Forex & commodities on January 18, 2018: outlook


Here are my discretionary thoughts on forex and commodities. I only trade the S&P 500.
Go to the homepage for my latest thoughts on forex and commodities.

Thoughts

  1. Gold & silver are weak relative to the U.S. dollar.
  2. The 10 year Treasury yield is at a big resistance.
  3. A positive correlation between Bitcoin and the USD. An inverse correlation between Bitcoin and gold.

4 pm: Gold & silver are weak relative to the USD
There is an inverse correlation between gold/silver and the USD right now. Gold and silver’s price action was weak vss the USD today. Gold and silver fell even though the USD fell!
Moreover, the gold:silver ratio has been going up. This is a medium term bearish sign for precious metals.

8 am: the 10 year Treasury yield is at a big resistance.
I agree with Jeff Gundlach and Bill Gross: bonds are in a bear market and interest rates are in a bull market. However, we need the market to confirm this hypothesis:

  1. The 10 year yield needs to break above its post-Trump election resistance.
  2. The 10 year yield needs to make a higher high and break above 3%.

The 10 year Treasury yield is currently at its post-Trump election breakout resistance.

Once the 10 year yield breaks above 3%, the bull market in rates & bear market in bonds is confirmed. We need to see rates make higher highs before we can confirm a bull market in rates. (Remember: bull markets make higher highs while bear markets make lower highs).

8 am: correlations between Bitcoin, the USD, and gold/silver
There is now a positive correlation between Bitcoin and the U.S. dollar.

There is also an inverse correlation between Bitcoin and gold (the USD and gold have an inverse correlation). Here’s a chart with Bitcoin and gold. Gold is inverted on the chart.

The U.S. dollar is in a bear market and gold is in a bull market. Based on this correlation, it means that Bitcoin will enter into a bear market very soon.
However, this correlation does not exclude the possibility that:

  1. Bitcoin will have 1 more leg higher…
  2. While the U.S. dollar makes a bear market bounce…
  3. And gold/silver make a bull market pullback.

Read Forex & commodities on January 17, 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. The USD Index will crater below its final support (90-91) in the first half of 2018.
  3. The best traders I know are still bullish on Bitcoin in the short and long term. I don’t know when the crypto bubble will end.

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