Forex & commodities on December 28, 2017: outlook


Here are my discretionary thoughts on forex and commodities (oil, gold, silver, etc). I only trade the S&P 500.
Go to the homepage for my latest thoughts on forex and commodities.

Thoughts

  1. The pigs are flying in crypto
  2. A bullish sign for USDCAD and a bearish sign for oil
  3. Are we seeing a bearish divergence in copper?
  4. Bitcoin double top at $20,000?

4 pm: The pigs are flying in crypto.
*I do not trade Bitcoin because I don’t touch bubbles.
“The pigs are flying” means that previous laggards will outperform in the last leg of a bubble. When the pigs start to fly:

  1. The bubble is not over
  2. The bubble has one more big leg to go that can last a few more months.

We are starting to see the pigs fly in crypto. Bitcoin was previously the leader. Other cryptocurrencies are now catching up (i.e. pigs flying).
Bitcoin topped on December 17.

Bitcoin cash topped on December 20.

Ethereum topped on December 19 and has fallen a lot less than Bitcoin.

Ripple continues to soar.

Many traders think that Bitcoin will make a double top at $20,000. It is for the above reason that I think the bubble in crypto is not over. When pigs start to fly, the bubble still has room to run.
7 am: A bullish sign for USDCAD and a bearish sign for oil
There is an inverse correlation between USDCAD and oil. USDCAD has been flat-down because oil has been rallying.
Here’s USDCAD’s daily chart.

Here’s WTI oil’s daily chart.

Oil is very overbought on a weekly bar chart. Hence, traders should expect short-medium term weakness in oil. This is a short-medium term bullish factor for USDCAD.

7 am: a bearish divergence in copper.
Copper’s medium term tops frequently coincide with bearish divergences. Here’s copper’s weekly bar chart.

Copper is making a bearish divergence right now. Combined with the fact that oil’s weekly RSI is very overbought, I think commodities will struggle or fall over the medium term (i.e. AT LEAST next few weeks).

7 am: Bitcoin double top at 20,000?
Bitcoin is in a bubble. Bubbles frequently end with a double top (with a massive decline in between the 2 tops).
Here’s NASDAQ in March 2000. Notice how it made a double top before really starting to crash.

Bitcoin has yet to make a double top. Many of the best Bitcoin traders I know are long Bitcoin until it bounces back to $20,000.

4 comments add yours

  1. Troy,
    Very confused with your predictions on gold now with this new blogpost on divergences in copper and your new 2-3week commodities selloff as opposed to yesterday’s blogpost of being long gold in January with bitcoins historical sell off.

    • The time frames are different. Bitcoin/gold seasonality is just a study. And it only applies to January. The bearish divergences in copper can take months to play out (i.e. 3 months).

  2. Troy, I really think golds rally is due to the safety trade of investors preparing for a small correction. The market trades forward 6 months out, hence the safety trade in the gold rally.

    • Maybe you’re right. Gold does have a safety haven aspect to it. Gold is influenced by many factors.

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