IMF Expects Precious Metals Index to Rise

IMF’s economic outlook for 2020 is less grim, but the more distant future is more worrisome. Therefore, the precious metals index is expected to rise.

October’s edition of the IMF’s World Economic Outlook Report is out! The main message that the report conveys is that the IMF now predicts a less severe global contraction than in 2020 but a slower recovery in 2021 . The global economy is projected to plunge 4.4 percent this year and rise 5.2 percent in the subsequent year, contrary to the -5.2 and 5.4 percent changes forecasted in June.

Unfortunately, the prospects for emerging countries, excluding China, have worsened, and the economic decline for 2020 is projected to be greater than previously estimated. As a result, the pandemic will reverse the progress made since the 1990s in reducing global poverty.

When it comes to the US economy, it is forecasted to contract by 4.3 percent this year before growing at 3.1 percent in 2021, compared to -8 percent and 4.5 percent seen a few months ago. However, the reasons for the celebration are limited, as these projections could be revised down soon.

You see, the problem is that the second wave of the coronavirus cases (see the chart below) is hurting the employment rate again.

As the chart below points out, the number of Americans who applied for unemployment benefits has recently risen to the highest level over the last few weeks.

Even though the IMF’s near-term projection improved, another issue is that the baseline forecast envisages growth to slow down into the medium term , as the deep downturn this year will harm the supply potential. It means that the US will only modestly progress toward the 2020–25 path of economic activity projected before the epidemic .

Most importantly, the subdued outlook for medium-term growth comes with a significant projected increase in public debt stock. What is worrying is that the reduced potential output also implies a smaller mid-term tax base than previously anticipated, making repaying debts even more difficult.

Indeed, debt is an increasingly pressing problem all over the world , including the US. As a matter of fact, according to the IMF’s Fiscal Monitor , the debt-to-GDP ratio will stabilize next year everywhere but China and the US:

In 2020, government deficits are set to surge by an average of 9 percent of GDP, and global public debt is projected to approach 100 percent of GDP, a record high. Under the baseline assumptions of a healthy rebound in economic activity and low, stable interest rates, the global public debt ratio is expected to stabilize in 2021, on average, except in China and the United States.

However, public debt is not the only big problem in the US. Corporate indebtedness is also a worrying issue . In response to the coronavirus crisis, firms have also taken on more debt to cope with the reduced income and cash shortages, adding to the already high debt levels. Therefore, if the recovery is delayed, “liquidity pressures may morph into insolvencies,” according to the IMF’s Global Financial Stability Report . So far, the policy support limited the scale of bankruptcies. Still, the economists from the Bank of International Settlements predict that bankruptcies in advanced economies could rise from the baseline in 2019 by around 20 percent in 2021.

Implications for Gold

What does all the above mean for the gold market? Well, the improved near-term outlook for the US economy is not good news for the yellow metal. However, the slower expected growth in 2021 and beyond is becoming more positive. Notably, “the global economy’s long ascent back to pre-pandemic levels of activity remains prone to setbacks”. In other words, the uncertainties persist, which should support the safe-haven demand for gold as a result .

It is perhaps why the IMF expects that the precious metals index will increase by 28.4 percent in 2020 and by an additional 10.4 percent in 2021 amid the elevated risks and dovish monetary policy .

The growing coronavirus cases, subsequent worries about the already fragile recovery, US presidential election uncertainty have recently pushed gold prices above $1,900, as one can see in the chart below.

What is most important here is that the price of gold managed to rise above $1,900 again, despite the declining odds of a new fiscal stimulus before the elections and the resulting S&P 500 Index decrease. Gold’s decoupling from the stock market would increase its role as a safe-haven asset.

However, it might be the case that gold is just hovering around $1,900 right now, and it needs a fresh catalyst to continue its rally . Who knows, maybe the US presidential elections, which are likely to be contested, will provide such a trigger? We will elaborate on this later – stay tuned!

In order to enjoy our gold analyses we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

 

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

Further Price Pressure as the USDX Is About to Rally

Gold, mining stocks, and the USD Index have not been doing much recently. However, yesterday, this “inactivity” took quite a decisive shape, and unfortunately, things are not looking good for gold.

As you are all aware, gold tends to move conversely to the USD Index. Therefore, it’s useful to focus on the latter for signs that would influence the former. So, what does the current USDX outlook look like?

Well, it looks like the USDX is about to rally. It broke above its medium-term resistance line and verified this breakout. This verification took the form of a decline based on a more recent short-term breakout, which seems to have ended.

From a medium-term point of view, since the market had to correct before moving higher again, it’s no wonder that it had to do the same from a short-term perspective as well.

Based on the chart above, the outlook for the USD Index is bullish.

But, before we move to gold, please pay attention to the shape of the last candlestick. The USDX moved relatively lower, almost touching the declining support line.

Considering the above, one might have expected to see a visible daily gain in gold – maybe with a small correction, but again, with a substantial gain in terms of daily closing prices. So, did we witness something like that?

Not really.

Gold was marginally up, which is a notable bearish indication. The bearish confirmation comes from the fact that gold tried and failed to break above the declining resistance line.

Above the resistance line, gold took only a small comeback from the USD Index that made gold invalidate its intraday breakout. It is a clear sign of weakness.

And you know what precious metals sector sign of weakness is even more visible? It’s yesterday’s action in gold and silver mining stocks .

Namely, miners have declined adamantly– much more visibly than gold. This type of underperformance is what precedes the decline. Or, more precisely, it is often the very initial part of a more significant decline.

That is a perfect cherry on the bearish analytical cake that we’ve “baked” in our previous analyses. Over a week ago , we wrote that the situation was reminiscent of the earlier cases, marked with blue ellipses. Namely, the GDX ETF moved only a tad higher, which was the final top for at least some time. We argued that the strong daily rally that started with a bullish price gap was not so bullish after all. Indeed, over a week later, once again, miners are visibly lower.

Of course, based i.a. in the USDX situation, most probably, this is not the end of the miners’ decline, but rather, it is just the beginning. The situation relative to the 50-day moving average (marked with blue) confirms it. After all, back in March, miners moved slightly above their 50-day moving average only to plunge shortly after that, and the current situation is the only similar case to the above. There were no other cases when the miners broke below this MA and then moved back up slightly above it, declining once again afterward.

And due to the above, if the situation wasn’t bearish enough, the Stochastic indicator based on the GDX ETF has just flashed a clear sell signal.

All in all, currently, the outlook for the precious metals market remains bearish.

As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

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 subject to change without notice. Opinions and analyses are 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 deemed 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.

 

ParagonEX Dynamic Announces Groundbreaking Arabic Trading Tools At Virtual Expo

The company has established trust in the Fintech sector as a reliable software provider that guarantees a positive experience. Each solution offered by ParagonEX Dynamic is carefully developed, ensuring businesses get feature-rich, state-of-the-art tools that drive business growth. Soon, the company will showcase its groundbreaking new Arabic trading tools at the Finance Magnates Virtual Summit 2020.

A Strong Focus On The Arabic Market

There are 420 million Arabic speakers worldwide and Arabic traders are increasingly focused on new technologies. Fintech in particular, has become the focus for significant attention in the UAE and MENA more broadly, with more than $100 million of capital raised to date for

finance-related tech startups. The Arabic market is one familiar to ParagonEX Dynamic who strive to provide tailored trading products for customers in this region. The latest addition is an update to the ForexPro platform.

ParagonEX Dynamic customers are now able to easily experience the Arabic market without additional financial investments. The company translated the trade room and all required widgets for the ForexPro platform using Arabic market professionals. Adding a major market to its vast portfolio in the midst of a difficult year, is a big achievement for the company.

“We are eager to showcase the functionality of our newly added tools.” said CEO Amnon Goldrat. “We are already getting so much positive feedback from our clients in the region and we are keen to take more steps to meet demand.”

An Opportunity to Connect

To showcase its new Arabic trading tools, amongst others, ParagonEX Dynamic will be exhibiting at the Finance Magnates Virtual Summit 2020, scheduled for November 18. Finance Magnates’ annual London Summit has taken a virtual twist this year due to the ongoing pandemic.

During times when in-person contact is limited, businesses need to maximise their online reach. That means using the virtual world to build partnerships, engage with other businesses and learn about the latest developments in the sector. The Finance Magnates Virtual Summit 2020 will offer ParagonEX Dynamic the perfect platform to engage with a global audience, industry leaders and influencers. It will also offer opportunities for the company to showcase its innovative business solutions through public and private chat, video and audio calls, one-on-one meetings, and Q&A sessions.

The event will bring together 3,500+ attendees, 130+ speakers and 150+ exhibitors. Therefore, it is a valuable space to reach out to businesses involved in Retail & Institutional Online Trading, Digital Assets & Blockchain, Payments and FinTech & Innovation.

What ParagonEX Dynamic will Highlight at the Summit

With a commitment to innovation, ParagonEX Dynamic is dedicated to anticipating rapid changes in the finance sector and pre-empting solutions. To demonstrate what sets the company apart, various services and solutions will be exhibited at the summit, such as:

Custom Trading Software Solutions

ParagonEX Dynamic offers white-label trading software that brokers and fintech service providers can customise. This versatile platform is powered by the latest technologies and has been designed to be easy to understand for traders of all levels of experience. Among its outstanding features is Social Trading, which allows traders to learn from experts and even copy trading strategies. The user-friendly Portfolio Manager helps traders implement various portfolio strategies to manage risk and maximise chances of success.

The platform can be further customized with the integration of MetaTrader 5, for brokers who offer multiple trading instruments. The All-in-One CRM provides a satisfying interaction with the brokerage or fintech firm. While partners can effortlessly integrate affiliate networks, with rich features like tracking automation. Most importantly, integrating preferred payment providers is completely hassle-free.

To enhance retention and to lower churn rates, businesses can also offer value-added services through the platform. These services include:

  • Excellent customer care, delivered by domain experts
  • Dedicated technical support and account management
  • Online sessions and virtual instructors to explore the back-office features of the platform
  • Tips and guidelines for businesses wanting to make the most of all the functionalities

In addition, all the raw data is analysed to create custom reports that can be used to improve operational efficiency and grow the business.

Additional Services

ParagonEX Dynamic also offers tailor-made solutions for business, such as:

  • API Integration: The company’s proprietary, cutting-edge widgets can be integrated for immediate implementation on any operating platform.
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In addition to these, the company also offers 360° comprehensive solutions, including:

  • Servers Hosting
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  • Integration with Market Data Feeds
  • Integration with Payment Processing
  • Multi language support- including Arabic

“We value our clients as business partners. We translate advanced technologies into meaningful tools for them to use. We treat their goals and objectives as our own,” explained CEO Amnon Goldrat.

ParagonEX Dynamic aims to enhance each client’s competitive edge by consistently exceeding client expectations. Contact the team at the Finance Magnates Virtual Summit 2020 or via their website below.

For more information, visit ParagonEX Dynamic  or email INFO@PARAGONEX-DYNAMIC.COM

GOLD Bears Continue to Dominate

Gold is still bearish and I can see new drop coming at the POC zone if the price makes a retracement.

78.6-88.6 makes a good confluence with historical sellers. We can see the zone which also shows historical selling, so I expect the price to reject. The zone is 1915-1920. However there is still range present in the gold markets and the final target is 1882. If the market breaks lower than it will be a continuation of the downtrend. As fas as bears are concerned, even 1925 could be good for selling, but I doubt the price will get there today.

For a look at all of today’s economic events, check out our economic calendar.

 

EUR/USD Bulls Fighting to Reach 1.1925 Target Zone

The EUR/USD made a strong bullish bounce at the 61.8% Fibonacci support zone. This could indicate a larger bullish ABC pattern (purple).

This article will indicate the key zone for the confirmation of the breakout. We also review the targets and invalidation spots.

Price Charts and Technical Analysis

EUR/USD 4 hour chart

The EUR/USD is testing a key resistance trend line (orange). A bullish breakout above the resistance trend line (orange) and Fractal (red box) confirms the uptrend continuation (green arrows).

In this case, price action is expected to reach the Wizz and Fibonacci targets. The main target could be as high as 1.1925-50 zone where the larger wave C (purple) could be completed.

A bearish breakout (orange arrows) is expected to be just a pullback within wave B (purple). A bullish reversal (blue arrows) could confirm the current wave pattern. Only a break below the bottom invalidates it (red x).

On the 1 hour chart, price action is using the 21 ema zone as a support for a bullish bounce. The 50% Fib also remains a key support zone.

A break below the top of wave 1 invalidates the wave 1-2-3 (purple) pattern but not the entire bullish outlook. Only a break below the bottom would invalidate the entire bullish pattern (red x).

EUR/USD 1 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

For a look at all of today’s economic events, check out our economic calendar.

 

Dollar Comes Back to the Bearish Territory

Nasdaq is still below dynamic and horizontal resistance

SP500 is on a good way to break crucial levels and go higher

DAX sharply bounces from the 12960 points

Dollar Index ignores the inverse head and shoulders and creates a flag. Situation here is bearish

EURUSD are flirting with important dynamic resistance

GBPUSD are one step from breaking 1,3 – the most important level in the past few weeks

AUDUSD with a small bullish correction but the main sentiment is very negative

EURAUD makes another attempt to escape from the long-term rectangle

EURCHF breaks crucial support and later tests it as a resistance. Pretty standard price action move

Gold tries to go higher but the upper line of the pennant looks well defended

Trade the US Election ‘Game of the Throne’ Volatility

Seychelles, 19 October 2020– For the many people, the US Election has turned into a saga not unlike a presidential ‘Game of Thrones’. To give everyone the best support to trade the volatility caused by the Presidential and Senate elections, global investment gateway, Squared Financial, has launched an innovative deposit bonus campaign.

Ahead of the US election, on the 3rdNovember 2020, SquaredFinancial is giving investors an additional deposit bonus to boost their trading. The exclusively offer is available for new clients who register between the 19thof October and the 6thof November 2020.

SquaredFinancial’s deposit bonus campaign gives traders the specialist tools they need to interpret how different election outcomes could impact global financial markets. Squared’s highly regarded analysis team will provide exclusive election insights, including:

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Manie Van Rooyen, Chief Executive of SquaredFinancial Seychelles, said: “This campaign forms part of our wider strategy of adopting a client-centric approach. It reflects our ongoing efforts to respond to the needs of traders through innovative technology, insightful educational resources and proactive customer support.”

The SquaredFinancial US Election campaign will allow qualifying traders to get up to a 25% deposit bonus in addition to the exclusive information and insights. The level of deposit bonus will be linked to levels of trading and offers a fantastic opportunity to make the most of the election volatility.

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S&P 500 Testing Critical Fractals after Bounce at 21 EMA

The S&P 500 made a critical break above the 21 ema zone. The bulls are in clear control but can price action break above the critical resistance trend line (orange)?

Let’s review the key decision zones and expected wave patterns on the S&P daily and 4 hour charts.

Price Charts and Technical Analysis

S&P 500 daily chart

The S&P 500 has made a break, pullback and bounce pattern at the 21 ema zone. Price action must now break above the resistance Fractal for a confirmed bullish continuation (green arrow) within wave 5 (pink). The main targets are at the round 30,000 level and 30,750.

If price action breaks below the 21 ema zone (orange arrow), then the wave 4 (pink) pattern is not completed. In that case, we expect price action to retrace and test the long-term moving averages.

A bullish bounce (blue arrows) at the support zone could confirm an ABC pattern via the wave 4 at a later point (pink 4’). A break below the long-term moving averages, however, would invalidate (red x) the bullis outlook.

On the 4 hour chart, price action must break above the resistance trend lines and fractals (orange line) for a bullish breakout (green arrows) within the wave 5 (purple). A break below the 21 ema zone could trigger a deeper retracement (orange arrows).

A bullish bounce (blue arrows) at the long-term moving averages support zone (blue boxes) could confirm a wave 4 at a later spot (4’ purple). But a break below that zone, however, indicates a bearish ABC (red) correction that could take the price way lower. This could indicate the start of a deeper correction.

S&P 500 4 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

For a look at all of today’s economic events, check out our economic calendar.

Stimulus Hopes Keep Stocks Afloat

The dollar was little changed against its major peers, gold traded slightly higher and crude oil fluctuated ahead of today’s OPEC+ Joint Ministerial Meeting.

China’s Q3 missed expectations

China’s GDP grew 4.9% in Q3 compared to last year, coming up short of market expectations for 5.2% growth. Despite the miss, China remains the only major economy to post growth for the first nine months of 2020. Other indicators are also pointing towards a broader recovery which could be reflected in GDP for the final quarter of the year, if sustained.

Fixed asset investments turned positive for the year, increasing 0.8% in the first nine months of 2020. Retail sales rose 3.3% year-on-year in September in a clear indication that consumers are confident enough to open their wallets again. Finally, also released today was the industrial output figure which was another bright spot, growing 6.9% in September, the fastest since December 2019. This should make China more appealing to investors as fundamentals are catching up with stock market performance, while most major economies still have a tough road ahead towards full recovery.

Stimulus Hope

Market participants are fed up with US politicians as the deadline for coronavirus relief continues to be pushed further out, with House Speaker Nancy Pelosi setting this Tuesday as the latest line in the sand. A stimulus package is certainly required at the moment with US infections topping 50,000 for a fifth straight day while millions of Americans need aid with rising economic stress. Given recent history, it’s hard to say whether a bill will be approved or not, however the earlier the bill is signed the better it is for households, the economy and equity markets. The slight rise in US Treasury yields and futures are signs of optimism that a deal could be reached before 3 November, but chances of disappointment remain high.

Prepare for a no Brexit deal

The pound moved sharply lower on Friday after British Prime Minister Boris Johnson announced that it’s time to prepare for no trade deal. GBPUSD declined almost 100 pips in a matter of less than a minute after Johnson’s announcement. However, the currency managed to pare the losses throughout the day and closed where it started. Many traders might have been shocked by the Pound’s reaction, especially those who are not used to Johnson’s Brexit statements. Currency markets are simply saying do not believe what he says, as it could be just another tactic he’s using to get some concessions from the EU.

A no Brexit deal means that the Bank of England would take interest rates into negative territory and 10-year yields would drop below zero (they are currently 18 basis points above zero). That’s clearly not priced into Sterling. Markets still believe the base case scenario is a last-minute deal which could send GBPUSD towards 1.35. However, if they are wrong, get ready for a 1,000pip drop.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Oil: Stable, Finally?

Technical

Currently, it is in consolidation around $40.50 trading above 50-while all the Moving Averages are assembled in ascending order. Therefore, from the technical perspective, there is little indication for oil to lose value again.

Fundamental

OPEC+ is meeting today. The Joint Ministerial Monitoring Committee will hold an online reunion to check whether all the OPEC+ country members comply with the output cut policy – that the JMMC’s main objective and function normally. No new decisions are expected before OPEC+ next meeting on December 1, however, there is a certainty that the likelihood of easing the cut in the year is very low. Primarily, that’s because of the second wave of COVID-19 which keeps the demand outlook in a gray area.

In addition to that, Libya is reported to be increasing its output (that was previously reduced to minimum levels due to the military and political unrest in the country). Therefore, expect to see strict guidelines from the side of OPEC+ which will make sure the cuts are there to put firm ground to the price of oil. For us, it means it may be dropping from time to time to $36 as it did two weeks ago, but lower than that – OPEC+ will try to let that happen.

Election

A logical question related to the oil market is how a potential change of the US President will the oil price. Most observers agree that if something will change, that will be stability: with Joe Biden, it is expected to be higher. That is not because of specific points on his agenda related to oil but rather due to the general “change of attitude”: a steady one.

Donald Trump used to move markets – not only oil – with his tweets or comments, sometimes as eccentric as short. Joe Biden seems to be more “emotionally mature” if that may be ascribed to the manner a politician behaves. However, in reality, only time will tell. All we can say for now is that Joe Biden is generally much less “into oil” than Donald Trump – only that may be enough for the oil price to be more secure.

This post is written and submitted by FBS Markets for informational purposes only. In no way shall it be interpreted or construed to create any warranties of any kind, including an offer to buy or sell any currencies or other instruments. 

The views and ideas shared in this article are deemed reliable and based on the most up-to-date and trustworthy sources. However, the company does not take any responsibility for accuracy and completeness of the information, and the views expressed in the article may be subject to change without prior notice. 

SPREADEX OFFERS 0% COMMISSION ON FAANG + TESLA FOR EARNINGS SEASON

This alongside extended opening times from Midday to 1am (UK time) to allow investors to trade these companies spread-free before and after their latest earnings updates.

SpreadEX spokesperson Connor Campbell said: “With one of the most important third quarter earnings seasons in memory thanks to the impact of the pandemic, alongside increased volatility in the run-up to the US election on November 3rd, SpreadEX wanted to put investors in the best position possible to effectively and successfully manage their portfolios.

“By removing spreads on what are essentially the biggest companies in the world, and extending opening times to create a clear runway and landing zone either side of these mega releases, SpreadEX is allowing investors to trade what they want, how they want and when they want.

Combined with our powerful, fully-customisable trading platform – which includes advancing charting, trade via charts and a variety of different ways to receive price alerts – we firmly believe that SpreadEX is the single best place to see out the third quarter earnings season.

Since SpreadEX was founded in 1999 our ethos has been to put investors first, and this is the latest example of us searching to put that principle into action.”

GBP/CHF Sellers are Within the Confluence Zone

The GBPCHF is bearish. Price is currently retracing and if it gets to the POC zone, we might be expecting a drop lower.

1.1900-1.1890 is the POC zine . 88.6 makes a strong confluence with the W H4 camarilla pivot. We can also see historical sellers there. If the market makes a reversal pattern in the zone, the price should drop. Targets for the move are 1.1850 and 1.1795. On a further momentum down we might see 1.1765. There is also a big market risk in the GBP trading due to uncertainty about Brexit so be careful regarding risk you take per trade.

For a look at all of today’s economic events, check out our economic calendar.

 

Doji Clusters Show Clear Support Ranges On The S&P500

Clusters of Doji shaped candles have, for centuries, illustrated very clear levels of support/resistance in price action.  Whenever multiple Doji candles appear in a cluster-like formation, traders should pay attention to these levels as future support/resistance ranges for price action.  In the case of the S&P500 E-Mini Futures Daily Chart, we can clearly see three separate support zones – the highest one being right where price closed on Friday (near 3475).

As the US elections near, we do expect increased volatility to become a factor in the US markets.  Currently, our predictive modeling systems are suggesting a Bullish trend bias is in place in the markets.  Therefore, we expect the bias of the trend to continue to push higher.  Yet, these Doji Cluster support levels become very clear downside targets if increased volatility prompts any broad market rotation over the next few days/weeks. These three levels are :

  • 3445~3495
  • 3330~3390
  • 3185~3225

We are suggesting that IF any deeper market rotation takes place, support near these Doji Cluster levels would likely act as a major price floor – prompting some price support and a potential for a quick upside price reversal near these levels.  If the lowest level, near 3200, is breached by deeper price rotation, then a new price correction phase may setup.

Traders should use these levels to prepare for the expected volatility spike as we near the US elections.  We believe price will become more volatile as traders/investors attempt to reposition assets away from risk before the elections.  We are particularly concerned of a breakdown in the Technology sector related to recent threats to increase liability related to a special clause (230) that protects companies like Facebook and Twitter from the same Publisher Liability as major newspapers.

Given the renewed focus on these social media sites and the content posted/restricted on these sites, it appears they have become the target of investigations and the US Congress.  This could lead to some very big volatility spikes in the NASDAQ and the Technology sector over the next few weeks and months.  This could result in some very good trade setups as price levels may rotate wildly because of the elections and the pending decisions related to these social media firms.

Want to learn how we help traders stay ahead of these bigger trends and setups?  Visit www.TheTechnicalTraders.com to learn more about my swing trade alert and passive long-term signals services. Stay ahead of the market and protect your wealth by signing up today!

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

NOTICE AND DISCLAIMER: Our research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.

Are We Entering Stagflation That Will Boost Gold?

Inflation is back. OK, not inflation, but inflation expectations. As the chart below shows, they plunged during the coronavirus crisis, but they have already recovered. Currently, and based on the inflation-protected Treasury yields, Mr. Market expects that inflation will be, on average, 1.5 percent in the next five years and 1.7 percent in the next ten years.

Meanwhile, the real bond yields have continued their downward trend. As the chart below shows, the yields of 5 and 10-year Treasury Inflation-Protected Securities plunged from around zero in January to around -1.15 in mid-September.

Do you already see the implications? Yes, you are right. The charts above show the rebound in inflation expectations and the sharp decline in real interest rates . Such a combination indicates that stagflation is coming . Or, at least, that investors worry about the simultaneous occurrence of stagnation and inflation .

To understand this better, let’s take a look at the chart below. It presents nominal Treasury bond yields. As you can see, they have remained in a sideways trend since April, even though inflation expectations have rebounded. So, the only reason why nominal interest rates did not increase in tandem with inflation expectations is that the growth expectations have declined. In other words, investors expect both economic slowdown and a rebound in inflation to occur simultaneously, i.e., stagflation.

These expectations are fueled by the coronavirus crisis and following supply-chain disruptions and shortages, the Fed’s new monetary regime that allows for overshooting the inflation target, and the significant expansion in the public debt and the broad money supply . Driven by the quantitative easing and the increase in bank deposits, the M2 money supply growth pace has increased from about 7 percent before the pandemic to about 24 percent in July, as the chart below shows.

The unprecedented spike in the broad money supply – and not only in the monetary base controlled by the central bank – is the reason why the coronavirus crisis was more inflationary than the Great Recession , and it can translate into higher price inflation in the future.

However, the money supply acceleration has been matched by a plunge in the velocity of money or the number of times a dollar is spent in the economy (see the chart below). So maybe there is nothing to worry about?

Actually, there is! You see, the velocity of money is a vague concept. It is defined as a nominal GDP divided by the money supply. So, it does not have a life of its own, and it is not defined independently of the other terms in the famous equation of exchange: M*V = GDP = P*(real GDP).

Hence, the velocity of money had to decline simply because the economy shrank, while the money supply expanded during the Great Lockdown (see the chart below). But it means that the money supply has been growing faster than the economy, which is a recipe for inflation, which is described precisely as „too much money chasing too few goods”.

And please note that in the aftermath of the Great Recession , the ballooning Fed’s balance sheet and monetary base were accompanied by slowing M2 money supply growth. Because of the financial crisis , loan growth declined sharply. In contrast, today, the banking system is in a healthier position, and commercial banks substantially expanded the credit creation.

Of course, the rise in the broad money supply was partially a result of companies’ drawing down on pre-arranged credit lines, not the irrational exuberance of the commercial banks (although government guarantees make banks to provide loans to many sub-marginal companies), but the end result is the same: the rapid expansion in the bank credit and the broad money supply. As the chart below shows, the total bank credit growth accelerated from about 5.3 at the beginning of the year to 11.3 percent in May. Hence, the risk of inflation is higher than in the aftermath of the economic crisis of 2008. It makes the current macroeconomic environment even better for gold.

To sum up, although the increase in the mere monetary base does not have to translate into higher inflation, the record fast expansion in the broad money supply is disturbing, and it increases the risk of inflation or stagflation sometime in the future. The supply chain distortions, ballooning federal debt , and more dovish Fed , which is eager to accept inflation above its 2-percent target for some time, also add to this risk. As higher inflation increases the appeal of gold as an inflation hedge , and decreases the real interest rates , the heightened stagflationary risk should support the gold prices.

Of course, the coronavirus crisis has also resulted in a massive drop in GDP growth and an increase in spare capacity that can keep consumer price inflation low for some time. However, when the economy recovers somewhat, while the large monetary and fiscal stimulus program continues, the broad money supply’s unprecedented fast growth could end up being inflationary after a certain lag. When gold sniffs out the smell of inflation, it should shine.

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get a 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

EUR/USD Bear Flag Pattern Aims at 1.1650

The EUR/USD is testing the Fibonacci support levels. Price action is expected to make a bullish reversal at the Fibs despite the bearish breakout.

How far can price fall before finding support? And what are the bullish targets? Let’s review.

Price Charts and Technical Analysis

EUR/USD 4 hour chart

The EUR/USD has reached the 61.8% Fibonacci level, but we are expecting a deeper push lower. The main target is the 78.6% Fib around 1.1650.

The resistance levels (red box) and the 21 ema zone are expected to stop price action from moving higher. Only a breakout above the long-term moving averages would indicate an immediate push up.

Price action should make a bullish bounce at the Fib levels. This would complete a bearish ABC (green) within wave B (orange) and confirm the start of the wave C (orange). Only a break below the bottom invalidates the current ABC (orange) wave pattern.

On the 1 hour chart, we see the main reason why one more bearish price swing is anticipated. The bear flag chart pattern is typical for a wave 4 (red) after price action showed a strong bearish impulse (wave 3).

The wave 4 is invalid if price action is able to break above the bottom of the wave 1 (red x). Also candlesticks that fully break above the 21 ema zone could be a first warning of a pending change in direction.

EUR/USD 1 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

For a look at all of today’s economic events, check out our economic calendar.

CEX.IO Broker to Launch Digital Asset Margin Trading Services for EU Residents

CEX.IO, one of the largest international cryptocurrency exchanges, announces the launch of CEX.IO Broker, a digital asset margin trading platform, for the residents of the European Union. Earlier, CEX.IO Broker received a market-making CIF license from the EU-based regulator, the Cyprus Securities and Exchange Commission (CySEC).

CEX.IO Broker*, a part of the CEX.IO Group ecosystem, combines security with a clean, straightforward interface where users can harness the power of professional trading tools. With the multi-account trading terminal, advanced exposure management, various leverage levels, and other useful features, CEX.IO Broker provides the flexibility to deploy the margin trading strategies that best fit its customers’ trading style. To add a level of convenience, traders can use a single login to access both derivatives markets on CEX.IO Broker and spot markets on CEX.IO.

Authorised to operate as a Cyprus Investment Firm (CIF), CEX.IO Broker can provide investment and professional trading services – including, but not limited to, transferable securities, derivatives, and foreign exchange – within the European Union under the MiFID II framework.

“Obtaining the CySEC license was a crucial milestone. Launching a service under this license will provide our users with a regulated platform to work with digital asset-based derivatives. CEX.IO Broker also opens the path for forex traders in Europe to a new industry and asset class. By offering a multitude of services, we provide the opportunity for our users to grow in our very own ecosystem,” – Oleksandr Lutskevych, founder and CEO of CEX.IO, stated.

The CySEC granted the CIF license to CEX.IO Broker upon the company’s compliance with all the relevant requirements provided in the Investment Services and Activities and Regulated Markets Law of 2017.

“At CEX.IO Group, we are committed to eliminating the technological barriers that prevent users from engaging in different cryptocurrency-related activities. The purpose of our products is to act as a bridge into the open financial system. With our CySEC license, we provide regulated services on the newly launched CEX.IO Broker platform, allowing traders to work with digital asset derivatives in a safe and transparent environment,” Oleksandr explained.

Founded in 2013, CEX.IO is a prominent service provider in the cryptocurrency industry that has been mostly known for the company’s pioneer digital asset exchange platform.

Over the years, the group has been working hard to expand its ecosystem with new crypto solutions, including the B2B fiat to crypto on/off-ramp solution CEX Direct, the technical solution for liquidity aggregation, CEX.IO Aggregator, as well as the identity verification and compliance platform, Identance. Recently, CEX.IO started offering cryptocurrency-backed loans, CEX.IO Loan, and staking services, CEX.IO Staking.

“We are delighted to expand our ecosystem with the regulated services of the CEX.IO Broker platform. Right now, the market is undergoing a period of rapid growth in cryptocurrency derivatives. Our objective is to offer an elegant solution, where users understand the instruments, manage the risks, and put assets to work to achieve their goals,” Oleksandr added.

*CEX.IO Broker is a trade name of CEX Markets Ltd. CEX Markets Ltd. is authorised and regulated by the Cyprus Securities and Exchange Commission (licence no. 381/19).

Crude Oil Stalls In Resistance Zone

CLEAR PRICE CHANNEL MAY PROMPT BIG BREAKOUT OR BREAKDOWN MOVE IN OIL

In this report, I discuss the recent price action in crude oil and how economic conditions and the pennant flag chart pattern is indicating a big price move is about to take place over the next few weeks.  While some of you may want a clear, bold prediction as to whether a breakout or breakdown may happen, as technical traders, our job is to predict different possible setups and identify the criteria that will tell us when to enter the trade upon confirmation. Read below to learn more.

Crude Oil has continued to retest the $41.75 to $42.00 resistance level over the past 30+ days. My research team believes this represents a very clear indication that further failure to advance above this level will prompt a moderate price decline – likely breaking below the $36.00 ppb price level.

We believe the completed Pennant/Flag Apex, highlighted in Light Green on the Crude Oil Futures chart below, represents a technical pattern suggesting a new price trend is pending.  The recent sideways price action, highlighted by the Gold Rectangle on this chart, shows the range of price recently that is currently presenting a very clear support level (near $36) and a very clear resistance level (near $42).

Our research team believes the downside potential in Crude Oil outweighs the upside price potential at this time because of two primary factors; continued COVID-19 cases and the likelihood that continued economic restrictions will stay in place and the pending change in the seasons (Winter is coming).  We believe these two factors will lead to lower demand for Crude Oil over the next 3+ months which could send Oil prices tumbling lower.

Currently, Our research team is watching Crude Oil for any price breakdown below $37 as a signal that downward price pressure has prompted a price move below the MIDPOINT of the Gold Rectangle sideways price range.  We believe when the price of Crude Oil breaks below the Midpoint of this range, there is a much stronger potential for a breakdown move below the $36 price level.  Of course, we would have to have technical confirmation of this breakdown in trend from other indicators, but as long as Crude Oil price stays above $38.25 the bias of price within the range is still Bullish in nature.

This may become a very good trading signal in the next few days or weeks ahead.  Traders should keep Crude Oil on their watch lists as this technical pattern plays out.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders.  If you want to learn how to become a better trader and investor, visit www.TheTechnicalTraders.com to learn how we can help you make money with our swing and investing signals. Don’t miss all the incredible trends and trade setups, sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

Gold Asks Where Is The Inflation

The U.S. CPI inflation rate rose by 0.2 percent in September , following a 0.4 percent increase in August. It was the smallest jump since May. The move was driven by a 6.7- percent spike in the cost of used cars and trucks, and it’s the most significant upward change over half a century. The core CPI rose 0.2 percent, following a 0.4 percent increase in the preceding month.

On an annual basis, the overall CPI increased 1.4 percent (seasonally adjusted), following a 1.3 percent increase in August. The core CPI rose 1.7 percent, much like in the month prior (or a bit less if we abstract from rounding). Therefore, as the chart below shows, the period of disinflation perhaps ended, but the inflation remains low. It seems that even though the inflation rate has reached the bottom in May or June, the outbreak of high inflation in the near future is unlikely.

Indeed, the expectations from the inflation rebounded after a plunge during the coronavirus crisis. But, they have stabilized around the pre-pandemic level, at which market players don’t see an outbreak of inflation, as shown in the chart below.

So, is Mr. Market right that the inflation will remain low, i.e., below the Fed’s target? Well, he might be. After all, the pandemic caused a profound economic shock, and the demand remains subdued. Now, with the new wave of Covid-19 infections and the slow economic recovery within the fourth quarter, inflation could remain tepid for quite some time.

However, it is also possible that both expectations and the inflation itself will be increased over the medium term. This is due to another boost in government spending monetized by the Fed , the delayed respond of prices to the earlier increase in the broad money supply (see the chart below) – there is always a lag here that can last from 6 to 18 months), and the declining confidence in both the government and the central bank.

At some point it should be clear for everyone that the GDP recovery from the coronavirus crisis is driven by massive increases in debt, government spending and the central bank’s liquidity . Thus, although the few winners of the pandemic are clear, most of the small and medium sized businesses remains significantly away from 2019 levels. At some point people should realize that neither the easy monetary policy or fiscal deficits wouldn’t help the Main Street and small business fabric.

Implications for Gold

What does all of the above mean for the gold market? Well, as gold is by many perceived as an inflation hedge (not always correctly), it should welcome the inflation rate acceleration. However, the subdued inflation is not necessarily awfully bad for the yellow metal. This is because low inflation implies that the Fed will remain dovish and won’t hike the federal funds rate for years to come. Yes, the rising inflation could force the central bank to normalize its monetary policy – but under the new monetary regime (I wrote about it in a detail the last edition of the Gold Market Overview ), the Fed will not raise interest rates until the inflation stays above 2 percent for a certain period of time. As long the Fed remains behind the curve, gold should shine.

To put it differently, the lack of higher inflation is not surprising at all. After all, during economic crises and recessions , the uncertainty increase and people decide to spend less of their incomes than previously. So, the demand for money increases, which neutralizes part of the rise in the money supply. However, when the crisis finally ends, people will gradually withdraw their cash balances. Therefore, we could still see a higher inflation. But it will not happen now. Instead, it will occur when the situation normalizes, and the economic recovery sets in for good.

And, who knows, maybe this is a crazy idea, but isn’t is possible that the Fed expects such a scenario, and it is the reason why it changed its monetary regime to allow for higher inflation? In any case, investors should remember that although higher inflation is an upside risk for the gold that would support its prices, gold does not need – as the 2000s and 2020 bull market showed – double-digit inflation to shine.

If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

NQ100 Bearish Reversal at Fibonacci Targets

The NASDAQ 100 (NQ) has made a major bearish bounce after reaching strong Fibonacci targets (red circles). How deep will the pullback go before price action finds support within the larger uptrend?

Price Charts and Technical Analysis

NASDAQ 100

The NQ 100 has completed a bullish ABC (orange) pattern within wave B (purple). The strong bearish price action at the Fibs plus the break below the 21 ema zone seems to indicate a pause in the uptrend and a wave C retracement (purple).

The wave C can develop either in an ABC (orange) or a 5 wave pattern. The NQ could be building a larger ABCDE triangle chart pattern in case of an ABC.

The image shows the most likely price movements and expected patterns in my view. The formation is valid if price action does not break the top nor the bottom (red x).

On the 1 hour chart, the bearish reversal is indicated by our Elliott Wave software via the red candles. The bears are now in full control of this time frame, but they will run into a strong and thick layer of support because of the moving averages (blue box).

Price action is expected to run out of steam at the support but it will create two more bottoms. This will complete a 5 wave (green) pattern. At that point, price action could finish the expected wave a (orange) and start an ABC pattern (green) in wave B (orange).

NASDAQ 100 1 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

For a look at all of today’s economic events, check out our economic calendar.

 

 

GBP/USD Rollercoaster Continues

The GBPUSD Rollercoaster continues. Brexit deadline expires today and there is no agreement yet. Roller coaster continues.

Depending on the outcome of the Brexit negotiations and whether talks continue or not, the Brexit rollercoaster continues. This is the market risk. Technically sellers come around 1.3045-56 zone, shile buyers show within 1.2885-98 zone. Targets are pivot point in-between. Breakouts to the upside are possible above 1.3080 towards 1.3120 and 1.3159. Breakouts to the bottom are possible below 1.2860 towards 1.2840 and 1.2805.

For a look at all of today’s economic events, check out our economic calendar.