Forex & commodities on March 2, 2018: outlook


Here are my discretionary thoughts on forex and commodities. I only trade the stock market.
Go to the homepage for my latest thoughts on forex and commodities.

Thoughts

  1. USD continues to go down on trade war fears.
  2. Gold miners: a medium term bullish sign for gold and silver
  3. The U.S. Dollar should be going up on trade war fears. It isn’t.
  4. This could be the start of a bond market rally (correction in interest rate yields).

4 pm. USD continues to go down on trade war fears.

As I said this morning, the USD going down on trade war fears is a bearish sign for the USD. The USD should go up on these fears. A market that doesn’t go up when it should is bearish.
4 pm. Gold miners: a medium term bullish sign for gold and silver
GDX has once again hit its year long support level and started to bounce.

This is a short-medium term bullish sign for miners, gold, and silver. In addition, silver went up more than gold today, which is normal for a healthy precious metals rally.

3 am: the U.S. Dollar should be going up on trade war fears. It isn’t. 
Trump announced tariffs on steel and aluminum imports yesterday. The U.S. Dollar should be going up on trade war fears. Remember how the USD spiked and Mexican peso crashed in late-2016 after Trump won and fears of a U.S.-Mexico trade war surged?
Instead, the USD Index is going down on trade war fears.

This is a medium-long term bearish sign for the USD Index. It isn’t going up when it should be going up. Its reaction to supposedly bullish triggers isn’t right.
3 am: this could be the start of a bond market rally
Interest rates were extremely overbought, especially on the short end of the yield curve.
Here’s the 2 year Treasury yield and its weekly RSI 14.

When a market is extremely overbought, ANY NEWS can trigger a correction. It is not the real reason for a correction – it’s just an excuse. Perhaps Trump’s tariffs will be the excuse for a correction in interest rates.
Keep in mind that mainstream media expected yields to go up on trade war fears (i.e. fear that China will dump U.S. bonds in retaliation). Instead, yields fell. This is a medium term bearish sign for interest rates. Yields aren’t going up when they’re “supposed to”.

Read Forex & commodities on March 1, 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. I’ve decided to buy some gold and silver as long term investments.
  3. The U.S. Dollar is in a bear market.

3 comments add yours

  1. Hi Troy,
    Is there any value to add some bond ETF now for diversification? If yes, would you recommend short term (SHY) or long term bond (TLT)?
    Thanks.
    Alex

    • Hi Alex,
      Personally I would not buy bonds right now. Interest rates are in a bull market, which means that bonds are in a bear market.
      Kind regards,
      TRoy

  2. Trump clearly wants a weaker dollar. The strong dollar policy was always arguably a sham, but right now, it looks like the pretence has dropped, and whilst global growth is arguably good, it seems like the market is happy to oblige.

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