Spotting the next trend

[Dollar_McGavin]

I totally get what you’re saying and agree when it comes to unpredictable geopolitical events like natural disasters, earthquakes, tsunamis etc. The Fukushima nuclear power plant disaster is a perfect example, it was impossible to foresee and I agree with you that these definitely have an impact.

But if we take what the charts are showing us right now, we can already predict there will be revolutions, military coups, increased geopolitical tensions between countries and even wars in the future. But we can’t say when these things will happen or which countries / parties will be involved, just that the probabilities of these happening are very high because they’ve happened in the past under similar conditions. These things will have much greater impacts on the short term charts / time horizons but in the largest timeframes / longer time horizons these things will confirm what the longer trends had already priced in.

[Laylatrade]

I totally get your point. Ultimately the election is a factor(small or big) which can be considered when it comes to trading, specifically intraday.

[Dollar_McGavin]

@Laylatrade

I totally get your point. Ultimately the election is a factor(small or big) which can be considered when it comes to trading, specifically intraday.

Absolutely, 100% agree.
The shorter the trading horizon, the greater the impact of the election (or indeed any other geopolitical event) and the more a trader must take these things into consideration.

[tommor]

I very much agree, avoiding getting hit by a sudden price reversal due to a world event can be largely avoided by being on the right side of the trend. Most geo-political news does not emerge from a vacuum, and the markets pay attention to these things night and day, which we just can’t do. The result is they telegraph their analysis to us by moving price up or down. When was the last time that a country with a booming economy and sky-rocketing currency suffered a coup?

One other thing for traders to be aware of, almost no geo-political news emerging over weekends is good. Weekend news events are unplanned, nobody in power plans to release their latest good news story on a Saturday afternoon, so most weekend news is bad.

[Dollar_McGavin]

What do muni bonds have to do with gold & silver?

Welcome to another episode of Dollar McGavin’s mental madness. If my last update didn’t drive you off the deep end, this one will surely send you to the loony bin.

(Apologies for the dark humor, but I need it to keep me sane from the disaster I see coming)

Here is a weekly chart of the MUB muni bonds ETF. Muni bonds tried to recover from the COVID lows when the Fed bought them outright to support municipalities. Since the Fed stopped buying and inflation kicked in from the 1st leg of the commodities bull run, muni bonds have deteriorated. Junk bonds are not far behind.

Bonds are used as collateral for interbank transactions and loans, they make up a large portion of the foundation for the global banking network. To a bank, when the value of a collateralized asset can no longer cover its transaction liability, it is the equivalent of a margin call in trading.

The chart suggests that we are headed towards darker times. The latest rally was supposed to be a recovery rally which ended in a double top and now looks to be rolling over. The funny little labels in the charts is actually a proprietary indicator that measures and collects the price swing data in time and magnitude. The rectangle area is a statistical extrapolation (70% probability) of where the current down swing is expected to bottom, blue shaded area if it was a bullish pullback or red shaded area if its a bearish impulse wave. The current downswing is targeting the red shaded area.

In other words, if this market continues to behave (price swings) as it has always done, there is a 70% chance that the current price swing bottoms in that red shaded rectangle, the same levels that led to Fed interventions and bank collapses in previous years. BTW, some banks never recovered from the GFC and others look extremely vulnerable.

And whenever the money unit (currency) and banks are called into doubt, there is an exodus into gold & silver. IMO, the institutions and the big players have already sensed this and it’s reflected not only in the current gold & silver bull run, but can be seen in the global risk on markets, such as equity indices, financial sector and banks stocks showing signs of topping and rolling over.

BTW, it would give me no pleasure or ego boost to be proven right because the 2nd and 3rd order effects will be horrible and a lot of people around the world will be much worse off. Personal feelings and emotions aside, I just go where the charts analysis takes me.

[Laylatrade]

yeah! it was a great discussion with you.

[Dollar_McGavin]

Palladium and platinum, the other half of the precious metals complex, look like they’ve hammered in mega bottoms and are breaking out to join gold & silver.

Weekly chart of palladium:

This is a monthly chart of platinum, after a decade long bear market, IMO, this is the 2nd cheapest asset (behind silver) on the planet. The yellow moving average has a length of 60 months (5 years) and is turning higher indicating bullish long term momentum. At this scale, these things turn slowly, but once they get going they’re unstoppable for years.

[Dollar_McGavin]

This thread is turning into a journal, which wasn’t my intention. I’ll keep updating until we see either a strong move down in risk assets and/or a strong move up in commodities.

On Friday, silver made a weekly close inside the parallel channel so no parabolic move yet. We know its coming as it does in every precious metals bull market, we just don’t know when. Right now it looks like it’s catching its breath to make another try this week, let’s see what happens.

In the meantime, the US Dollar index is the most important chart to watch in my opinion. It is the lynchpin to virtually all other markets. This is a monthly chart going back to 2009, the Global Financial Crisis and the beginning of the ZIRP environment.

The USD strengthening since 2009 has drawn a lot of foreign capital into US assets: equities, bonds, real estate and more. This has resulted (together with other factors such as ZIRP) in the biggest and longest equities bull market in US history.

Once nominal gains in US assets no longer offset the USD depreciation vs other currencies + hedging costs, look for foreign capital to make for the exit. Roughly 30% of the market cap in US equities is held by foreign investors. Essentially a rollover in the USD means a rollover in US assets as well as global risk assets. This can be seen in the stagnation of global equities indices around the world: Sensex, Nikkei, STOXX600, EU50, FTSE100, DAX, HSI, KOSPI and more.

I expect the USD/DXY to head down to the 2009 lows, possibly even lower. Why? Because the US has the most debt to deleverage and the USD will be the release valve. The math says, negative real rates are in the cards = inflation will run very hot. The markets now look to be pricing in a stagflationary environment = financial/risk assets down + hard assets (commodities) up.

The prime beneficiary will be commodities, energy and precious metals, which have already initiated their respect secular bull trends. While the USD / DXY looks to be breaking down into a secular decline, the Bloomberg Commodity Index looks to be on the verge of breaking out into the next leg higher:

Let’s watch and see how things unfold.

[Dollar_McGavin]

One more thing to add here is that even though the markets are waiting on the US election, the secular trends have already started. The charts have already signaled what’s to come:

1. gold bottomed in 2015
2. commodities bottomed in 2020
3. the US Dollar index topped in 2022
4. non-US global equities looked to have topped earlier this year
5. US equities on the verge of topping and rolling over now

[Dollar_McGavin]

European banks and the vulnerable financial sector

Many banks never completely recovered following the global financial crisis. Considering that we’ve had a global ZIRP environment which devalued most major currencies, this alone should have been enough to lift stock prices. But for many financial institutions, this isn’t the case.

The interesting thing with banks is that most people’s understanding of how banks work today is terribly outdated. Banks have virtually free reign to create as much “money” out of thin air as they like and a license to expand their balance sheets at will, the only thing that limits them are their own risk models & management. The global banking industry thus can be seen as a very complex daisy chain or network of liabilities between each other. This daisy chain network is so complex and so opaque that there is no way for any bank much less regulators to calculate the sheer scale of liabilities and true risk to the entire global banking system.

Simple example: Bank A creates “money” (assets to add to their balance sheet) out of thin air to lend to bank B which does the same with bank C, which does the same to bank D, which does the same to bank A + bank B + bank E and bank F. All of these banks of course do commercial and retail business as well, but they only know the risks to their own balance sheets, they have no idea what risks other banks are carrying or what the total risk in the global banking network looks like.

So when one of the banks gets into trouble for whatever bad / risky deals they made and is unable to meet its liabilities to the others, that’s when we see contagion spread very very quickly to virtually all banks around the world.

Here are 4 vulnerable banks that may be the epicenter of the next banking crisis. The following are linear monthly charts going back to 2009 of major European banks that never recovered post GFC.

French bank Société Générale:

Spanish Banco Bilbao:

German Commerzbank:

And the German behemoth Deutsche Bank

There are several Japanese (remember the JPY carry trade unwind?) and American banks & financial institutions as well but I’ll leave it here for now.

[Dollar_McGavin]

Happy Sunday morning everyone!

Just thought I’d add an update from my normal weekend analysis.

I find it fascinating how price charts can sometimes read like a novel. And these tell an interesting tale. First look at the Bloomberg commodities and Muni bond charts posted earlier in the thread. Then take a look at junk bonds below. Junk bonds are a proxy for corporate credit risk. A healthy corporate credit market is the backbone of a healthy growing economy.

Rising commodity prices drive inflation and inflation is bond market kryptonite. This is clearly illustrated when you look at commodities and bonds side by side. Now as commodities look like they’re headed into a 2nd leg higher, muni and junk bonds look like they are headed much lower. This will drive up financing costs for businesses, which is not good for equities nor the broader economy. And just like Muni bonds, junk bonds are not far above their COVID lows and if this market continues to behave as it always has, there is a 70% chance that the current wave down will bottom in the red shaded area, well below previous crisis levels.

This looks to be impacting risk markets, let’s start with the poster child for the current AI boom: Semiconductors. They seem to be in the process of forming a head & shoulders pattern that is falling out of the longer term uptrend channel going back to Oct 2022. Price will need to make a quick move through and hold the red moving average to avoid completing the H&S formation which is targeting the $130 level, ~40% drop from the current price.

It also looks to be impacting the broader US equities markets. First the S&P500, where price has fallen out of a shorter term uptrend channel, which looks to be cascading into falling out of a longer term uptrend channel:

And then the Nasdaq100, which tends to lead the S&P500 has so far failed to get back in and stay inside its longer term uptrend channel. It now looks like it’s leading the downside.

This is global as can be seen in European and UK equities. Unlike US equities where the strong USD (DXY) attracted a lot of foreign capital, the European and UK markets traded mostly sideways since Q2. The Euro Stoxx 50 seems to have run out of upward momentum and has decisively broken out of the intermediate term uptrend channel and down through its 10, 50 and 200 daily moving averages that have clustered together, suggesting longer term decline.

The UK FTSE100 has been trading sideways since hitting ATHs in May, suggesting distribution phase and has fallen out of its intermediate term upward channel going back to Aug 2023.

And the same for the Japanese Nikkei, where price has fallen out of its longer term upward channel going back to 2022, suggesting the JPY carry trade unwind may have just been a prelude to what’s coming.

While US elections will have some short term impact on the markets, these tectonic plates have been in motion for quite some time. The next few weeks and months will be volatile enough to blow up hedge funds, pension funds, the global banking sector as well as margin calls in risk assets. Precious metals and commodities will be the main beneficiaries, but may initially go down with the other markets as margin calls may force liquidation to cover losses elsewhere.

No one has a crystal ball to foresee how or in which order things will unfold but the overall direction is quite clear, in my opinion.

Let’s watch and see how the next few weeks play out.

[Dollar_McGavin]

When there are strong market movements, I always find it helpful to zoom out and look at the bigger picture. While all eyes were on the jump in the US equities markets post election results, the more interesting part is what wasn’t talked about. For example the Fed has started a rate cutting cycle, what happened during the 2 previous bull markets when the Fed started cutting rates? The charts speak for themselves:

Also looking under the surface, which sectors benefitted the most last week? It certainly wasn’t the semiconductors and technology, the 2 leading sectors of the 15-year long bull market. Sure they went up but neither made new ATH highs to match the equity indices and the SOXX ETF has a ways to go before negating the H&S formation:

Surprisingly, the sectors that shot up the most was finance (+6%) and banking (+12%). Really? Are these really going to be the new driving force to lead the US economy higher? Has commercial real estate and bonds (major foundational pillars) made a miraculous recovery? The bond charts posted in earlier replies and this real estate ETF look more like they’ve started intermediate term declines:

A rising tide lifts all boats, so if the financial and banking sectors are the rising tide, then someone forgot to tell Citigroup (down 85% since 2006) and AIG (down ~95% since 2007), which both haven’t had much of a recovery even after 15 years.

What’s really interesting is while US indices went to new ATHs, nearly every other equity index looks to be breaking down, here’s one example:

Also of note is that while US banks gapped up nearly 12%, European banks tried to spike up higher but then were driven down, as was the case for major French bank BNP Paribas:

Are we in the midst of a new renaissance period in US banking and finance or could this be market makers sensing upcoming volatility trying to suck in HFT algos and short term momentum capital in order to re-position their books?

Gold and silver also had a pullback that looks to be finding short term support. Question is whether this is a short term pullback or an intermediate term one, odds are it’s the former but we won’t know for sure until we get more clues.

Should be a very interesting week ahead.

[Elliotrades08]

This is an interesting take! Spotting shifts in speculative capital can indeed be powerful for identifying trends. Silver, with its relative underappreciation compared to AI-driven sectors, could be primed for a move, especially with macro factors like inflation and global debt. It’ll be fascinating to see how this plays out!

[Dollar_McGavin]

Happy Monday morning, everyone!

Let’s jump right into the latest action in the Nasdaq 100 with a daily chart, where it looks like a trap was sprung on the bulls into a marginal ATH:

On a weekly chart of the SOXX Semiconductors ETF, price failed to hold the red moving average (see previous SOXX update) and made a decisive move down to continue driving an intermediate term H&S pattern formation:

I posted a Microsoft chart and comments in another thread:

There goes microsoft

Good call there mate! My analysis says the same and not only MSFT but Apple, Google, Meta, Health Care, Real Estate and more, basically a broader decline in risk assets. I often find that combining different classes of indicators (trendlines + Support/Resistance + moving averages + oscillators) with differing TA theories (Elliot waves + cycles theory) can help eliminate a lot of uncertainty. [MSFT_2024-11-16_16-03-39] For example in the chart above, price fell out of the long term u…

In addition to MSFT, this daily chart of Apple shows a marginal ATH / double top with the action now below the yellow intermediate term SMA and not too far above a vital support area:

In addition to semiconductors, healthcare has been one of the better performing sectors during this long term bull, but looks now to have a made a strong move down decisively shifting the short, intermediate and long term momentum downwards:

In previous updates, I brought up banks. The chart below shows the high correlation between the real estate sector and regional banks:

And if we take a closer look at the action in real estate, we can imagine what it will mean for regional banks:

Going abroad to Japan, please see the Nikkei big picture weekly chart in an earlier update which shows a potential H&S pattern formation. In this daily chart below, we’ll take a closer look at the “right shoulder” currently in formation, which seems to have made a lower high. The red SMA turning down and a break through the yellow SMA and dashed support floor will give a final confirmation:

The Indian Sensex has been the 2nd best performing stock index behind the Nasdaq 100. No doubt that it is in bubble territory. We see not only a lower low but also the intermediate term yellow SMA turn down confirming that the recent ATH was the intermediate cycle high. With most global central banks now in rate cutting cycles, this strongly suggests that it was the bubble blow off top for this long term bull.

Right now, there are so many areas that have either already started or are on the verge of breaking down that any one of them could start a chain reaction across risk assets. Again, it’s impossible to say in which order it will happen, but it’s also impossible to ignore the dominoes lining up near the edge.

[ausguyforex]

Buy ethereum and Bitcoin

[Dollar_McGavin]

Happy Sunday afternoon to my fellow traders!

JPY Carry Trade - what’s driving it?

In short, it’s the Japanese fiscal time bomb. With a government debt to GDP at an eye-watering 255%, the JP government need low interest rates to avoid defaulting. This has forced the BoJ to keep rates at artificially low levels, so low in fact that they are below inflation, i.e. negative real rates:

As a result the Japanese government bond market has become dysfunctional, with the BoJ being the largest holder of JP government bonds. Bond investors, banks and financial institutions (unlike speculators) will avoid buying bonds at negative real rates and therefore look for yield and better returns in other asset classes (both domestically and abroad) during risk on conditions. However when conditions change to a risk off environment all that capital gets repatriated all at once resulting in major volatility across global markets, this is the unwind.

Nikkei update: We continue to observe the price action in the “right shoulder”, which has now fallen out of the intermediate up channel and turned down the red SMA confirming a lower high and increasing the odds we soon see a lower low below the yellow support level:

Which asset thrives during negative real rates?
Gold has made ATHs this month vs EUR, JPY, GBP, SEK and CHF. These 5 currencies make up 91% of the US Dollar Index (DXY).

The USD and CAD which appreciated this month vs gold have very high government and household debts, where like Japan we can expect negative real rates in the future to add more fuel to the ongoing gold bull.

US Junk Bonds Update
Junk bonds and equities tend to top and bottom in sync. In the weekly chart, we can expect the red SMA to confirm an intermediate top this week and a price decline over the coming months. An average intermediate decline from current levels will cascade into a long term decline similar to the decline in 2022.

Zooming in on a daily chart, we can see that price has fallen out of the upward channel and is being squeezed between the short term red SMA and intermediate yellow SMA. High probability that price breaks to the downside this week.

Nasda100 update:
And a downward move in junk bonds means high probability of a downward move in equities. In the Nasdaq 100 daily chart below, the benign sideways price action has given the red SMA time to flatten out. And unless we see very strong bullish price action at the beginning of the week, the red SMA will turn down and confirm the bull trap as a short term and intermediate term top. The Fed rate cutting cycle suggests high probability of this top being the long term top:

Semiconductors update
Last week the red SMA in the weekly chart turned down and confirmed the “right shoulder” top. High probability we now see this sector roll over.

BTC & ETH - the other speculative asset
I am by no means an expert on BTC or cryptocurrencies in general. However, there is something different with the current bull run, can you see it?

What’s different is that ETH and the broader blockchain sector didn’t join BTC into ATHs, with one exception, the LEGR Blockchain ETF. Let’s take a closer look:

The LEGR chart above highlights price falling out of the intermediate term upward sloping channel, a negative short term divergence between price and the red SMA. Price needs to hold the yellow SMA and dashed support level in order to avoid breaking down.

And finally ETH which usually leads BTC both to the upside and downside, may still join BTC into ATHs but has some resistance to overcome:

For over a decade BTC has had a positive correlation with the Nasdaq100 and tech stocks. IMO, the real test for the current BTC bull run is whether it can defy previous behavior and continue higher while the Nasdaq 100 and tech stocks decline.

This week could see some major fireworks with a lot of speculative capital at risk. Looking forward to see how the week unfolds.

[Dollar_McGavin]

Good day fellow traders! Hope you’re all doing well!

Gold at an inflection point - is it going parabolic?
Gold will need to make a decision and soon about whether it’s going parabolic now or later.

Make no mistake that gold is in a long term uptrend with very strong momentum and there will eventually be a parabolic phase. The question is whether it already is in the parabolic phase or do we need to wait for an intermediate term move down first before going parabolic.

The chart below shows 2 different potential paths. The current intermediate up trend has run twice as long as the statistical average telling us it’s in a strong run, but it’s now decision time.

If it takes the blue path and breaks below the blue support level, then expect an intermediate term move down before going parabolic. If price takes the yellow path and breaks through the yellow resistance level then it’s time to buckle up.

A sure sign would be to see silver take the lead and slingshot past gold. Silver moves much faster and more dynamically than gold, but gold is the decision maker, there is no bull trend in silver unless gold says so.

Capital outflow from Semiconductors and Tech to fuel commodities bull

As I mentioned at the beginning of the thread, in order for precious metals and commodities in general to move much higher it needs an influx of capital. And I believe it will come from the semiconductor and technology sectors, both of which are looking very ripe for rolling over.

Please refer to the latest update of the SOXX weekly chart earlier in the thread illustrating the head and shoulders pattern that has been forming this year. Then look at the daily chart below:

I’m expecting the intermediate term yellow SMA to cross below the long term blue SMA this week. That will be a confirmation of a new long term bear market.

While Semiconductors are on the verge of a long term bear market, tech stocks not far behind being on the verge of an intermediate term downtrend with a high probability of it cascading into a long term bear market.

And once semiconductors and tech stocks go, then I expect the broader equity indices across the globe to follow, please refer to these charts in earlier updates.

The real panic selling will occur once the banks go, this I believe will cause panic buying in hard assets as investors look to get out of financial assets and depreciating fiat.

First Japanese banks, which looked like they were going to implode with the JPY carry trade unwind. It wouldn’t surprise me if the current run up was an official BoJ intervention to buy the banks a little more time to get their balance sheets in order.

The European banks look very similar to the tech stocks in that they are on the verge of heading into an intermediate term downtrend which with high probability cascade into a long term bear market:

Another interesting week ahead

[Dollar_McGavin]

Happy Sunday evening everyone!

Why do I look at so many different markets? To paraphrase boxers:

It’s the punches you don’t see that hurt the most

The reason I do this is to see capital flow and to understand why. Capital doesn’t stand still, it’s in continuous motion. My job as an investor / trader is to ignore the hype and know which the capital is flowing in order to get ahead of the big moves.

While everyone is focused on new ATHs in US equities and BTC hitting $100K, I usually prefer to take a deeper look behind the façade.

Since the end of September, capital has been flowing into USD denominated assets, namely US equities, tech stocks and crypto as illustrated in the DXY:

Yes, even crypto is attracting foreign currency as shown by the positive correlation with DXY this year:

Going by the 2 charts above plus the ATHs in the US indices and crypto, we can conclude several observations:

1. Foreign investors are a major driving force behind the current trends since end of Sept
2. Investors are treating crypto (including bitcoin) as risk / speculative assets
3. A repatriation of foreign capital will most likely trigger a major downturn in US equities and crypto

So the question then becomes, what could trigger a repatriation of foreign capital? In other words, what is the punch that most won’t see coming?

1. The first we already mentioned, if the USD depreciates vs other currencies (DXY rolling over)
2. Global economic shock or downturn due to bankruptcies, real estate or banking crisis or geopolitical event
3. Rollover in Non-US financial markets, requiring liquidity to cover losses or margin calls
4. Rollover in US risk markets such as semiconductors

This means that the current trends are only as strong as the weakest link. It’s impossible to say where the initial domino will fall, but US Real Estate, Semiconductors, European equities, the Nikkei 225 and Japanese banks certainly are strong candidates.

US Real Estate

First an update of the US real estate market that is showing signs of an intermediate top:

Nikkei 225

The massive downward spike that’s been attributed to the JPY carry trade unwind broke several major technical levels and was the first signal of an impending long term (2+ years) bear market. It looks like we may get the 2nd signal soon with the yellow intermediate term SMA turning down this week confirming a lower intermediate high made on Oct 15th.

European Stocks

European and UK equities are basically going sideways and showing strong signs of distribution:

And finally, one place where capital is not flowing is semiconductors… remember those?

One clear sign will be an upturn in US Treasuries as investors rush to the “safety of this risk-free asset”:

At the risk of repeating myself, the markets have already confirmed the beginning of a secular bull market in commodities. The precious metals sector have also started their long term bull markets. What I’m looking for are signs of the parabolic phase as I believe the capital driving force will come from these risk markets that I’ve been posting about.

Seems only a matter of time…tick tock…tick tock…

[Dollar_McGavin]

Good evening fellow traders. hope you’re all having a festive weekend!

Ok, the number of signs pointing to an impending risk assets bubble burst are piling up.

SOXX
Let’s start with a semiconductors update, which looks to be hanging on for dear life:

Notice how the price is hugging the yellow intermediate term SMA. I’ve also added the Yearly Cycle Trendline. This is part of Cycle Theory which is too complex to explain in a forum, but a break below this trendline (which we got last week) means that the ATH @ $267.24 was the top for this multi-year bull run. The only way to negate this is a new ATH. In any case, price is now getting squeezed between the red and yellow SMA and will need to make a decision soon.

NVDIA
And now NVDIA looks to be joining the rest of the semiconductor space:

Price is not only falling out of the long term uptrend channel going back to Oct’22 but looks to have also broken the Yearly Cycle Trendline and has made a marginal lower low. NVDA needs to make a new ATH and quickly to keep this bull run in tact.

Healthcare
Healthcare has been a go to sector for many investors during this bull run. It’s also the first US sector to roll over into a multi-year bear market:

I suspect that the other sectors are not too far behind. Two things that can push the other sectors over the edge are the financial sector and financial assets.

US Banks
Major US banks look like they just made a classic 3 gap blow off top & reversal. All the tell tale signs are there with a breakout gap, multiple mid / runaway gaps and an exhaustion gap. The blow off top is marked by an attempted breakout above the top line of the upward parallel channel which then failed and aborted back below that same top line.

As I mentioned in a previous post, considering all of the problems in the Real Estate sector, this looks to be a manufactured move by market makers & institutions to re-position order books and liquidate preferred clients.

Now let’s cross the Atlantic and take a look at the 2 largest banks in Europe (as measured by AUM).

BNP Paribas
Europe’s largest bank looks like it’s rolling over:

Crédit Agricole Group
And Europe’s 2nd largest bank looks very similar:

And now back to the US financial sector and a major player in the insurance space.

AIG
AIG never recovered after shares lost ~95% of their value in the GFC fallout and now looks to be in trouble again:

Real Estate
And speaking of Real Estate, the sector continues to deteriorate and we may see it pick up downside momentum this week:

Junk Bonds
These financial assets are the backbone of the corporate credit market. They are in a multi-year bear market but have been in a pullback since Oct’23. They now look to be rolling over. If these bonds don’t make a new high soon, the downside volatility will be brutal as the yearly cycle aligns with the multi-year cycle:

Municipal Bonds
It’s a pivotal moment for Muni bonds. Here’s an update to the weekly chart I posted earlier in the thread. There’s a lot of information here, but it’s needed to illustrate what I’m seeing.

The most important thing to understand here is to look at the 2 Yearly Cycle lows and see the strong trends that they produce as shown by the yellow arrows. Now the yellow SMA is saying that this market is in a Yearly Cycle advance, but it’s been very weak so far. We would expect a fresh Yearly Cycle advance to blow through that yellow dashed resistance level overhead. However the current price action is saying that the more probable move is break of the yellow support level targeting the red shaded area, this would make a lower low and confirm that the Yearly Cycle has topped and entered a Yearly Cycle decline.

Gold
Finally, what does all this mean for gold?

As I wrote 2 weeks ago, gold needed to make a decision whether it’s already in the parabolic phase or if it needs another leg down first:

The spot market still looks undecided. The futures market however looks like it’s making a cautious move higher:

The futures market is more aligned with risk assets rolling over but we never take anything for granted and await further confirmation this week.

[Dollar_McGavin]

Happy Sunday evening everyone, hope you’re all getting some time off for the holidays

I started this thread 2 months ago to show that trend changes can be spotted way before they happen. As we are in the middle of a secular trend change, not all market participants will see the trend shift at once. Some see it happening very early, others a bit later which makes it a gradual process. And of course some don’t see it coming until it runs them over. This past week there were several markets that joined the US Healthcare sector into a multi-year bear market.

Junk bonds - The financial foundation for the US equities bull is crumbling
Junk bonds entered a multi-year bear market.

Municipal Bonds
Here’s an update of the weekly Muni bonds chart, look at the last 2 candles. Gains accumulated over several months wiped out in 2 weeks. That’s what the start of a yearly cycle decline looks like.

As financial assets go, so go the riskier assets. The big players are aware of the charts above and have already positioned themselves accordingly.

Semiconductors
An update to the weekly SOXX chart. Two weeks ago the SOXX ETF was being squeezed between the intermediate cycle red SMA and the long term (yearly cycle) yellow SMA and needed to make a decision. And last week it decided to fake a move above the red SMA before breaking and closing below the yellow.

A break of the yellow support level @ $211.21 would be final confirmation.

NVDA continues to breakdown
As expected NVDA broke below the yellow intermediate cycle SMA. As I wrote last week, NVDA broke below the Yearly Cycle Trendline and fell out of the multi-year uptrend channel. Unless it makes a new ATH quickly, it will join the rest of the semiconductor space and other sectors in a multi-year bear market.

US Industrial sector enters a multi-year bear market

US Real Estate and Commercial Real Estate rollover into a multi-year bear market

US Major Banks
Let’s check in on US banks, where price fell through that massive post US elections gap.

Now let’s take a look at the 2 largest financial market bubbles in world.

India’s Sensex - the 2nd largest equities bubble
It looks like the 2nd largest equities bubble in the world is bursting with that strong move down last week.

Of course this market can keep the bubble in tact by making a new ATH, but highly unlikely as risk markets everywhere are rolling over.

Nasdaq100

Nasdaq100 doesn’t exhibit the clear cut signs shown in the other charts but we shouldn’t expect that from the strongest performing index. What is clear however is that bearish weekly candle right where we would statistically expect the intermediate cycle to top out. And if it does turn out to be the intermediate top then look what’s waiting below, the long term upward parallel channel bottom and the Yearly Cycle Trendline both of which are at risk of being broken through. As this is the strongest performing risk market, we can expect it to be the last to break.

US Dollar Index
As stated several times before, the strong USD has attracted a lot of foreign capital into US assets. Around 30% of the US equities market cap is made up of foreign capital which can vanish very quickly when DXY (or any major risk market) rolls over. After 3 months in a strong uptrend, I’m expecting this intermediate cycle to top out and roll over any day now. The daily bearish candle right in the timing band for an intermediate cycle high is a first signal.

Gold futures ready to turn higher
This is a very short term chart (1 hour) but gold (as well as silver) futures look like they’ve made a bottom and are ready to turn higher.

This week will be a short trading week in holiday thin conditions, we could be in for some extra fireworks this year. Let’s watch and see.

Happy holidays to all who are celebrating!