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?
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…
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…
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.