While in my previous article I busted on TA a little as a psychic power, I also mentioned I use it as part of where to enter/exit positions and use it with my macro outlooks. I do not manage billion dollar funds, so I can be a little daring with my eTrade account at times when I so feel the need.

Broadening wedges – let’s have a talk

When you look at wedges, you can find these patterns emerging within TA.

So I saw these patterns recently and looked them up. What do they suggest?

Gold chart

When you look at the gold charts, you see what’s called a broadening descending wedge, which is listed as “bullish”. Remember, these TA charts are probability-based. Not bible. Take a look at the gold charts…

That red line is the long term gold trend line. The dotted line is what I’m seeing as the most near term resistant line. In the VERY short term, do we get back over the red trend line or break back down to thw 1675 which also sits around 50% fib retracement? I would contend possibly that the downtrend has ended but we then moved into a sideways channel if the black dotted line holds.

From here, if you look at that tech chart, you can see the touches on the bottom of the rail. I could see this is how Brady MAY be talking 1400-1500 in some of his tweets. This might be where he is getting that. It would potentially be a full move back from the March 2020 lows.

One could also say on the last touch of the top rail, then the break down – this is when most of the chart guys were talking about “technical damage”. It was a very unnatural move, with virtually no news. It’s as if the bots and algos saw the top of this rail hit, know the pattern that was emerging, and triggered hard sells to prevent a breakout. That to me is in the world of manipulation we all talk about.

So near term, I’m suggesting we could continue this pattern to the upside with the continuation of this.

The DXY
As we have seen time and time again, if the DXY gets a rally, gold falls. If it hiccups, gold rallies. In the last year, we have printed 40% more currency into existence. Many want to discuss how a lot of the M2 is “stuck in the banking system”, but I also call bullshit on that. This money is put there potentially to lend out. Which is then used for margin at cheap rates to bid up the stock market as well as to buy houses with low rates which drive up home prices. The more home prices are driven up, the more capital gains sellers make, which is a transfer from the M2 to pockets. Likewise, higher stock prices and cryptos bought on margin then sold provide more money in their pockets. So, unlike 2009ish – ridiculously low rates have had people borrow money to put it into the casino to get 7777 and then cash out winnings.

But if we look at the DXY, it’s the reverse type of wedge – suggesting there’s a down move in the future. This also has a pretty high RSI.

What this would tell me is that the casino that always wins is going to hype retail into piling in to buying the dollar and selling gold. Once they get these retail people in, they turn the tables and short the dollar and go long gold.

The 10 year?

While we do not have a wedge going on here, what we do have is a 40 year down channel. This looks like a machine could have drawn this.

If we look at what happened when it went above the channel in 2018-2019, that’s when we saw gold really start to make a move. But at the same time, this is also when we almost broke the stock markets.

While I’m hearing a lot of people a lot smarter than me talk about 2% for the 10yr coming which can then trigger market melt downs and a reversal in tapering – I’d suggest we are probably at the Rubicon now at 1.5%. What will happen if this line is crossed, let alone shoot up to 2%?

What this potentially suggests is either we cross this Rubicon and markets tank, or they back off before a market melt down.

You can potentially see the S&P anticipating this move over 1.5% now….

On one of the shows I was on, I mentioned I try and investigate this stuff like a crime scene. Think about seeing blood spatter, a pool of blood around where a body may have been, and a bloody knife. You can see the directionality of the spatter. The amount of blood could tell you if they died. The knife is the likely weapon used.

Like that – I’m trying to use the clues above to think about where this is going. No one can tell you on the planet if gold will go up 5% today or down 3%. What we can do is use a lot of different items to form a hypothesis, and then base the probabilities from there. We can potentially mitigate certain risks.

What I’m seeing is…

  • if the upper rail on the 10yr breaks to the upside, we may get a repeat of 2018 quickly.
  • The S&P might be rolling over. Seeing the futures bid up overnight, dip buyers coming in during the day, and banks getting out.
  • lower highs and lower lows with S&P
  • gold in a descending broadening wedge pattern potentially looking at trendline support OR 1675 support. IF trendline support holds, gold could force shorts to cover.
  • DXY in ascending broadening wedge and high RSI.
  • Further selling on S&P could have DXY going up and 10yr being bought and rates go up, triggering more selling and feedback loop.
  • De-leveraging of margin and derivatives may start to unfold, amplifying any move down.
  • High inflation pressures may then have people exiting cash and bonds and going to gold.
  • Some of the miners look to be at end of head and shoulder formations

SILJ finishing H&S…

Follow up….

At 0630 on 10/1, we saw a big rally yesterday. Looked like this silver smash got a V recovery of sorts. While several of these miners appear to have a head and shoulders pattern completing, it is starting to form a Michael Oliver-like argument with the arm wrestling match. What I think I need to see over the next week is the fork of gold vs equities. I saw this leading up to the March 2020 smash. Meaning – markets corrected by another 500 points or so and gold was way up.

This is suggesting either a sideways movement with chop, or a lower low could be coming soon.

With $1.6T in reverse repo last night, I don’t think we may run into a melt down situation, but the arm wrestling looks more and more likely with dip buying and chop ahead.