Forex & commodities on January 3, 2018: outlook


Here are my discretionary thoughts on forex and commodities (oil, gold, silver, etc). I only trade the S&P 500.
Go to the homepage for my latest thoughts on forex and commodities.

Thoughts

  1. Ethereum’s bullish breakout.
  2. The USD’s price action on today’s FOMC minutes was not bullish.
  3. Oil’s weekly momentum is very overbought and “smart money” is bearish.
  4. Do not buy USD here.
  5. How gold will make an medium term top

4 pm: Ethereum just broke out from its trading range.
*I don’t trade crypto. I only watch this market.
Ethereum just brokeout from its trading range. Some of the best crypto traders I know think that it’ll continue to rally to at least $1000 (round number resistance).

3 pm: USD price action vs today’s FOMC minutes.
A few FOMC members said that they supported “faster rate hikes” in today’s FOMC minutes. Gold and silver instantly tanked. Here are 15 minute bar charts.


The USD Index barely went up! This is weak price action, especially considering that the USD has been falling over the past 2 weeks. If USD was bullish, this should have been a strong bullish reversal trigger.

3 pm: Oil’s weekly RSI is very overbought.
Here’s the chart for WTI oil with weekly RSI 14.

This is about as high as weekly RSI gets since 2009. Weekly RSI only significantly exceeded this level in 2007 when oil surged and inflation skyrocketed. Oil is unlikely to surge right now. “Peak oil” concerns in 2007 are nonexistent today thanks to U.S. shale.
Oil always makes a correction or pullbacks after weekly RSI is this high. So oil’s medium term outlook over the next 1-3 months is bearish.
Meanwhile, the latest COT Report shows that “smart money” hedgers are bearish on oil. At the very least this is not bullish for oil in the medium term.

8 am: Do not buy USD here.
A lot of traders want to long USD here. The USD Index is at a multi-year support.

Going long USD right now is a 50-50 medium term bet. If the USD is going down, then it will not bounce at 90-91 because it has already done so.

Once the USD breaks below 91-90, it will grind down nonstop until it hits the next support at 87. There are no supports between 91 and 87.
8 am: How gold will make a medium term top
Yesterday’s post explained why gold will probably go higher in the short term.

Gold’s 4 hour RSI is extremely high right now. Extremely high RSI’s are usually followed by bearish divergences.

There is a strong inverse correlation between gold and USD.

As long as the USD Index doesn’t decisively break below 91, gold will make a medium term top soon. Here’s how I think this top will play out.
Gold will make a 4h RSI bearish divergence.

Gold’s main resistance trendline is at $1350. This is the most likely top area.

Bottom line

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

  1. Gold and silver will remain within their wide range during the first half of 2018. Then gold and silver will rally strongly in the second half of 2018.
  2. The USD Index will remain within this range (i.e. 90-96) during the first half of 2018. Then the USD will crater below this range in the second half of 2018. The USD is long term bearish.
  3. The best traders I know are still bullish on Bitcoin in the short and long term. I agree with them only to the extent that this bubble has a few months left. See “the pigs are flying” in this post.

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