Forex & commodities on December 29, 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. EURUSD is coming up against a huge resistance. USD Index is coming up against a huge support.
  2. Copper is extending its winning streak to 16 consecutive days, a new record.
  3. Bitcoin is still making higher highs, so still a bullish pattern.
  4. There is an extremely strong inverse correlation between USDJPY and gold.

4 pm: Big resistance for Euro, big support for USD.
EURUSD is coming up against its previous high. This is a massive resistance. EURUSD will soar if it breaks above this resistance in a meaningful way (e.g. by more than 1 cent). Here’s the weekly bar chart.

Likewise, the USD Index has fallen to a massive resistance. Here’s the weekly bar chart.

Likewise, a USD breakdown below this level will result in a massive breakdown. In such a case, USD Index’s consolidation over the past 3 years is officially over.
I do not expect the USD Index to break down until the second half of 2018. Hence, I expect the EURUSD’s resistance and USD Index’s support to hold.
*The EURUSD is definitely in a bull market over the long term. Do not expect EURUSD to retest e.g. $1.05. EURUSD is making higher highs and higher lows.
Notice how EURUSD has turned previous resistance ($1.15) into support on the weekly bar chart.

3 pm: Copper is extending its winning stream to 16 consecutive days.
Copper is on track to close higher for the 16th day in a row. This is a new record. The second longest streak was November 10, 2016 when copper went up 14 days in a row. Here’s what happened next.

Copper made a small pullback before grinding higher over the next 1-2 weeks. This is a classic pattern. When momentum is extremely strong, the market usually makes a pullback before grinding higher. The market rarely goes from “extremely strong momentum” to “a sizable correction”. The market needs time to digest such bullish momentum.
8 am: Bitcoin is making higher highs, so still a bullish pattern
*I do not trade Bitcoin because I don’t touch bubbles.
The best Bitcoin traders I know are bullish on Bitcoin in the short term and the long term.
Bitcoin is making higher highs on the 4 hour bar chart. So the short term bullish trend is still intact.
More importantly, the overall head-and-shoulders pattern’s “neckline” has not been decisively broken. These traders think that Bitcoin’s long term is still bullish as long as Bitcoin does not significantly break below this neckline.
Here’s a 4 hour bar chart for Bitcoin.

Bitcoin’s 50 daily moving average is still main support.

8 am: there is an EXTREMELY strong correlation between USDJPY and gold.
Gold has the strongest inverse correlation to the USDJPY pair.
Here’s the 20 daily rolling correlation between YCS (short Yen ETF) and GLD (gold ETF)

This means that there is a strong inverse correlation between gold and USDJPY.
This means that if gold and silver breakout from their current ranges in the second half of 2018, then the USD Index will significantly break down below 90 (USD’s main support) in the second half of 2018.

Bottom line

I only trade stocks. These are just my thoughts/outlook on other markets.

  1. Gold and silver will remain within their wide range during the first half of 2018. Then gold and silver will rally strongly in the second half of 2018.
  2. The USD Index will remain within this range (i.e. 90-96) during the first half of 2018. Then the USD will crater below this range in the second half of 2018.
  3. The best traders I know are still bullish on Bitcoin in the short and long term. I agree with them only to the extent that this bubble has a few months left. See “the pigs are flying” in this post.

2 comments add yours

  1. Down $6500 on gold shorted at 1268. The momentum is waaay stronger on the upside then the downside! Usually the opposite. Gold went up faster then when it went down according to daily bar charts. Your blog post on gold going down in December was completely 100% wrong

    • Yes it was wrong. That post was based on gold’s seasonality over the past 4 years. Seasonality is a fact. Like I said, seasonality is not 100%. If you’re looking for a holy grail, then you shouldn’t be trading in the first place.
      Also, I do not trade gold. I focus on the S&P 500.
      My focus: medium-long term for the S&P 500, has been correct. That is what I trade. Everything else is supplementary.
      I am here to share my thoughts and outlook. I am not here to handhold you and be blamed for every one of your trading mistakes. It is your capital. You’re the one who’s holding the position.
      I will not waste time replying to negative comments such as these anymore. If you have better studies/facts, feel free to point them out.
      No study is 100%. Blaming others for your losses is something that only losing traders do.
      And for the last time, I do not reveal the Day Trading Model’s components (as per your previous request). I have no obligation to do so.

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