Silver Validating April 21st Signal
04/26/17 Weekly Re-Lay Alert: “Euro-Focus; Another Example of A.M.C.”
“Recent months have seen a growing focus on all things Euro – on the UK (and Prime Minister May’s move toward Brexit), Germany (Angela Merkel’s meeting with Trump & her impending re-election campaign), NATO & France (preliminary election on April 23rd & run-off election on May 7th).
As a result, the Dollar/Gold/Euro relationship has provided yet another example of why NOT to rely on one hard-and-fast correlation when viewing these markets. No matter how often this topic is discussed, we still receive a consistent stream of inquiries that ask something like ‘How can your Dollar & Gold analysis conclude ‘x’ when everyone knows if the Dollar goes up then Gold goes down (or vice-versa)?’.
At the risk of pummeling an already-beaten ‘dead horse’, let’s take a quick look at the price action of the past three months & see if the aforementioned assumption (of a consistent & reliable Dollar/Gold inverse relationship) is accurate… or even close…
In mid-Jan. ’17, Gold set a 2–4 week peak and worked lower into Jan. 27th.
At the same time, the Dollar Index also sold off – from mid-Jan. into Jan. 26th.
After setting its lowest daily close on Jan. 27th, Gold rallied for 4 weeks – into the week of Feb. 27—March 3rd.
After setting its lowest daily close on Jan. 31st, the Dollar Index rallied for 4 weeks – into the week of Feb. 27—March 3rd.
After peaking on Feb. 27—March 3rd, Gold pulled back into March 10th.
After peaking on Feb. 27—March 3rd, the Dollar Index pulled back into March 10th.
For the next two weeks, the Dollar Index & Gold traded inversely – with Gold rallying while the Dollar declined. Of that 8–9 week period, that 2-week period was the only time this ‘foolproof’ correlation worked.
From late-March into mid-April, Gold experienced a sizeable, ~2-week advance – nearly matching the magnitude of its preceding advance.
From late-March into mid-April, the Dollar Index experienced a sizeable, ~2-week advance – nearly matching the magnitude of its preceding advance.
The Dollar turned down a few days sooner but, since mid-April…
— Gold has dropped for nearly 2 weeks.
— The Dollar has dropped for nearly 2 weeks.
Out of 14–15 weeks, since mid-January, only about 3 of those weeks have traded in a ‘textbook’ Dollar up/Gold down or Dollar down/Gold up correlation. 10–12 of those weeks have not. Is that really the type of correlation that Gold traders should be using? I would again argue: No!
If you want to really observe the lunacy of that correlation, look at side-by-side charts of Silver & the Dollar Index since Feb. 1, 2017. Here is a brief, general synopsis of Silver & Dollar Index action:
Both up into late-Feb.
Both down into mid-March (Dollar continued down into late-March).
Both up into second week of April.
Both down since then.
As of today’s close, Silver is ~0.5% below its Feb. 1st close.
As of today’s close, DXM is ~0.5% below its Feb. 1st close.
But didn’t someone say that is impossible?!? [See FACTS for explanation]…
Gold & Silver have sold off after fulfilling all of the 2–4 week upside potential with Gold attacking monthly resistance (1284.2–1298.5/GCM) as Silver spiked to new intra-year highs and its upside LLH objective (18.635/SIK).
Gold has since dropped to its weekly HLS (1260.1/GCM) while Silver is still expected to drop below [reserved for subscribers] in the near term.”
Dollar/Gold/Silver (/Euro) relationship reinforcing outlook for Gold & Silver to see sharp sell-offs from their mid-April peaks. Silver’s April 21st weekly sell signal (Turn -Key AND 2 Close Reversal sell signals) corroborated that and projects lower prices into May 3–12th. Gold remains on track for initial drop to 1223.4–1230.3/GCM but could bounce in interim.
See Weekly Re-Lay & INSIIDE Track for additional details on larger-degree cycles that could extend these anticipated sell-offs, in line with 2017 outlook (discussed in January 2017 INSIIDE Track).