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Its been a long time since both Gold & Silver were receiving this much attention from traders and investors globally. Over the last few weeks we have witnessed a big shift on the longer term weekly charts that this current move is different from what we have seen over the last few years.
 
Gold finished the week at another 2019 high at $1,425, while also more importantly making a six year weekly high as well. The reason why I say that Gold has had a big shift is because we have recently seen on the weekly chart a break above a long six year sideways consolidation phase shown on the chart. It recently made a small retracement to retest the old resistance now support area of the consolidation phase, followed by a bounce higher off support.
 
In addition the 52 week moving average has now swung to the upside as the price action sits just above $1,415 support. Its possible we could see a move towards $1,480 resistance this week after we saw a retrace on Friday on the daily chart to a key support.
 
However its also important to note even though over the next several weeks & months that we could see the price at or above $1,564 resistance area based on the 52 weekly moving average range relative to price. I’m also expecting that we will encounter consolidation soon as well which could see either a pullback or sideways phase for a few weeks. Especially we hit $1,480 resistance before any consolidation.

Silver on the other hand has also had a big shift on the weekly chart even though its still lagging considerably relative to Gold’s recent price action. On the weekly chart Silver has had a big price move week breaching multiple resistance areas including the last previous weekly high area of $15.80-85, closing at just under the $16.20 resistance area after reaching a weekly high at the $16.60 which was also a key resistance.
 
Ideally this coming week it would be ideal to see another follow through of buying for the week and close above $16.20 resistance allowing it to consolidate the new higher high of this week. Given the past history of weekly potential price action moves away from the 52 week moving average, Silver has the ability over the coming weeks and months to move beyond $18.65 resistance.
 
Considering for Silver though its 52 week moving average has gone from sloping down to now flat, we could see a consolidation move coming soon as well allowing the 52 week moving average to swing to the upside and allow a breather before making its next big move higher. Given that we will have the FED FOMC meeting to decide rates at the end of the month of July, we could see a move higher for both Silver & Gold leading into the FED decision & sell the news / retrace after FOMC meeting.

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The US dollar index this week has taken a decent fall, as it well & truly confirms that the bullish uptrend is over, finishing the week at just above 96. The index has now made a series of lower highs and lower lows, whilst already breaching its uptrend from Sep 18 this week.
 
In the short term, I’m looking for a short term bounce soon as it retraces eventually to form another lower high, most likely at the 96.70 resistance, or as high as 97 given the strong move this week. In addition the US dollar index is now sitting on the lower bound of the downtrend channel.

After we see a retracement move, I’m looking to see the index to continue to make lower as it heads towards the strong support level of 95 over the medium term. If the move continues to make lower highs it will set up some strong moves ahead for Gold soon.

Gold has surprised many traders & investment banks, especially those that had recently held short positions again the yellow metal. Gold’s strong move this month has certainly got the markets attention now, but the bigger moves have not even started yet for Gold.
 
Over the next few weeks I’m expecting to see a retracement in line with a move higher in the short term for the US dollar index. Gold is in need of a consolidation on both the daily & weekly charts, with a likely move towards $1,350 level. Of course it all depends on whether Geopolitical tensions over Iran & US settle down this week.

Looking forward ahead for Gold, after we see one to few weeks of consolidation, I’m expecting big moves for Gold as its just broken out of 6+ year consolidation period on the weekly chart. At a conservative level I’m looking for Gold to at least retest its $1,900 highs made in 2001.

Given the intentions of the FED now and other central banks for the remainder of 2019 & 2020 towards monetary policy, its quite foreseeable that Gold moves beyond $2,000 USD over the longer term. I have added the next few resistance levels to watch over the medium term.

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Copper continues to remain under pressure as it sits close to the lows reached at the start of Jan 19. The price action is in a consolidation sideways pattern over the last two weeks, as Copper prices in a slowing weak global economy.
 
This contrasts with US stocks over the last two weeks that has seen a large bounce off its recent lows on the prospects that Powell & the FED are now looking cutting rates in 2019. The prospect of rate cuts is inflationary for hard assets, however Copper is not buying this premise at least for now.

Currently the price action for Copper is sitting between 26,680 resistance & 25,940 support. In addition the price is respecting its downtrend line as well. So moving forward we would need to see a clear breakout above both 26,680 & 27,135 resistance, before we see Copper following the bullishness of US stocks. Given the weakness its more likely we see the price move towards 25,940 soon.

Platinum's price action is showing a close resemblance to Copper's price action, as it also has not seen any recent bounce in the last two weeks of trading, while also hovering near its lows reached In Dec 18 & Feb 19.
 
Why this is relevant is because Platinum is utilized in multiple industrial applications in multiple industries within the manufacturing process. So just like Copper, the price action of Platinum at the beginning of the year saw a decent rally and new uptrend formed as the markets were pricing optimism on the global economy based on a trade deal being struck between the US & China.
 
Now the deal has collapsed, the price action has collapsed along with the deal. Platinum is also in a consolidation pattern as it currently is respecting $800 support after hitting $820 resistance last week. Given that global economic macro data remains weak as global trade slows, it likely like copper we see lower prices in the short term.

So if we see a break of $800 support, look for a move towards $780. If we see a move above $820 in the coming weeks, followed by a close above the 52 day moving average price of $845 - $850, then this would indicate a shift in optimism for the global economy.

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Last week price action for US stocks was remarkable from the start to the end of the week. On Monday we saw US stocks gapped lower on the threat of tariffs on Mexico by Trump. With each trading day we saw weak or negative economic news being released in the US. Yet what we saw was stocks were no longer moving lower. By the end of the week on Friday we had US Non-farm payrolls released and it was a massive miss, coming in at 75k new jobs instead of 177k estimates, but it didn’t matter. By the end of the day stocks continued to move higher, as it followed the momentum of buying that started from Tuesday. So why successive pieces of negative news & economic data being released did the S&P 500 index form a bullish engulfing pattern on increasing volume? The answer in one word is: FED.
 
Last week Mr Powell held its monthly press conference and the general point of the commentary by Powell was that the FED would do what is required to keep growth going in the US. Which the market interpreted as the FED is about to start cutting rates, with the likely hood of several cuts to come by the end of 2019. The reaction by the market was swift, as we saw the US dollar index roll over and break its uptrend, while Gold shot up this week over $100 an ounce as the market digested another pivot by the FED moving forward. Which is why I realized this week that this lows reached at the beginning of the week was likely to be the lowest prices we will see moving forward for the rest of the year.

Looking at the price action of the weekly chart for the SPX index, you can see that we have confirmed another higher low was formed, as the most recent low close was still above the lows reached back in the first week of March this year. This confirms on a weekly chart that the buyers are still in control of US stocks. The other interesting thing is that volume on the previous two weeks of falling prices was below the average volume for the index. With this week bullish engulfing candle stick pattern was formed on slightly above average volume, which also confirms the bullishness of the move.

This week I would be looking to see if there is follow through for the week in higher prices to close the week, to support the bullish pattern. If there is follow though its possible, we could see a move towards 2,930 resistance level either this week. If we see follow through buying then the likely support on a retracement is 2,873-75 level to look for in coming weeks. If we on the other hand see this move as a failed move, then prices would need to move back towards 2,785 support. However this is unlikely now the FED has given the green light for stocks to move higher regardless of how back the economy is. Well at least for now that is.
 
Lastly on a more of longer term look ahead, given the outlook of the FED and the interesting price action for US stocks, it would not surprise me at all if we see new all-time highs reached in the coming weeks or at the least next few months.

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This week was a monumental moment for U.S tech stocks, as they reached their previous all time high resistance / mountain peak around 7700, and for a brief moment surpassed this level making a new all-time intraday high around 7715. The week finished off with the highs at around $7690.

This week was also interesting as the index reached prior resistance area, while also hitting the bottom of the long term uptrend line that had been established in early 2016 on the weekly chart, signaling it hit two different resistance areas that have come together. This is significant as I'm expecting some volatility ahead with a pullback coming soon as a consequence of reaching these levels.

The other reason why I believe this, is that the weekly moving averages are quite stretched from the current price action. The current distance shown by the arrows is roughly the same distance as the previous separation before we saw the index pull lower.

Unlike the previous time this occurred, we saw a significant drop of close to 20% off the peak. I'm not expecting as big a fall to occur with the upcoming consolidation period ahead. One of the main reasons for the difference is that the FED has now completely performed a 180 turn on its monetary policy to appease the markets.

Based on the assumption of the continuation of global central banks to pump liquidity in the global markets, I'm looking for a more mild pullback and an eventual move soon to either the first support level area of 7375, or potentially a bigger move towards 7100 support area.

After we have seen several weeks of consolidation and the moving averages have had a chance to catch up to the price action, I would be looking to see the markets begin to attempt to move back to the prior resistance area of 7700, before it then makes another attempt to march towards a new all time high, with an eventual higher highs created.

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With the release of this week's Gurhaven newsletter, we cover some of the top posts from Guruhaven.com from last week. I review just what's going on with Silver, with the likely levels to look out for. Plus our traders and investors from Guruhaven discuss US markets, NASDAQ, Forex, China and more. To view the Silver review and for the round up of great content Click here for the latest newsletter

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Guest Article Written By: Robert Blake

When the US Federal Reserve raises interest rates it always affects the US dollar. In this case, the hike would normally reduce the inflationary pressure, and as a result appreciates the dollar. The latest decision to raise the target for the fed-funds rate to a range between 1.75%-2%, in June of this year, was due to a stronger economy and a healthy US jobs market.

We mentioned previously on Crush the Market how interest rates have been steadily rising since 2015.
With three to four increases forecasted for 2018, the graph of the Fed “dot plot” below illustrates how eight policy makers expect four or more quarter-point increases for the year.

Traditionally, interest rates in the United States averaged about 5.72% from 1971 to 2018, with Money Cafe reporting a high of 20% in March 1980 and a record low of 0.25% in December 2008.

Higher interest rates generally mean a lower economic growth, but also slower inflation. In the past, the best way to achieve full employment and stable prices was to set the inflation rate of the dollar at 2%, which would grow the economy at a healthy pace. The Fed hiked this year, in response to a growing economy and fear of rising inflation, increased interest rates by a quarter of a percentage point. Jerome Powell, Chairman of the Federal Reserve, remarked that the “economy is doing very well,” following the rate hike announcement. The graph below shows the historical Fed rates over a period of 47 years.

Historically, even with low interest rates the US dollar enjoyed favorable exchanges rates in relation to major currencies like the Euro or the Pound. Investopedia reveals that this is in part due to the US dollar being the reserve currency for much of the world. As a result of higher interest rates and a strengthening dollar, more Forex traders will be hedging on the US dollar.
FXCM outlines that the Forex market trades an average volume exceeding $5 trillion daily, and the current Fed interest rate plays a factor in determining the value of the US dollar. 

However, it is mainly its perception as a safe haven in uncertain economic times, which has been the main reason for its high value in relation to other currencies. However, it is mainly its perception as a safe haven in uncertain economic times, which has been the main reason for its high value in relation to other currencies.

Bloomberg reported how the dollar spot index, which tracks a number of global currencies against the US dollar, rose temporarily immediately following the Fed announcement.

As was expected, however, the trend that the Federal Open Market Committee (FOMC) is following seems to indicate that it’s stepping up the pace of rate hikes, stating that economic growth should continue regardless. While the course of the increases will remain gradual, the perceived aggressive pace demonstrates how the FOMC is looking to tighten policy amid falling unemployment levels (which fell to their lowest of 3.8% in May) and national growth.

The following chart illustrates the historical date of the price-adjusted US dollar index published by the FOMC.

For now, the economic forecast indicates that core inflation will reach the Fed's target of 2% by the year’s end with an overall economic growth of 2.8% for 2018. As such, with a fourth and final hike projected for this year, the Fed indicated that it will expect more rate hikes in 2019. Despite the recent hikes, as part of their long term forecast, the committee indicated that they still see the rate increasing to 2.9% and peaking at 3.4% by 2020, with an estimated GDP increase of 2.4% in 2019 and 2% in 2020. In addition to upwards estimates for GDP and inflation, the committee also estimated a cut to their original unemployment projection, from 3.8% to 3.6% for the full year. Despite the current political turmoil in the US, the economy continues to look positive.

Author Bio: Robert Blake is a freelance financial adviser and consultant. Since gradating from university he has started writing finance articles online to help give readers a clearer understanding of the US and global economy. In his spare time he can be found visiting financial seminars.

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US Interest rates have been steadily rising since the lows in July last year, as the market reacts to both inflation pressures, FED commentary and 2 rate rises in 15 months. As a consequence interest rates have risen around 1.2% for US 10 year Government bonds since July 2016. Rising rates has created a major headwind for the US economy, as the weight of the massive debt levels for consumers and companies are starting to have a weakening effect on demand dragging the US economy towards slower growth. In spite of slowing growth economy the US stock markets are or near all time record highs as bullishness over the Trump presidency have overridden a weakening macro environment as stock investors look to the future with optimism.

Market Pricing 100% For FED Rate Rise For March

Over the last few weeks the probability of FED rate rise in March has been climbing, as a series of press releases and comments from various FED officials, including FED chairperson Janet Yellen have shown their eagerness to raise rates this month. Due to FED officials comments the market has priced in a 100% probability of rate rise when the FED holds their Federal Open Market Committee (FOMC) meeting and release their statement on the 15th March US time. 

US  Government 10 year Bond Yields Set To Break Out Towards 3.00%

With the recent talk regarding interest rate rises by the FED this week and the market now pricing a 100% certainty of FED funds rate rising by 0.25%, Government bond yields have once again started to climb higher for two straight weeks reaching previous resistance of 2.62% last Friday. (See chart below)

The important factor to note for the 10 year bond yields is if the 2.62% level is broken and closes above the resistance level indicated for the week, we will see interest rates move progressively higher towards 3.00% which is the next level of resistance.

Higher Rates To Hit Corporate & Consumer Credit Debt At Record Highs

If US Government bond yields move towards 3.00% over the coming months, a situation which is likely if the FED raises rates this week. This is going to have a major effect on slowing the US economy even further. The extremely high debt levels in the US, that were built up during a low interest rate environment created by the FED is now beginning to cause some serious problems for the economy and eventually stocks as well with small increases in rates having a larger impact on considerably higher debt levels.

The reason rising US Government 10 year bond yields is such an important factor in determining the health of the US economy, is because the majority of debt products for consumers and companies are priced from Government 10 year bond yields. In other words everyone will experience a rate rise and be negatively effected because the US is drowning in debt, with consumer credit and companies debt levels excluding financials are at record highs. (See charts below)

Crush The Market addressed the negative effects that a significant rise in rates would do towards the US economy back in November as rates began to spike higher in November with the election of Donald Trump. To view this article click the link below:

Surging Bond Yields Signalling Pain Not Growth Ahead For US Economy

Since November's article the rise in yields has played out as predicted with a slowing in a number of key macro economic data announcements, as the economy continues to slow in a rising interest rate environment causing pain for consumers, companies and the economy overall.

Consumer Credit  Debt Led By Student & Auto Loans

The picture is no different for the average consumer who is struggling under record levels of debt, with debt levels rising by approximately 1 trillion since the previous peak reached before the global financial crisis in 2008 & 2009.

The majority of the gains in debt levels have come across from an exponential increase in student debt as tuition fees for college are far outpacing CPI increases. The other main contributor for such a significant rise in consumer credit has been the boom in auto loans to the average consumer. Auto sales had previously been booming from increasing in credit for a number of years. Now as consumers are tapped out with much more debt since 2009, delinquencies are rising in the auto loans market as higher interest rates are biting hard on consumers disposable income.

The rapid increase in debt since 2009 together with increasing rates since July last year, has already been felt within the economy as various parts of the economy are now showing further continued weakness.

Higher Rates Slowing Lending Growth For Consumers

The rise of around 1.2% in US Government 10 year bond yields since July has already started to impact demand for more debt by consumers over the last year. Since the start of 2016 loan creation growth has slowed dramatically from between 9 - 10% per year to a current growth level of between 4% - 4.6% pa. Although the growth rate are in the positive the accelerating of debt growth levels is impacting retail sales within the economy. For example auto sales from the Big 4 auto manufactures have fallen by up to 11% in January 2017 from a year ago. To view auto sales data shown in my recent US economy article Click here.

Atlanta FED Slashes Q1 GDP Forecast to 1.2%

In the beginning of February this year the Atlanta FED forecasting team had set Q1 GDP as high 3.4%. Since February economic data has been released showing further deterioration and slowing in the economy with economic data missing expectations. As a result of this the Atlanta FED has had to  continually reduce their forecasts all the way to 1.2% as of March 8th. Depending on pending new economic data releases in the coming weeks we could see Q1 forecast fall below 1%.

US Gasoline Sales Begin To Fall Again

US Gasoline sales have been in structural decline for several years now, as the chart has shown below falling by over 50% since 2005.  After reaching the lows in 2014 gasoline sales began to start rising again as the economy began to gather pace as jobs and debt accumulation began to accelerate. However recent data has shown Gasoline retail sales have once again resumed their downward trend and starting falling as weakness in the economy  from higher rates is started to effect consumer demand.

Federal Government Receipts Now Negative Y/Y - First Time Since Last Recession

Similar to Gasoline sales US Federal Government receipts were growing strongly up to 2014 reaching a growth rate close to 14% y/y. Since 2014 recent high Federal Government receipts have been falling dramatically over the last 2 years, having just recently turned negative falling -1.1% Y/Y for the first time since the last recession in 2008 /9. (See chart below)

Having a closer look at the chart on the right hand side, you will notice that the majority of the decline in growth rates occurred over a relatively short time frame in 2016. This coincides with the similar time frames when interest rates stopped falling and began to rise rapidly in the second half of 2016.

US Restaurant Operators Same Store Sales Falling

The most recent data available for restaurant same store sales has been released, showing that December 2016 same store restaurant sales are the weakest they have been for in 3 years. In addition Q4 comparable sales and traffic is also down from a year ago, indicating that the restaurant industry is reeling as consumers cut back spending out for food.

 Does A Rising Interest Rate Environment Matter To Stocks?

According to history a rising rate environment has serious implications to the future performance of the market. Since the 1970's 7 out of 8 occurrences where interest rates cycles began to tighten resulted in some large corrections in the stock market. With the last tightening cycle resulting in a 56% fall in the markets in 2009.

The tightening cycle has been running for close to 9 months now as has already had a major impact to the grow rates of the economy slowing dramatically over the same period. With the potential for another rate rise occurring this week, its quite possible we could see 3% US 10 year Government bond yields in the coming months playing further havoc on the economy. Based on the last 45 years of data a tightening cycle in the US has not be very kind to stocks either as the economy reacts to higher rates.

Warning! - The Insiders Are Rushing For The Exits

Company executives are selling around 10 to 1 relative to buying trades of company stocks despite record prices for stocks. The buyer / seller ratio is also on a downtrend since peaking in late 2015  and the beginning of 2016 (See chart below)

When executives are selling in such large amounts it usually means they are seeing the writing on the wall for future earnings and prospects for the companies they run. Perhaps since interest rates are rising and the economy is slowing its starting to place pressure on future earnings targets. The next quarter earnings may provide further insights, especially since companies are conducting record amounts of buybacks that are financed from previously low rates of  debt.

The recent strong performance of stocks in late 2016 and early 2017 has masked a serious deterioration in the US economy that started as early as 2014 - 2015. With interest rates about to break out higher on the way towards 3% we could see the last legs of the economy knocked out bringing stocks down with them as earnings will start to fall again with weaker consumer demand filtering through to lower sales results.

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Stocks Bullishness At Record Highs While The US Economy Is Approaching Recession

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Russell 2000 Bullish Run Looks Tired As Momentum Falls

Disclaimer: This post is for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.

US Stocks Bullish Run Fueled By Optimism Over Real Data

Since the election results in November US soft data (survey / optimism data) has deviated from hard data (actual US economic data). More importantly since December hard data has been falling as the economic news has deteriorated. Whilst soft data has continued to shoot higher along with a very bullish stock market. 

The Russell 2000 Index (Small Cap's) review shown below will show a very strong bullish uptrend. This pattern is quite similar to the 3 main stock indices DOW, S&P 500 and the Nasdaq. This highlights that the recent market surge in US stocks is more a function of market euphoria and optimism rather than actual improving economic activity and growth within the US economy.

Russell 2000 - RUT (Small Cap's) Chart Review

Monthly Chart

The Russell 2000 (RUT) has been in an uptrend for several years now as seen in the chart below. After a 3 year consolidation pattern of mostly sideways action between December 2013 - October 2016. The RUT index broke out of resistance of 1252 in November last year after the US election result win of Donald Trump, as all indices moved higher.

Currently the RUT has established a new uptrend within its larger long term uptrend shown with the blue line on the chart below. This uptrend started after the index gave a false signal when it closed below support of 1100 back in January 2016. After hitting the lows one month later the index has been steadily climbing.

Momentum Stalling - Consolidation Or Pullback Ahead

Since the RUT has had a strong 13 month rally in prices, the momentum indicators shown in the monthly chart are indicating exhaustion of the current rally.

I have circled both the momentum and Stochastic indicator to show that both are indicating a reversal of the strength in the market. Momentum indicator is still high however has pulled back to 2.80. The stochastic currently is sitting at a bearish cross as the blue line has crossed below the red. The last time the Stochastic had a bearish cross in July 2015 (circled on chart price action) the RUT index experienced a correction in prices for the next few months.

Since its only early March, it would be appropriate to wait for confirmation at the end of the month. If the momentum indicator is confirmed we could see the price action retrace back to the current uptrend shown in the chart at around 1315 - 1320 price range.

Since the bullish rally is quite strong its unlikely we will see a retracement back to support of 1252 - 53 level. Keep this target in mind though if we experience volatility in prices in March. Especially since the FED is likely to raise interest rates by 0.25% this month.

Weekly Chart

The weekly chart is showing a similar pattern to the monthly chart with the strong rally in prices since late November. Currently the price action is at or near the upper band of the uptrend channel shown in the chart below.

RUT experienced a strong burst in price around 5 -6 weeks ago as it made a new record high above 1400. Since then the price has been consolidating as it has struggled twice to climb back above the 1400 resistance level, with 2 weekly rejection patterns shown on chart as the price failed to stay above 1400.

Weekly momentum indicator is showing more weakness compared to the monthly momentum as it has made lower lows as it now sitting at 0.06 after reaching a high of 1.88 a number of weeks ago. This indicates the strength in the market that was present as the price made new record highs has disappeared. This explains the hesitation of the index to move higher.

The weekly stochastic indicator is also indicating exhaustion of the current rally and a consolidation or minor retracement in price is likely in the coming weeks.

The weekly chart pattern is confirming the monthly price action as the recent bullish run is running out of steam at least in the short term for now. Most likely the price action will move towards the lower uptrend channel band around 1300 - 1305 level. Based on the current bullish optimism its unlikely the price action will move towards support of 1282 - 84 level.

For confirmation of the retracement in price on the weekly chart, look for a weekly close below the 10 week moving average line which is currently at 1377 level.

Daily Chart

The daily chart price action as of last Friday's close on the 3rd of March is sitting just above its support level at 1,394. After breaking out approximately 2 weeks above the 1388 level the price action has been moving sideways and above its previous resistance level which is a bullish indication.

Contradicting the price action above the 1,388 level is that both Momentum indicators are showing a loss of strength in the market. Momentum has recently moved negative to -0.02 and the stochastic has also had a bearish cross a number of trading days ago. This means in the short term its likely we will see the RUT index close back below the 1,388 level.

If the index does close below 1,388 level, pay attention that the index stays within the previous sideways range between 1345 - 1,388. If the RUT index falls below 1,345 support level over the next 1 - 3 weeks the next target of support is 1,313.

Wildcard Event

Based on the strong bullish run of the RUT index and the major US stock indices, its unlikely we will see a retracement / fall in prices greater than 10% over the short to medium term time frame. However the FED will be meeting on the 14th & 15th of March to decide whether interest rates are rising in March. The decision will be made on the 15th. Based on prior announcements of a rate rise the market may experience with 1 - 3 days of the announcement a lot more volatility. If this was to occur we could see a mini panic of selling as the market digests the news. Therefore the wildcard this month is the FED announcement in the middle of the month that you should be weary of.

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Disclaimer: This post is for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.