Forex & commodities on February 21, 2018: outlook


Here are my discretionary thoughts on forex and commodities. I only trade the stock market.
Go to the homepage for my latest thoughts on forex and commodities.

Thoughts

  1. Gold and silver will fall a little more if the stock market makes a pullback.
  2. Gold and silver might fall a little more in the short term, but expect a massive medium-long term breakout.
  3. Some traders expect the U.S. Dollar Index to rally to 94.

4 pm: Gold and silver will fall a little more if the stock market makes a pullback
There is a clear intraday correlation between gold/silver and the stock market right now.

  1. The S&P initially went up on today’s FOMC minutes (2pm), and then fell.
  2. Gold & silver initially went up on today’s FOMC minutes, and then fell.

This correlation is normal for gold and silver bull markets, which coincide with bull markets in stocks. The global financial markets are clearly playing an “inflation” theme.
There’s a >50% chance that the stock market will pullback soon. Based on correlation, the stock market’s pullback will drag gold and silver lower.
5 am: Gold and silver might fall a little more in the short term, but expect a massive medium-long term breakout
Gold and silver are inversely correlated with the USD Index right now. Gold and silver will fall a little more if the USD bounces a little more.
The medium-long term outlook is extremely bullish. Silver’s 200 monthly moving average is extremely useful. This resistance has capped silver for a long time. I expect silver to break above its 200 monthly moving average in the next few months. When that happens, I expect gold and silver’s bull market to really get underway.

3 am: Some traders expect the U.S. Dollar Index to rally to 94.
Some of the successful traders that I know expect the U.S. Dollar Index to rally to 94. They think that this isn’t just a bear market bounce – it’s a bear market rally. The U.S. Dollar is currently sitting on its 200 monthly moving average. It has also made a bullish divergence on the weekly bar chart.


USD Index of 94 is

  1. The U.S. Dollar’s 38.2% retracement, which is standard for a bear market rally. And…
  2. The U.S. Dollar’s 200 weekly moving average. (200 weekly moving averages are frequently used as bull/bear decision making points).


I disagree. I don’t think the U.S. Dollar Index will make such a big bear market rally. The U.S. Dollar’s historical bear markets went down in a straight line without big bear market rallies that retraced 38.2%.


The nature of currencies is that they swing sideways for a very long time. But when they do breakout of break down (bull or bear market), they move in one direction nonstop.
Read Forex & commodities on February 20, 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.

1 comment add yours

  1. Thanks Troy , what is difference between a bear market bounce and a bear market rally ?

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