Forex & commodities on February 19, 2018: outlook

Here are my discretionary thoughts on forex and commodities. I only trade the S&P 500.
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  1. Silver is still being capped by its 200 weekly moving average resistance
  2. China wants to push the price of gold higher in the long term.
  3. Interest rates will pullback in the next few weeks
  4. U.S. oil rig count continues to surge. A bearish factor for oil.

3 am: Silver is still capped by its 200 weekly moving average resistance
Silver is once again capped by its 200 weekly moving average resistance. Along with short term bearish price action, I expect gold/silver to fall a little more before resuming their medium-long term uptrend.

3 am: China wants to slowly push the price of gold higher
China wants to replace the U.S. Dollar‘s reserve currency status with the PetroYuan, which will be convertible into gold. They must do 2 things to accomplish this goal:

  1. Push USDCNY lower
  2. Tie Yuan to gold. If USDCNY goes lower, the02n gold will appreciate in terms of the U.S. dollar.

China is accomplishing the first goal right now. China is pushing USDCNY lower in the medium-long term.

China seems to have pegged gold to 8500 Yuan. Gold is fluctuating in a narrower and narrower range (in terms of Yuan).

Hence, USDCNY’s bear market is a medium-long term bullish factor for gold.
3 am: interest rates will pullback in the next few weeks
The 2 year Treasury yield keeps going up, which makes it even more insanely overbought on a weekly bar chart. Here’s the 2 year yield and its 14 weekly RSI.

I said before that insanely high RSI needs a bearish divergence before the market can make a correction. The 2 year yield has now made a bearish divergence. I expect interest rates to start falling in the next few weeks.
3 am: U.S. oil rig count continues to surge. 
Total U.S. oil rigs surged +7 last week. This is a medium term bearish factor for crude oil. U.S. supply is increasing, and oil is a relatively inelastic market (i.e. a small change in supply/demand = big change in $).

Read Forex & commodities on February 16, 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.

4 comments add yours

  1. If u are expecting weakness with bonds and interest rates, wouldn’t that be negative for the stock market?

    • The overall correlation between stocks and rates is extremely random. And you have no idea when the correlation will break. I’d rather ignore rates until rates start to hurt the economy.

  2. Rates normally start to rise after a couple years into a recovery, not 7-8. When the market has run its course, it will be over, regardless of what rates or the Fed does. This market spike from the 2016 lows has the earmarks of a long term, large degree 5th wave. I look for one more higher top, a quarter or 2 out, for a final top. Silver looks to be coiled and ready to rally, watching for a set up to go long.

    • That’s because this has been an extremely slow economic recovery. The speed of rate hikes has more to do with magnitude of the recover vs time of the recovery.

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