the emerging market but political tensions and currency wars have left many wounded. Exporting deflation and hurting major exporting economies was the start to many more negative sentiments. Emerging markets was and still battling with a slowdown in China and on top of that, battle with commodities slump. Chinese equity rout left many questioning if this is the beginning of a hard landing. Saxo Bank Steen Jakobsen sees China in between a hard and easy landing phase as they continue to do stimulus programmes and have the opportunity to make real reform. Nevertheless, the world has to admit that China is slowing down rapidly so be well prepared for severe revisions of where the global economic growth will come from.

Central banks around the globe continue to promote easy monetary policy as they cut interest rates. China pledged tax cuts and other fiscal stimulus after their national holiday seems to support the broader market for now. Confirmation of such action will send the market higher no doubt but there are questions remaining if everything is really back to normal or we are moving away from normal to bad and the worse is yet to come?

One thing for sure, global currency war could escalate into 2016 and things may get slightly nastier. Considering that central banks are already “balls deep” with stimulus programs and low to zero interest rate – what happens and who will save the economy if it is tanking?

What a difference a week made to the VIX index – market confidence was at its peak and there lack of fear has certainly drive the equity market higher. The new month and trading quarter has certainly given extra boost. Weekly VIX found support at 200 ma and the next question is if this could hold and rebound higher.

Dollar Technical Outlook

Weekly chart shows how the Bollinger band and price action is fast converging for an imminent breakout. Often, the dollar index does not trade below the mid Bollinger band for long and a rebound could soon kick in. Daily chart also shows a rising 200 ma that has acted as support but will they come to the rescue again for the 3rd time? We think that next week, dollar could start weak but soon found floor and made a case of a strong rebound. The catalyst will be any good sets of economic data to suggest that a rate hike is looming.

Going into next week, we envisaged a weaker dollar to start with as dollar bulls look to unravel and switch to short term safe haven trade. A weekly doji inside last week bullish engulfing candlestick could well signal the bulls do not have what it takes to regain previous high.”

Weekly

Daily 

Gold Technical Outlook

Dollar weakness has certainly brought love to the yellow metal. A daily close above 20, 50 and 100 ma has certainly bring many hedge funds going long – not because it is a safe haven trade (it could well be if hedge fund managers are seeing more turbulent in the global equities ahead). Given the weakness in the VIX (which may have found support) and higher gold prices, it does not seem to correlate well. One of the other is lying or at least front running for much needed safe haven assets. We also have lower bond prices – which indicate risk on sentiment but Gold manage to withstand that as well. By studying the weekly chart, a close above 20 WMA is often a 50/50 scenario where gold could propel to the top of the Bollinger band (in this case 1205 levels) and it could well target the 50 WMA at 1180 levels before finding some resistance. We are not sure what the catalyst might be for higher prices unless we see a larger dollar sell off here and we are looking to short if prices do reach the higher target.

Position Valid Date Price Action Stop Loss Target Results
SHORT 5th – 9th 1148 Order Placed 1158 1070 -10
SHORT 12th – 16th 1176 Order Placed 1186 1136
SHORT 12th – 16th 1163.5 Order Placed 1173.5 1133.5

Weekly

Daily

Silver Technical Outlook

In general, global commodities market is reviving in a dead cat bounce scenario and this is a short term rally across all asset in this sector. The short squeeze continues but we envisaged that next week is the start for Silver to break lower.

Our argument has not changed on the fact that Silver remains in a bear market and rallies are shorting opportunity.”

Position Valid Date Price Action Stop Loss Target Results
SHORT 5th – 9th 15.55 Order Placed 15.65 14.65 -10
SHORT 12th – 16th 16.20 Order Placed 16.45 14.80
SHORT 12th – 16th 16.45 Order Placed 16.70 14.80

Weekly

Daily

Platinum Technical Outlook

Again no surprise here as the global commodities market is on the short term phase of dead cat bounce. The overall trend is still down but shorts are unwinding and it is foolish to stand in its way. We may now get some pullback but if sentiment has not improved then we envisage a retest on the low. Platinum weekly chart shows a perfect RSI divergence that took weeks to materialise. The bounce could lead to higher prices in the short term but once it found resistance then we may continue lower.

Short term, we are biased for a bullish move higher – potentially for another bear flag formation. Only a break above 20 dma will abate more selling

Position Valid Date Price Action Stop Loss Target Results
Short 12th – 16th 1010 Order Placed 1020 920

Weekly

Daily

Palladium Technical Outlook

No change in our commentary and the weekly chart shows that 200 ma is acting as strong resistance but any more retest higher will be met with stronger sell order. Rocket Palladium – short busy covering here and no doubt it is a buyer’s market for now. However, we do expect this impulsive buying to end and a retest of previous low is imminent.

Position Valid Date Price Action Stop Loss Target Results
SHORT 736 Order Placed 746 600

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.

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