Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20
Global "Debt Mountain": Beware of This "New Peak" - 13th Nov 20
Overclocking Zen 3 Ryzen 5600x, 5800x, 5900x and 5950x to 4.7ghz All Cores Cinebench R20 Scores - 13th Nov 20
Is Silver Leading Bitcoin or is Bitcoin Leading Silver? - 13th Nov 20
How Elliott Waves Simplify Your Technical Analysis - 13th Nov 20
How to buy Bitcoins using debit/credit card? - 13th Nov 20
Will COVID Vaccine Kill Gold and Silver? - 12th Nov 20
Access to Critical Market Reports - 12th Nov 20
Stock Market Dow Futures Reach 30,000 on News of COVID-19 Vaccine Trials Success - 12th Nov 20
8 Terms & Conditions You Must Know Before Asking For Life Insurance Policy Quotes - 12th Nov 20
Gold Stocks Post 2020 US Election Outlook - 11th Nov 20
Champions’ League Group Stage Draw: All You Need To Know - 11th Nov 20
Stock Market Secular Trend - 11th Nov 20
Stock Market Correction Curtailed by US Election - 11th Nov 20
What Causes a Financial Bubble? - 11th Nov 20
Ryzen 9 5900X RTX 3080 - Scan.co.uk vs Overclockers.co.uk UK Custom PC System Builder Review - 10th Nov 20
Killing Driveway Weeds FAST with a Pressure Washer - Saving Block Paving from LOTS of WEEDs - 10th Nov 20
Trump Fired, Biden Hired, What Next?  - 10th Nov 20
Looking for a Personal Loan? Here Is What You Have To Know  - 10th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Rising Euro, Falling Dollar, Market Correlations Turned

Stock-Markets / Financial Markets 2012 Dec 28, 2012 - 07:18 AM GMT

By: P_Radomski_CFA

Stock-Markets

This week has brought in some calm after recent declines in the precious metals sector. Everybody seems to be waiting for some more decisive moves (both in the markets and on the part of the government, as the “fiscal cliff” issue has not been resolved yet), but these are not very likely before the beginning of the New Year.


Meanwhile, currency markets have been moving in the direction that makes precious metals investors happy – or should make them happy, were the situation “normal” – i.e. were the correlations between precious metals and the U.S. dollar strong and negative. Quite unfortunately, the situation is far from normal, but this is likely due to the abovementioned “fiscal cliff” problem and the uncertainty caused by the lack of final solution. Let us then move on to the technical part of today’s essay and see what we can figure out from the charts and correlations – we’ll start with the euro’s long-term chart (charts courtesy by http://stockcharts.com.)

Recall that two weeks ago, we had discussed that if the index closed above 132, the breakout would be confirmed and higher values likely. A small decline was seen last Friday, but the Euro Index is once again above the 132 level. If it closes the week in this trading range, the breakout above the September high will be confirmed and a further move to the upside likely. The 138 level appears to be within reach if this holds true. All-in-all, the Euro Index picture this week has bearish implications for the dollar.

Now, let’s move on to the U.S. currency – we’ll start with the medium-term chart.

A consolidation has been ongoing for over a month, and the index now appears ready to move lower. The decline and consolidation here are a reflection of the upswing and consolidation seen recently in the Euro Index.

Let’s have a look at the short-term USD Index chart now.

In the chart, there is an interesting development. A small rally lasting a few days has been seen and this makes the current situation quite confusing. The cyclical turning point is upon us and if it wasn’t preceded by a pullback, higher values would be likely to follow. The very short-term trend however has already been to the upside, so we could see a reversal and lower index values. (The Euro Index could continue to rally without a pause as well, or more precisely, after a small pause that is not visible on the above chart that is created based on weekly candlesticks.) In short, it seems that lower values are more than likely to be seen in the USD Index. If the precious metals begin to respond positively to this weakness in the dollar, the short-term picture could quickly become bullish for gold, silver and mining stocks.

To put the above analysis into proper perspective, let’s check the current correlation values.

The Correlation Matrix is a tool which we have developed to analyze the impact of the currency markets and the general stock market upon the precious metals sector.

The Correlation Matrix is quite confusing this week as it shows that the coefficients have truly turned upside down. They are pretty much neutral for silver when it comes to the 30-day period, but clearly upside down for the 10-day one, as well as for gold and the precious metals mining stocks.

The strangest picture here is between gold and the USD. Gold generally moves opposite of the USD Index but has been pretty much in tune with it for the last 30 days and has moved in the opposite direction of stocks. In short, the situation is far from normal. However, it seems that this situation will turn back to normal quite soon and the chart below explains why.

The decline in the above chart does quite a good job in representing the simultaneous slide in the dollar and the price of gold (the thing that made the correlations turn upside down in the past 30 trading days). On the above chart we see that the decline is excessive and likely to end or at least pause very soon, so the correlation might return to its normal state in a week or two.

The RSI levels are not much above 30, so further short-term strength is suggested here. If the breakdown is invalidated, the picture then would become clearly bullish.

Summing up, the situation in the Euro Index improved this week while it deteriorated in the USD Index. Since the cyclical turning point in the latter is quite close and a small rally was seen this week, the implications are bearish. If the precious metals sector begins to respond, then much more strength will likely be seen in gold, silver and mining stock prices.

We expect to see a return of the negative correlation between the USD Index and the precious metals very soon.

Use the following link to sign up for a free, no-obligation trial of our Premium Service and read the complete version of this study that is over 10 times bigger. You’ll also receive Market Alerts on a daily basis and when the trial expires, you’ll start receiving our free newsletter. Additionally, you will also receive 12 gold best practice emails.

Thank you for reading. Have a great and profitable week!

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Gold & Silver Investment & Trading Website - SunshineProfits.com

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules