The Dollar Index continues to test support at 96.50. The primary trend is down and breach of support is likely, signaling a decline to test the 2016 low at 92/93.
Spot Gold found support at $1250. A weaker Dollar and rising political uncertainty both favor an up-trend but rising interest rates are expected to weaken demand. Respect of support at $1250 would confirm the up-trend, while breach of $1200 would warn of another decline.
Crude could fall to $30/barrel next year — and stay there for two years — according to Fereidun Fesharaki, chairman of consultants FGE.
Oil at $30/b oil next year if OPEC fails to deepen cuts, IAEE conference hears https://t.co/wUuljZcdya pic.twitter.com/RWTPCUkxBv
— Oilpro (@Oilprocom) June 20, 2017
Nymex Light Crude breached support at $45/barrel, signaling a primary decline. Expect further support at $40 but penetration of this would target the 2008 low at $30 and the 2016 low at $25 a barrel.
The Dollar Index is finding support at 96.50/97; the latest long tail on the weekly chart signaling buying pressure. But the primary trend is down and breach of support would signal a decline to test the 2016 low at 92/93.
Spot Gold is testing support at $1250. Fundamentals, like a weaker Dollar and rising political uncertainty, still favor an up-trend. Respect of support at $1250 would confirm. Breach of $1200 is unlikely but would warn of another decline.
Strange week on the ASX, with strong jobs numbers from the ABS causing a surge in the Aussie Dollar and a more optimistic outlook on the ASX.
But Iron ore continues to fall, headed for a test of 50.
The ASX 300 Metals & Mining index respected resistance at 3000 and is headed for a test of primary support at 2750. Breach would confirm the primary down-trend.
The ASX 300 Banks index respected resistance at 8500 and is likely to test primary support at 8000. Again, breach would confirm the primary down-trend.
The ASX 200 has formed a broadening wedge consolidation, in a down-trend. Declining Twiggs Money Flow indicates some selling pressure. Expect a test of primary support at 5600. Again, breach would warn of a primary down-trend. But a failed swing (that respects 5700) would warn that all bets are off and the index may be preparing for a rally.
Nymex Light Crude is testing support at $45/barrel. Breach would offer an immediate target of $40. Follow-through below $40 would signal another test of the 2008/2016 lows at $30.
The chart below plots long-term crude prices adjusted for inflation. Recent falls show real crude prices returning to their previous trading range (0.1 to 0.2) before the 2004 to 2015 “China boom”.
The 2004 to 2015 surge in crude prices is very likely a major cause of low global growth over the last decade. Return to the previous trading range would be a bullish sign for the global economy.
Last week I wrote: “I believe that the latest rally is a secondary reaction and that the ASX is headed for a down-turn, with miners and banks leading the way. But it’s no use arguing with the (ticker) tape.” This week the ticker tape backs up my bearish sentiment, so I am a lot more comfortable.
Iron ore continues to fall, headed for a test of 50.
Banks’ bear market rally also petered out, with the ASX 300 Banks index headed for a test of support at 8000. Breach would confirm the primary down-trend.
The ASX 200 broke support at 5700. Declining Twiggs Money Flow signals selling pressure. Breach of primary support at 5600 would warn of a primary down-trend.
The Dollar Index found short-term support at 96.50/97 but the primary trend is down. Breach of support is likely and would signal another decline. The medium-term target is the 2016 low at 92/93.
Spot Gold encountered resistance at $1300/ounce and is retracing to test support at $1250. Fundamentals, like a weaker Dollar and rising political uncertainty, still favor a continued up-trend. Respect of support at $1250 would confirm.
The Dollar Index continues its downward slide. Breach of support at 97 indicates another decline. The medium-term target is the 2016 low at 92/93.
Spot Gold is advancing strongly, having broken resistance at $1260. The immediate target is $1300.
Iron ore is falling.
And the broader DJ-UBS Commodity Index is testing support at 82. Breach would signal a decline to test the 2015 low at 74.
But the Aussie Dollar rallied Friday, the large engulfing candle suggesting another test of resistance at 75 US cents.
Miners finished strongly, with the ASX 300 Metals & Mining index reflecting short-term buying pressure. 13-Week Twiggs Money Flow recovered above zero.
The ASX 200 is testing resistance at 5800. A 21-day Twiggs Money Flow trough above zero indicates medium-term buying pressure. Breakout above 5800 is likely and would suggest another test of 5950/6000.
Banks also rallied, with the ASX 300 Banks index headed for a test of 8500. Expect strong resistance.
Perhaps this UBS report had something to do with it.
I believe that the latest rally is a secondary reaction and that the ASX is headed for a down-turn, with miners and banks leading the way. But it’s no use arguing with the (ticker) tape.
A prudent speculator never argues with the tape. Markets are never wrong, opinions often are.
~ Jesse Livermore
If you want to know why RIO is higher today than when iron ore was at $92 then check this out from UBS:
Hitting the Wall or Just a Wobble?
Australian equities performed poorly in May (falling 3%) despite global markets posting solid gains (rising 2%). The market weakness in May was overwhelmingly driven by the heavyweight banks sector. On balance we believe “hard landing” fears are overdone though we concede that the consumer outlook is lacklustre.
Staying Overweight Resources and Neutral Banks
We continue to overweight the resource sector on the basis of relative valuation, and benign (iron ore) to moderately constructive commodity expectations (copper, oil, mineral sands). With the bank sector off 10% (total return), we think the sector is once again looking “fair” in an absolute sense (12.8x and 5.9% yield) and notionally cheap in a relative sense. A constrained growth outlook and near-term capital uncertainty keep us neutral.
Other Favoured Themes
From a thematic standpoint two of our key themes remain 1) public infrastructure exposure (we continue to hold Boral and Lend Lease Group) and 2) domestic energy suppliers continue to be well supported by investors (we continue to hold AGL Energy, Origin Energy). We continue to overweight US$/US economy plays.
What can I say? That’s some crazy shit.
