Forex & commodities on January 9, 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. Oil will probably wait until February before making a correction
  2. Gold and silver will soar if the U.S. dollar breaks down.
  3. Central bank policy is long term bearish for the U.S. dollar.

3 pm. Oil will probably begin a correction in late-February with the U.S. stock market.
Oil’s weekly RSI is insanely high. When momentum is this high, the market typically needs to make a bearish divergence before it can top (i.e. momentum has to weaken).

Literally every asset in the world is going up right now: stocks (U.S. and foreign), cryptocurrencies, corporate bonds, and commodities. Assets are highly correlated right now. This means that if the U.S. stock market makes a correction, then oil and other commodities will make a correction as well. The S&P’s 6%+ “small correction” will drag everything down.
The U.S. stock market will most likely begin a correction in February. This puts bearish pressure on oil in February.
7: 33 am. Gold and silver will soar if the U.S. dollar breaks down.
There is an inverse correlation between the USD and gold/silver. The U.S. dollar is at a massive support, and gold/silver are at massive resistances. Gold and silver will soar if the USD breaks down.
Neither bulls nor bears have an edge here. If gold and silver breakout, then bulls have the advantage. Expect a massive rally.
Here’s the U.S. dollar.

Here’s gold.

Here’s silver.

7 am: Central bank policy is a bearish factor for the USD
Inflation in the EU and Japan are on the rise because the global economy is picking up steam. Their respective central banks must taper soon because they cannot hide under the guise of “deflation” anymore. Inflation is clearly on the rise.
As a result, Japan is shrinking the size of its bond purchases and the ECB will have to do likewise soon. (USDJPY fell today after the BoJ announced a reduction in the size of bond purchases).
Here’s the EU’s inflation.

Here’s Japan’s inflation.

I stated that the U.S. dollar went up and the Euro went down as interest rate differentials widened. As the ECB and BoJ begin to taper, I expect the interest rate differential to narrow. This is a medium-long term bearish factor for the USD.

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. Revision: Perhaps the USD will break down sooner than I expected.
  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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