Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

4 Measures of Market Risk to Keep an Eye on

Stock-Markets / Stock Markets 2019 Aug 27, 2019 - 07:21 AM GMT

By: Submissions


It wasn't a big surprise that President Trump commented earlier today that trade negotiations with China have reopened. Had he not done so, it would have led to further losses in the equities markets and potentially a significant technical break in the S&P 500.

The appetite for risk is back, the question is whether it is here to stay. Based on charts of some of the commonly traded assets in times of risk aversion, I think a case can be made that a bottom is in for risk appetite, or at least, we might be close to one.

Starting with equities, the S&P 500 has traded in a range for most of the month. Friday's decline had momentum behind it. As mentioned, the absence of Trump's comment earlier today would have likely led to a downside continuation.

Had SPY opened lower today, I think it would have caused some panic among technical traders. A break below the mid-August low would have been inevitable. Perhaps the 200 DMA might have temporarily brought some buyers, but a downside range break would have been in the cards, and I expect such a scenario would have let to a further liquidation in equities. I also think it would have encouraged bears.

Instead, equities are catching a bid in pre-market trading. Sure, there was a break below the August 15th low in the futures market, but the US open won't reflect that. The upward momentum and overall shift in risk sentiment are likely to keep equities bid. At the very least, the range in SPY remains intact.

Turning over to bonds, there is some potential for a reversal. But to be clear, I'm not in the habit of making 'catch the falling knife' type of calls and suggesting that bonds have topped is exactly that. Rather, I'd like to point out to the technical significance of where the 10-year yield bounced today.

The above chart is a monthly view of the 10-year yield. Note the importance of support at around 1.45%. In 2012 it triggered a turn for a move back above 3%. It did the same once again in 2017.

But as mentioned, the momentum is down. There isn't enough technical evidence of a turn. But I do think this an important area for the instrument, and I would not be chasing it lower here.

Next is the Japanese yen. Looking at the front-month futures contract, there is a level near 0.0095 that has capped rallies for the last three weeks. This is a level that acted as support in 2013 and has been a major hurdle since 2018.

At the same time, the momentum is clearly to the upside here. Making a case that a meaningful reversal is likely to take place here is a tough one. At the same time, going into the end of the month, I think the yen will struggle to make further gains.

There is not enough technical evidence of a turn in all of the above, but I think the technical picture suggests that there is no reason to be aggressively bearish risk. It is very possible that a divergence can even take place where some instruments continue while others reverse.

Having said that, it seems like Gold might have some further upside, but there is certainly a significant amount of resistance in place.

Looking at the monthly chart of spot gold below, there is a fairly significant resistance confluence up above. It stems from a horizontal level at $1562 which was well respected during 2011 and 2012. Slightly above it, the 61.8% Fibonacci retracement of the drop from 2011 highs comes into play.

From a fundamental perspective, progress in trade talks with China will ultimately remain a major driver for risk. There have been talks that Trump will want to wrap up negotiations so as not to cause damage to the economy and the equity markets ahead of the elections. I agree with this view, and I expect that he will continue to try and intervene whenever possible during periods of risk aversion, either through his twitter account or press releases. He did exactly this ahead of the market open today, perhaps it’s the start of a new trend.

By Jignesh Davda

The Gold Analyst

Quality Analysis of the Price of Gold

© 2019 Jignesh Davda - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - 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