Forex & commodities on February 16, 2018: outlook


Here are my discretionary thoughts on forex and commodities. I only trade the S&P 500.
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Thoughts

  1. Gold and silver’s short term bearish price action continues
  2. A short term bullish factor for the USD: the stock market’s upcoming pullback.
  3. The U.S. Dollar Index is on the verge of breaking down, even though interest rates are up. Bearish for the USD.
  4. The U.S. Dollar will tank and oil/gold/silver will surge in the final 2 years of the bull market in stocks

4 pm: Gold and silver’s short term bearish price action continues
Silver continues to underperform gold, which is short term bearish in a rally. This implies that precious metals will fall a little more before making a medium term bottom.

It’s clear that silver is much weaker than gold on a daily bar chart.


4 pm: A short term bullish factor for the USD: the stock market’s upcoming pullback.
There is an inverse correlation between the S&P 500 and U.S. Dollar Index right now. The S&P 500 will probably make a pullback (50-61.8% retracement) over the next few days/weeks. If the S&P makes this pullback, we can expect the U.S. Dollar to bounce a little more. But if the S&P doesn’t make a pullback, then the U.S. Dollar will continue to crater.
The U.S. Dollar Index is still trying to bounce off of its 200 monthly moving average.

3 am: the USD is on the verge of breaking down.
The USD is once again falling on no news. This is the most bearish of price action. The market’s direction when there is no news = the market’s underlying trend. And right now the USD’s trend is DOWN.
The U.S. Dollar is falling even though interest rates are rising. Imagine how much more the USD would fall if interest rates were to pullback.


The 2 year Treasury yield is insanely overbought and has now made a bearish divergence. I expect Treasury yields to pullback in the next few weeks. This will push the USD down even more.

 
3 am: The U.S. Dollar will tank and oil/gold/silver will surge in the final 2 years of the bull market in stocks
Based on current data, the Medium-Long Term Model states that the bull market in stocks has approximately 2 years left.
There is an extremely strong correlation between the stock market, EURUSD, oil, and gold right now.

This correlation is normal for the final few years of a bull market in equities. Inflation tends to rise during the final few years of an economic expansion and bull market. That inflation pushes oil, gold, and EURUSD higher while it pushes the U.S. Dollar lower.
I expect commodities to go up over the next 1-2 years while the U.S. Dollar continues to go down.
Read Forex & commodities on February 15, 2018.

Bottom line

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

  1. Gold and silver will break above their tight range in the first half of 2018.
  2. I’ve decided to buy some gold and silver as long term investments.
  3. The U.S. Dollar is in a bear market.

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