Forex & commodities on January 26 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. The U.S. dollar’s underlying trend is decisively DOWN.
  2. Gold and silver are weak compared to the U.S. dollar
  3. The Euro is defying bearish seasonality this year.
  4. The 10 year Treasury yield’s bearish seasonality begins in April.

3pm: the USD’s underlying trend is decisively down.
Triggers/events can distort a market and confuse traders. Here’s a method I use to determine the market’s trend

Is the market going up or down when there are no triggers?

The market’s trend when there are no triggers is the real underlying trend.
The U.S. dollar jumped on Trump’s comments yesterday. But without those comments, the U.S. dollar is going down again. The USD Index’s trend is decisively down. There aren’t enough triggers to cause a sustainable rally.

9 am: gold and silver are weak compared to the U.S. dollar
There is an inverse correlation between gold/silver and the USD on a daily bar chart right now. However, gold and silver are weak relative to the U.S. dollar.

  1. Gold and silver are falling this morning even though the U.S. dollar is falling!
  2. Moreover, the gold:silver ratio continues to go up. This is a bearish sign. The gold:silver ratio should fall in a healthy rally.

4 am: the Euro is defying bearish seasonality this year.
The Euro tends to fall during the first half of a year and rise in the second half of a year. Here’s the seasonality.

Instead, the Euro is rallying like crazy this January. The Euro ignoring its bearish seasonality = bullish price action for the Euro. This is bearish for the U.S. Dollar.

4 am: the 10 year Treasury yield’s bearish seasonality begins in April.
The 10 year yield is rallying right now, which is in line with its beginning-of-the-year bullish seasonality.

Seasonality turns bearish by April. If the 10 year Treasury yield reaches 3% by then (a major resistance), I expect it to make a correction. Seasonality will become a bearish factor for Treasury yields.
Read Forex & commodities on January 25, 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.

2 comments add yours

  1. Troy — any idea why the COMEX has had a huge ramp-up in gold & silver exchange-for-physical (EFPs)?
    Just this month, they’ve transferred the paper equivalent of 30% of global annual production of silver to London, to be settled for physical.
    EFPs used to be pretty rare, but they’ve been going through the roof since October.
    Also, London unable to deliver, citing 13 week delays.

    • No idea Dan, but thank you for bringing that to my attention. That’s very interesting.
      If I had to guess, that’s central bank buying? Like you said, EFP’s used to be pretty rare. China/Russia need massive amounts of physical gold and silver.

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