USD and bitcoin retest important trendlines

In my last analysis, I pointed out that USD priced in gold was approaching a strong point of resistance at 0.82 mAU/USD (0.00082 Troy Oz./$ or $1224.65/Troy oz.). I thought it would hit this resistance and then reverse downward if the FED meeting was interpreted as “hawkish” by the market. I also thought if the FED meeting was interpreted as “dovish,” it would reverse right away and go downward.

Technical analysis for USD priced in gold.

The markets apparently interpreted Yellen’s remarks as “dovish” because the dollar immediately sold off to retest its downtrend line from December of last year.

USD gold 12-25-17 chart 1

If it breaks down below this line, we can expect it to continue to depreciate at a rate of at least 10% per year in gold value, since that is the rate represented by this trendline. When the dollar first broke up through this line in early December, it implied that perhaps the dollar’s depreciation was slowing down. Now it appears this may have been a false hope to dollar bulls.

On the other hand, it’s possible the dollar could bounce here, which would once again call into the question the major point of resistance at 0.81 mAU ($1228.08/oz.).

usd-gold-12-25-17 chart 2

Assuming this higher trendline holds, we are still looking at at a decline in the dollar of around 9% per year. It is only if this higher trendline were to break that dollar bears would really need to start worrying.

I think the most likely outcome is a break downward through the lower trendline, keeping the 10% rate of depreciation on track to continue. Either way, we should know by Friday which way it’s going to go.

Technical analysis for U.S. stocks priced in gold.

Stocks are still in a long-term bullish trend. After spending two years beating up against the 2 oz./share horizontal line of resistance, they broke through and are now headed for another strong line of resistance at 2.25 oz./share. This line goes all the way back to 2007.

U.S. stocks priced in gold 12-25-17 chart 1

In the meantime, they are in a short-term pullback with a MACD crossover, heading towards the 50-day SMA. The last time they hit the 50 SMA, they rallied strongly. I expect they will probably do the same this time.

U.S. stocks priced in gold 12-25-17 chart 2

Eventually, interest-rates will rise and stocks will sell off. But I don’t think today is that day.

Technical analysis for U.S. bonds priced in gold.

When I wrote my last post two weeks ago, the TLT bond fund had just broken out of its bearish triangle and was hitting horizontal resistance at 102 mAU/share (0.102 oz./share). I wondered if it would break through or reverse. Since then, sellers have come in and driven down the price back into the triangle once again.

Having seen this happen, one could make a reasonable argument that the bearish triangle is still intact. If this is true, we can expect TLT to continue lower. However, I do not believe this is what is happening. It appears to me that the price has fallen to the 50 SMA, and it is just a coincidence that this MA just happens to be inside of the triangle. I expect that next week we are going to see the price rise above 98 mAU. If I’m wrong, then U.S. bonds are in serious trouble.

Technical analysis for Palladium priced in gold.

Palladium continues to lose momentum, but bulls have still not capitulated. I think a buying opportunity is coming soon. But it’s not here yet.

pall-gold-12-25-17

I am waiting for the 50 SMA to be hit.

Technical analysis for bitcoin priced in gold.

Bitcoin sold off hard this past week. It went from 15 oz. to 9.21 oz., a loss of over 30%! It’s almost at the 50 SMA (7.55 oz.), which would represent a huge buying opportunity if it would ever manage to get there. Given the mania surrounding it though, I worry that it won’t make it there and will just rally from here. I think this is a great buying opportunity, but keep in mind that bitcoin is an extremely risky asset. I keep no more than 10% of it in my portfolio at all times, and I’m planning on reallocating every three months to lock in whatever profits I make from it.

bitcoin priced in gold 12-25-17

Full disclosure: I own gold and BTC. Nothing said here should be construed as offering investment advice. Trading is risky and can lead to total loss of principal.

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