Here are my discretionary thoughts on forex and commodities. I only trade the S&P 500.
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- Gold’s upcoming correction completely depends on the U.S. dollar.
- USDCNY is leading oil, gold, and silver.
- Oil’s seasonality is weak in February and strong in March-April.
4 pm: gold’s upcoming correction completly depends on the USD.
Gold is extended in its intermediate cycle (TIME). Gold should make a pullback/correction right now from a TIME perspective.
But more important than gold’s cycle is its inverse correlation with the U.S. dollar. Gold cannot begin a correction unless the U.S. dollar bounces. And the U.S. dollar’s price action is very weak right now. This is typical for USD bear markets, which historically went down in a straight line.
If the USD continues to go down in a straight line without a bounce, gold and silver will go up nonstop without a pullback/correction.
7 am: the Chinese Yuan is leading oil, gold, and silver.
Oil and gold/silver have a strong positive correlation right now because China launched the PetroYuan. The PetroYuan is a mechanism by which China buys oil with Yuan (its own currency), which will be convertible for gold. This effectively links oil with gold.
As a result, the Yuan has become a leading indicator for gold, silver, and oil.
- A falling USDCNY (i.e. appreciating Yuan) = bullish for gold, silver, and oil
- A rising USDCNY (i.e. depreciating Yuan) = bearish for gold, silver, and oil
USDCNY is falling right now, which is medium-term bullish for gold/silver/oil. When USDCNY starts to bounce, expect a correction in gold/silver/oil.
If USDCNY doesn’t make a bounce right now, expect it to make a bounce at 6-6.1 (previous low in 2014).
7 am: oil’s seasonality is weak in February and strong in March-April.
Oil’s weekly RSI is insanely overbought right now. It has already made a bearish divergence on the daily bar chart, so it can begin to make a pullback/correction.
Oil’s seasonality is relatively weak in February but strong in March-April. Hence, the ideal situation is:
- Oil makes a pullback/correction in February to work off its insanely overbought weekly RSI.
- Oil continues its bull market rally in March-April with bullish seasonality as a tailwind.
This is oil’s seasonality.
Read Forex & commodities on January 31 2018.
I only trade stocks. These are just my thoughts/outlook on other markets.
- Gold and silver will break above their tight range in the first half of 2018.
- The USD Index will crater below its final support (90-91) in the first half of 2018.
- The best traders I know are still bullish on Bitcoin in the short and long term. I don’t know when the crypto bubble will end.