AG Macro Brief - 17 Feb 2020
US markets are closed today in honor of Washington’s birthday (Presidents’ Day).
Equities: Our analysis is largely based on wave principles. The principle is never wrong but our analysis can be wrong. Most of the time it is only in hindsight that we find out that there could be a different story or analysis that is developing or our existing analysis is getting extended.
There are various degrees of waves and they are all fractal in nature. The current position is that there is culmination of waves all leading to larger degree fifth wave top.
One of the characteristics of a significant top is the formation of an ending diagonal pattern in classical charting patterns. We are going through that now.
Without going through much of technical explanations as the structure stands a move below 3353 in the S&P 500 (28,996 in DJIA) should eliminate the ending diagonal pattern and a move down through 3318 the low of Feb 10 would raise the odds that the fifth wave of multiple degrees of trend were complete.
So one has to be patient for a clearer picture.
Bonds: Since the beginning of the month bond prices have moved sideways. As long as bond prices remain above 160^15 the low of Feb 06, they retain the bullish potential to a recovery high. A decline below that low will quickly diminish the bullish potential. On the top side 164^05 remains key.
Euro: The whole structure in Euro since the Sep 2018 low is open to interpretation. The Euro has dropped down to a significant support level at 1.0815 to 1.0840.
The daily sentiment index is at 8 % the lowest level of optimism in 15 months. The major turning points in Euro occur normally with a major spike in either direction and closing in NY in the opposite direction leaving a large daily range. We will be looking for something like that to conclude that we are seeing a change in direction.
Gold: Gold has rallied for the last 8 days while silver has for two days. If Gold were to rally above 1592 the Feb 03 high Silver should stay below it similar high before .
Bullish sentiment for Gold is in its upper range of its historic range. Any further rise will likely coincide with even greater optimism. You can hardly find anyone who is not bullish on gold. Gold should eventually rise but that may not happen from current levels . It will once the long term bear market is complete.
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.