The Dollar Index crashed on this week’s Trump turmoil. Follow-through below 98.50 confirms a primary down-trend with a medium-term target of the 2016 low at 93.
* Target: 99 – ( 104 – 99 ) = 94
Spot Gold found support at $1250 after Thursday’s retracement. Follow-through above $1260 would indicate another primary advance, with a target of $1300. Reversal below $1220 is unlikely but would signal a primary down-trend.
The big banks fell sharply on the week’s turmoil, with the ASX 300 Banks Index breaking support at 8500. Breach signals a primary trend reversal, offering a medium-term target of 8000*.
* Target: 8500 – ( 9000 – 8500 ) = 8000
Resources stocks rallied over the week. Expect strong resistance on the ASX 300 Metals & Mining index at 3000.
Iron ore continues in a bearish narrow consolidation above support at $60. Breach would offer a short-term target of $50*.
* Target: 60 – ( 70 – 60 ) = 50
These are ominous signs for the ASX 200 which is testing medium-term support at 5700. A sharp fall on Twiggs Money Flow flags strong selling pressure. Breach of primary support at 5600* would signal a reversal, offering a target of 5200*.
* Target medium-term: 5600 – ( 6000 – 5600 ) = 5200
Discussion of a possible impeachment action against President Donald Trump is rife in the media and seems to have spooked financial markets.
The Dollar Index fell through support at 98.50, signaling another decline. The long-term target is 93.00.
Gold rallied, breaking through resistance at $1250/ounce. Follow-through above $1300 would signal another advance, with a target of the 2016 high at $1375.
Dow Jones Industrial Average retreated from resistance at 21000. Expect a test of medium-term support at 20400. Reversal below 20000 would be cause for concern.
The S&P 500 is headed for a test of medium-term support at 2320. Breach would likewise signal a strong correction.
We are likely to get a secondary correction but I expect the bull market to continue. Impeachment of Trump would be a temporary setback and would make me more bullish on the long-term outlook.
It’s probably better to have him inside the tent pissing out,
than outside the tent pissing in.~ President Lyndon Johnson on FBI Director J. Edgar Hoover whom he mistrusted
Copper is testing long-term support at 5400, suggesting weak demand from China. Breach would signal a primary down-trend.
The Yuan has enjoyed a respite, consolidating in a narrow line for several weeks. But this is likely to prove temporary, with further advances of the Dollar against the Yuan eroding PBOC foreign exchange reserves.
Shanghai’s Composite Index broke support at 3100, signaling a primary down-trend, but the long tail indicates buying support. Recovery above 3100 would suggest a false signal (or government intervention) while respect of resistance would confirm the down-trend.
* Target medium-term: May 2016 low of 2800
The big banks fell sharply on news of a new levy on bank liabilities in the latest budget. At this stage the ASX 300 Banks Index merely shows a secondary reaction. Breach of 8500, however, would signal a primary trend reversal, offering a medium-term target of 8000*.
* Target: 8500 – ( 9000 – 8500 ) = 8000
Resources stocks compensated, with the ASX 300 Metals & Mining Index rallying to test resistance at 2850/2900. Breakout is unlikely given the weak lead from iron ore. Reversal below 2700 remains likely and would strengthen the bear signal for resources.
Iron ore formed a bearish consolidation above support at $60. Breach would offer a short-term target of $50*.
* Target: 60 – ( 70 – 60 ) = 50
Selling of the Aussie Dollar continues, with a medium-term test of primary support at 71.50/72.00 now likely.
Consolidation of the ASX 200 above support at 5800 is a bearish pattern. Breach would signal a correction to test primary support at 5600*. Twiggs Money Flow still indicates long-term buying pressure and only a fall below zero would warn of a reversal.
* Target medium-term: 5800 – ( 6000 – 5800 ) = 5600
The Dollar Index rally ran into resistance at 100. Reversal below last week’s low would signal a medium-term decline to 94*.
* Target: 99 – ( 104 – 99 ) = 94
Spot Gold found short-term support at $1220. Recovery above $1250 would signal resumption of the primary up-trend but a test of $1200 is more likely and breach would signal reversal to a primary down-trend.
Copper is widely considered to be a barometer of the global economy, with prices rising when the outlook improves. Currently A-grade Copper is testing support at 5400. Breach would confirm Chinese selling pressure, offering a target of long-term support at 4500.
Nymex Light Crude broke support at $47/barrel, signaling a down-trend. Follow-through below $45 would confirm.
Lars Christensen shows that projected oil demand is closely linked to monetary conditions, with a down-turn in oil prices whenever the Fed announces further rate hikes. At present both the PBOC and the Fed are adopting a restrictive stance which should be bearish for crude oil.
Iron Ore broke support at $60, warning of a decline to test the 2015 low at $40.
China’s crackdown on wealth management products may be fueling the sell-off.
Lars Christensen is one of the founding members of the Market Monetarism school of economic thought, having coined the term himself. Market Monetarists advocate that central banks target nominal GDP, instead of inflation, in order to achieve more responsive monetary policy and more stable economic growth.
