Forex & commodities on January 31 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. Commodities are relatively weak when compared to the U.S. dollar.
  2. The supply of bonds is going up. Bullish for interest rates over the medium-long term.
  3. The U.S. dollar is at several major support levels.
  4. The gold:silver ratio is going up. A short term bearish sign for precious metals.
  5. Oil has made a bearish divergence.

2 pm: commodities are relatively weak when compared to the U.S. dollar.
Gold, silver, and oil have a strong inverse correlation with the U.S. dollar right now. These commodities are making a pullback while the U.S. dollar is completely flat. Hence, they are relatively weak when compared to the USD.
Here’s the USD Index.



I expect the commodities pullback to continue throughout February as long as the U.S. dollar does not start to crater again.
2 pm: the supply of bonds is going up.
The U.S. budget deficit is rising, so the Treasury will increase the amount of long term bonds it sells for the first time since 2009 to $66 billion. This is a relatively small increase from $62 billion. The reasons are:

  1. Higher spending on entitlements as the U.S. economy ages.
  2. The Trump tax cut.
  3. The Federal Reserve’s quantitative tightening.

This is a small long term bullish factor for interest rates.
4 am: the USD is at several major support levels.
The U.S. dollar’s price action is very weak. However, I still think it will make a small bounce here. There’s a confluence of support at 88-88.5 on the USD Index.

  1. The 200 monthly moving average.
  2. 61.8% fib retracement of the entire 2014-2016 rally.
  3. Previous highs from 2009 and 2010.


This is just a small bounce in a bear market. The medium-long term trend is decisively DOWN.
4 am: the gold:silver ratio is going up.
This is a bearish sign for precious metals. A rising ratio implies that gold and silver will make a pullback/correction while the USD bounces.
*There’s a strong inverse correlation between the USD and gold/silver right now.

4 am: oil has made a bearish divergence
Oil’s daily and weekly RSI used to be insanely high. Historically, insanely high RSI means that the market must make a bearish divergence before a correction can begin.
Oil has now made a bearish divergence on the daily chart.

Ideally, oil makes a bearish divergence on the weekly chart. This has not happened yet.

Read Forex & commodities on January 30 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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