The euro currency is trading mixed with prices confined within Monday’s range. In the short term charts, we see the euro holding on to the support area near 1.1261.
We now expect the consolidation between the 1.1261 support and 1.1347 resistance levels.
A breakout from this level will confirm the near term upside in prices. The bias is to the upside as we see the Stochastics likely to move higher.
The upside breakout from the ascending triangle is also giving validation to this view.
However, a close below 1.1261 will see the euro posting declines.
Sterling Jumps On Brexit News
The Pound sterling broke out above the key resistance level of 1.2516. Fundamentals drove the gains.
Talks of Brexit dinner raised hopes that the UK might be able to move forward with a deal.
From a technical perspective, GBPUSD is now cleared for a test of 1.2643.
A retest of this will confirm a full recovery in the prices from mid-June.
In the near term, any dips around 1.2516 will likely be supported. This will keep the cable from posting further declines.
Oil Markets Remain Flat Despite Concerns Of Demand Slowdown
Crude oil prices continue to trade softly with prices holding on above the 40.00 handle. But price action is now challenging the rising trend line from below.
A breakout above this trend line will confirm a further upside in oil prices.
The next main target is seen at the 42.00 handle. To the downside, failure to breakout might keep price action subdued.
We could see some consolidation taking place near the 40.00 handle.
But a close below this level could open the oil markets towards a stronger correction lower.
Gold Rises Sharply As Investors Take Caution
The precious metal is making the final push towards the 1800 handle. Price action is gaining momentum as gold is a few points away from the elusive price target.
The Stochastics oscillator is also showing renewed momentum to the upside.
However, we could expect some profit-taking at this level. This means that gold prices might be at risk of a pullback.
Initial support can be seen at the recent swing high point of 1787.
A close below this level will see gold prices pushing down to the 1760 handle.
After breaking 1.1300 to the downside and starting a new correction towards 1.1250, EURUSD has reached the short-term correctional target at 1.1260 and returned to test 1.1300 from below. Possibly, today the pair may form a new descending structure to reach 1.1250 and finish the correction. Later, the market may resume trading inside the uptrend with the target at 1.1380.
GBPUSD, “Great Britain Pound vs US Dollar”
GBPUSD has finished the ascending wave at 1.2580; right now, it is falling to reach 1.2515 and may later grow towards 1.2555, thus forming a new consolidation range. If later the price breaks this range to the downside, the market may resume trading downwards with the target at 1.2460.
USDRUB, “US Dollar vs Russian Ruble”
After completing the ascending wave at 72.20, USDRUB is about to finish the first descending impulse towards 71.20 and may later grow to reach 71.70, thus forming a new consolidation range between these levels. If later the price breaks this range to the downside, the market may form a new descending structure with the short-term target at 70.60.
USDJPY, “US Dollar vs Japanese Yen”
USDJPY is still consolidating around 107.50. Today, the pair may fall towards 107.40 and then start another growth to reach 107.80. Later, the market may form a new descending structure with the short-term target at 106.90.
USDCHF, “US Dollar vs Swiss Franc”
After finishing the ascending impulse at 0.95450 along with the correction towards 0.9415, USDCHF is expected to form one more ascending structure to break 0.9460 and then continue trading upwards with the predicted short-term target at 0.9510. However, there might be an alternative scenario, which implies that the price may break 0.9410 to the downside and continue trading inside the downtrend to reach 0.9380.
AUDUSD, “Australian Dollar vs US Dollar”
AUDUSD is forming another descending wave to reach 0.6905, Later, the market may start another growth towards 0.6940 and then resume falling with the short-term target at 0.6860.
BRENT
Brent is still correcting towards 42.42 and may later form one more ascending structure to reach 43.80. After that, the instrument may start another decline to return to 42.42 and then resume moving upwards with the target at 45.02.
XAUUSD, “Gold vs US Dollar”
After breaking 1786.00 to the upside, Gold is expected to test it from above and then continue growing with the short-term target at 1799.17. Later, the market may start a new correction to reach 1777.77 and then resume trading upwards with the target at 1800.00.
BTCUSD, “Bitcoin vs US Dollar”
BTCUSD is falling towards 9126.00 and may later correct to reach 9250.00 thus forming a new consolidation range between these two levels. If later the price breaks this range to the upside, the market may form one more ascending structure with the target at 9550.00; if to the downside – resume trading inside the downtrend to reach 8700.00.
S&P 500
After forming the consolidation range above 3160.0 and breaking it to the downside, the Index is expected to correct towards 3120.0. After that, the instrument may resume trading upwards with the target at 3240.3.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
The daily chart shows a new ascending wave after the correction towards 38.2% fibo. If GBPUSD is able to break the key high at 1.2813, the price may continue growing towards 50.0% and 61.8% fibo at 1.2895 and 1.3242 respectively. However, if the pair reverses after testing the high, the asset may continue the long-term correction with the targets at 50.0% and 61.8% fibo at 1.2111 and 1.1946 respectively.
The H1 chart shows a more detailed structure of the uptrend after the convergence. By now, the pair has already reached 50.0% fibo. Later, it may continue growing towards 61.8% and 76.0% fibo at 1.2598 and 1.2678 respectively. If the price breaks the support at 1.2252, the instrument may continue the mid-term downtrend.
EURJPY, “Euro vs. Japanese Yen”
As we can see in the H4 chart, EURJPY is growing towards 50.0% fibo. There is a strong possibility that later the pair may form a new descending impulse, which may be heading towards the low at 119.31. After breaking it, the instrument may continue trading downwards to reach 61.8% and 76.0% fibo at 118.79 and 117.50 respectively. The key resistance is the high at 124.43.
The H1 chart shows a more detailed structure of the correctional uptrend and divergence on MACD, which may indicate the completion of the pullback and a further decline towards the low at 119.31. However, one shouldn’t exclude another scenario, according to which the asset may start a new rising impulse. In this case, the upside targets may be at 61.8% and 76.0% fibo (122.47 and 123.19 respectively).
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
The EUR/USD currency pair is in a sideways trend. Unidirectional trends are not observed. A trading instrument is consolidating in the range of 1.1260-1.1300. Demand for risky assets remains at a rather low level. Some countries have begun to apply quarantine measures again due to increased coronavirus infection. Representatives of the FOMC believe that the unemployment rate in the US will remain at a high level. Positions need to be opened from key support and resistance levels.
Today, the news feed is pretty calm. We recommend you to pay attention to the EU economic forecasts.
Indicators do not send accurate signals: the price has fixed between 50 MA and 100 MA.
The MACD histogram is near the 0 mark.
Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which indicates the bullish sentiment.
Trading recommendations
Support levels: 1.1260, 1.1220, 1.1190
Resistance levels: 1.1300, 1.1330, 1.1345
If the price fixes below the level of 1.1260, a drop in the EUR/USD quotes is expected. The movement is tending to the round level of 1.1200.
An alternative could be the growth of the EUR/USD currency pair to 1.1330-1.1350.
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.24815
Open: 1.25338
% chg. over the last day: +0.39
Day’s range: 1.25318 – 1.25667
52 wk range: 1.1466 – 1.3516
On the GBP/USD currency pair, the bullish sentiment prevails. The pound sterling has set new local highs. The GBP/USD quotes have found resistance at 1.2585. The mark of 1.2530 is already a “mirror” support. Investors expect additional drivers. In the near future, a technical correction of the trading instrument is possible. Positions must be opened from key levels.
We recommend you to pay attention to the hearing of the Bank of England Monetary Policy Committee.
Indicators point to the power of buyers: the price has fixed above 50 MA and 100 MA.
The MACD histogram is in the positive zone, but below the signal line, which gives a weak signal to buy GBP/USD.
Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which indicates the bearish sentiment.
Trading recommendations
Support levels: 1.2530, 1.2470, 1.2435
Resistance levels: 1.2585, 1.2620
If the price fixes below 1.2530, a correction of the GBP/USD quotes is expected. The movement is tending to 1.2480-1.2450.
An alternative could be the growth of the GBP/USD currency pair to 1.2610-1.2640.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.35324
Open: 1.35985
% chg. over the last day: +0.49
Day’s range: 1.35842 – 1.36238
52 wk range: 1.2949 – 1.4668
An ambiguous technical pattern has developed on the USD/CAD currency pair. Loonie is currently consolidating. The trading tool is testing local support and resistance levels: 1.3580 and 1.3620, respectively. The USD/CAD quotes are tending to grow. We recommend you to pay attention to the dynamics of “black gold” prices. Positions must be opened from key levels.
At 15:15 (GMT+3:00), data on housing starts in Canada will be published.
Indicators do not send accurate signals: the price has crossed 100 MA.
The MACD histogram is in the positive zone, but below the signal line, which gives a weak signal to buy USD/CAD.
Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which indicates a bearish sentiment.
Trading recommendations
Support levels: 1.3580, 1.3555, 1.3520
Resistance levels: 1.3620, 1.3650
If the price fixes above 1.3620, further growth of the USD/CAD quotes is expected. The movement is tending to 1.3650-1.3670.
An alternative could be a decrease in the USD/CAD currency pair to 1.3555-1.3530.
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 107.347
Open: 107.544
% chg. over the last day: +0.14
Day’s range: 107.427 – 107.710
52 wk range: 101.19 – 112.41
The USD/JPY currency pair is still in a prolonged flat. Unidirectional trends are not observed. Local levels of support and resistance are still: 107.45 and 107.75, respectively. Participants in financial markets expect additional drivers. We recommend you to pay attention to the dynamics of yield on US government bonds. Positions must be opened from key levels.
The news feed on the Japanese economy is quite calm.
Indicators do not send accurate signals: the price has crossed 50 MA and 100 MA.
The MACD histogram is near the 0 mark.
Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which indicates the bullish sentiment.
Trading recommendations
Support levels: 107.45, 107.25, 107.05
Resistance levels: 107.75, 108.10
If the price fixes above 107.75, USD/JPY is expected to rise. The movement is tending to 108.00-108.25.
An alternative could be a decrease in the USD/JPY currency pair to 107.25-107.00.
French economic data in the last couple of weeks were positive on balance. According to Markit, France’s Manufacturing PMI increased to 52.3 in June of 2020 from 40.6 in May, better than market expectations of 52.1. And Services PMI increased to 50.7 in June from 31.1 in May, when a reading of 50.3 was expected. Readings above 50 indicate activities expansion, below indicate contraction. So the contraction in private business sector halted and an expansion was achieved. Better data are bullish for FR40. At the same time deficits of both trade balance and current account widened in May when a narrowing was expected. Deterioration of France’s economic performance is a downside risk for stock market index.
When looking at the price action in Gold, it may not be clear why a deeper look is worth our time. Well, we think, for several reasons, that we can expect a sharp move to be on the way.
While the precious metal has so far failed to substantially break above 1,800 USD, the stabilisation slightly below may surprise.
In fact, the Fed’s balance sheet shrank by another 163 billion USD last week, resulting in the third week in a row that the Fed saw a reduction here. While this might surprise at first glance, a deeper look shows what’s happening: the reduction results out of a continuing decline in demand for the US central bank’s USD swap lines from foreign central banks like the ECB, BoJ or BoE.
While the balance sheet reduction continues this week with 130 billion USD of FX swaps expiring, Gold traders and precious metal traders in general seem to prepare and anticipate a more aggressive approach from the Fed in the near future, most likely to happen once Equity markets start to see sharp volatility again.
Once this happens, chances become elevated that we get to see an attempt to break above 1,800 USD, then to the highest levels since 2012, levelling the path rather sooner than later up to the current all-time high around 1,920 USD.
Technically the mode on a daily time-frame in Gold stays bullish as long as we trade above 1,660 USD:
Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between April 8, 2019 to July 7, 2020). Accessed: July 7, 2020, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2015, the value of the DAX30 CFD increased by 9.56%, in 2016, it increased by 6.87%, in 2017, it increased by 12.51%, in 2018, it fell by 18.26%, in 2019, it increased by 26.44% meaning that after five years, it was up by 34.2%.
Check out Admiral Markets’ most competitive conditions on the DAX30 CFD and start trading on the DAX30 CFD with a low 0.8 point spread offering during the main Xetra trading hours!
Discover the world’s #1 multi-asset platform
Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!
Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter “Analysis”) published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter “Author”) based on the Author’s personal estimations.
To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.
Global markets are mixed today after US equities snapped a five-day winning streak overnight. Investors are cautious in light of surging coronavirus cases globally while White House formally notified the United Nations of its withdrawal from the World Health Organization.
Forex news
Currency Pair
Change
EUR USD
-0.48%
GBP USD
+1.1%
USD JPY
-0.06%
The Dollar weakening has resumed today . The live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.2% Tuesday after Labor Department report job openings rose to 5.4 million in April from 5 million in the prior month. EUR/USD reversed its climbing as German industrial production rebounded a slower than forecast 7.5% in May. GBP/USD continued climbing with both pairs higher currently. USD/JPY reversed its sliding yesterday and AUD/USD reversed its climbing with both yen and Australian dollar higher against the greenback currently.
Stock Market news
Indices
Change
Dow Jones Index
-0.91%
GB 100 Index
+0.35%
Nikkei Index
-0.86%
Futures on three main US stock indexes are rising currently. Stock indexes in US pulled back Tuesday as San Francisco Fed President Daly said the US unemployment rate underestimates the economic damage of the virus: the three main US stock indexes posted returns ranging from -0.9% to -1.5%. European stock indexes are edging lower currently after a pullback on Tuesday as the European Commission lowered its euro-zone economic forecast by a percentage point, now seeing a contraction of 8.7% this year. Asian indexes are mostly extending gains today except for Nikkei and Australia’s All Ordinaries ASX 200 Index .
Commodity Market news
Commodities
Change
WTI Crude
-0.15%
Brent Crude Oil
+0.19%
Brent is extending losses today. Oil prices ended lower on Tuesday. The American Petroleum Institute reported late Tuesday US crude supplies rose by 2 million barrels last week. The US oil benchmark West Texas Intermediate (WTI) for August slipped 0.02% Tuesday. September Brent crude lost 0.05% to $43.08 a barrel.
Gold Market News
Metals
Change
Gold
-0.08%
Gold prices are pulling back today. August gold gained 0.9% to $1809.90 an ounce on Tuesday.
Note: This overview has an informative and tutorial character and is published for free. All the data, included in the overview, are received from public sources, recognized as more or less reliable. Moreover, there is no guarantee that the indicated information is full and precise. Overviews are not updated. The whole information in each overview, including opinion, indicators, charts and anything else, is provided only for familiarization purposes and is not financial advice or а recommendation. The whole text and its any part, as well as the charts cannot be considered as an offer to make a deal with any asset. IFC Markets and its employees under any circumstances are not liable for any action taken by someone else during or after reading the overview.
The Euro has refused to buckle under the weight of lacklustre economic data and dire warnings of late.
Germany’s factory orders and industrial production came in less-than-expected in May, and points to a long and laborious recovery for Europe’s largest economy. Factory orders in May registered a 10.4 percent growth compared to April, below market forecasts of 15.4 percent, while May’s industrial production posted a month-on-month expansion of 7.8 percent, as opposed to the expected 11.1 percent. On Tuesday, the European Commission also warned that the coronavirus pandemic could deal a larger-than-expected blow to the economy, forecasting a revised 8.7 percent contraction for the Euro-area in 2020, which is about one percentage point lower compared to previous estimates.
Even though the news saw EURUSD pulling further away from the upper bounds of its current range (1.135 – 1.117), the drop was limited, thanks to the softer Dollar. EURUSD remains elevated compared to the 1.076 – 1.100 levels seen in April and May. In late June, the 50-day simple moving average’s crossing above its 200-day moving average suggests that the currency pair could yet break to the upside of its current range (above 1.135) even though the upward momentum has waned.
From a fundamental perspective, the Euro’s buoyancy appears to be due to the baked-in optimism over the EU’s proposed EUR750 billion recovery plan. However, as EU leaders meet in Brussels next week (July 17-18) to iron out the details of the support package, any signs of discord at the negotiating table could weigh on the Euro and unwind recent gains.
The EU’s pandemic response will also be compared to developments in the States, and such contrasts are being manifested in EURUSD’s performance. Although Europe appears to be having a better handle on stemming the coronavirus’s spread, investors cannot yet rule out a second wave of outbreaks on the continent, nor a double-dip in its economy. Should these downside risks become reality, that may trigger a wave of risk aversion at the expense of the Euro, while strengthening safe havens such as the US Dollar, Japanese Yen, and the Swiss Franc.
Already, global risk-on sentiment appears to be fading, evidenced by the stalling rally in stock markets, as well as EURCHF carving a path back towards the 1.06 mark, having fallen by 2.6 percent since registering its year-to-date peak above the 1.090 psychological level. The Euro needs risk appetite to remain resilient in order to hang on to recent gains.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
A potential mining scenario for Troilus Gold’s gold-copper project is presented in a PI Financial report.
In an April 22 research note, analyst Philip Ker reported that PI Financial updated its model on Troilus Gold Corp. (TLG:TSX; CHXMF:OTCQB) to account for the envisioned operating scenario and upcoming preliminary economic assessment (PEA) on its Troilus gold project.
Ker first recapped results of all drilling done on the project. The most recent drill results, he noted, from the Southwest zone suggest potential to expand the Troilus project resource beyond the current estimates of 4.71 million ounces (4.71 Moz) of gold equivalent (Au eq) in the Indicated category and 1.76 Moz of Au eq in the Inferred.
Previous drilling, done in 2018 and 2019, extended the mineralization in the J zone (J4-J5 pits) and the Z87 pit to a vertical depth of about 500 meters. Expansion drilling around the Z87 pit led to the discovery of Z87 South and the delineation of Southwest.
The analyst next delivered the highlights of PI Financial’s newly conceived mining scenario at Troilus. It incorporates an open-pit operation with a 16-year mine life. The project would produce 158,000 ounces of Au eq per year, or 2.5 Moz of Au eq over the life of mine, assuming recovery rates of 93% for gold and 85% for copper and mill throughput of 20,000 tons per day.
Costs are estimated at US$225 million in initial capex and $96 million in sustaining capital. “We highlight current infrastructure lends to derisking efforts and is likely to reduce upfront capex and project development timeline,” Ker commented.
Assuming a gold price of US$1,500 per ounce, the resulting Troilus project economics would be an estimated $200 million net present value at an 8% discount.
Ker also wrote that “given the modest production profile, favorable operating jurisdiction and attractive forex rates, we see the Troilus project emerging as a viable bolt-on asset for a producer as an acquisition target.”
PI Financial has a Buy rating and a CA$1.55 per share target price on Troilus Gold, whose current share price is about CA$1.11.
Disclosure: 1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None. 2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Troilus Gold. Click here for important disclosures about sponsor fees. 3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. 4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports. 5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Disclosures from PI Financial, Troilus Gold Corp., Corporate Update, April 22, 2020
I, Philip Ker, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this report. I am the research analyst primarily responsible for preparing this report.
Research Disclosures: 1) PI Financial Corp. and its affiliates holdings in the subject companys securities, in aggregate exceeds 1% of each companys issued and outstanding securities. No
2) The analyst(s) responsible for the report or recommendation on the subject company, a member of the research analysts household, and associate of the research analyst, or any individual directly involved in the preparation of this report, have a financial interest in, or exercises investment discretion or control over, securities issued by the following companies. No
3) PI Financial Corp. and/or its affiliates have received compensation for investment banking services for the subject company over the preceding 12-month period. Yes
4) PI Financial Corp. and/or its affiliates expect to receive or intend to seek compensation for investment banking services from the subject company. Yes
5) PI Financial Corp. and/or its affiliates have managed or co-managed a public offering of securities for the subject company in the past 12 months. No
6) The following director(s), officer(s) or employee(s) of PI Financial Corp. is a director of the subject company in which PI provides research coverage. No
7) A member of the research analysts household serves as an officer, director or advisory board member of the subject company. No
8) PI Financial Corp. and/or its affiliates make a market in the securities of the subject company. No
9) Company has partially funded previous analyst visits to its projects. Yes
10) Additional disclosure: No
Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is amongst other factors determined by revenue generated directly or indirectly from various departments including Investment Banking. Evaluation is largely on an activity-based system that includes some of the following criteria: reports generated, timeliness, performance of recommendations, knowledge of industry, quality of research and investment guidance, and client feedback. Analysts are not directly compensated for specific Investment Banking transactions.
– Continuing our research from Part I, into what to expect in Q2 and Q3 of 2020, we’ll start by discussing our Adaptive Dynamic Learning predictive modeling system and our belief that the US stock market is rallied beyond proper expectation levels. The Adaptive Dynamic Learning (ADL) modeling systems attempts to identify price and technical indicator DNA markers and attempts to map our these unique price setups. Then, it attempts to learn from the past DNA markers and apply that learned price behavior to future price DNA markers. In this manner, it learns from the past and applies that knowledge to the future.
ES ADL PREDICTIVE MODELING
On June 15, 2020, we published this article referencing the ADL predictive modeling system and how the US stock markets were, at that time, 12% to 15% overvalued based on this analysis. Continuing this research, our researchers still believe the ES (S&P500) is very likely to fall to levels near $2500 before finding support just below that level. These predicted ADL price levels strongly suggest that the true valuation levels for the ES are near $2500 – not near the overvalued levels closer to $3000.
NQ ADL PREDICTIVE MODELING
Additionally, an update NQ ADL Weekly chart suggests the NQ has rallied to levels that appear to be extremely overvalued. The current ADL prediction levels suggest the NQ ADL valuation levels should be near $6600 – not near $10,325 as they are now. This suggests a massive -36% price disparity between the current overvalued rally level of the NQ and the expected ADL price level based on our advanced predictive modeling system.
Now that we’ve attempted to explain one of the core elements of our research estimates, let’s get further into the data that is likely to present a very real opportunity for skilled technical traders.
ECONOMIC CYCLES
As you are likely well aware of by now, a series of catastrophic economic events continue to unfold throughout the globe. Most importantly, the ability to earn revenues for consumers and corporations while dealing with hard fixed costs. In previous articles, we’ve suggested our belief that a unique event in localized economies is not much of a concern because global central banks can support the market well enough to allow economic activity to resume near fairly normal levels. We’ve suggested that the bigger problem is when an extended economic contraction takes place that is a global or more wide-spread economic event. This type of economic crisis is much more dangerous because of two factors:
_ A. The continued lack of revenue generation increases the pressure on the individual or corporation to cut costs, employees, or other assets. Without the ability to earn, these individuals or corporations begin to eat up cash reserves very quickly and will quickly begin to identify their longer-term sustainability objectives. Unless the economy starts to recover quickly, this crisis for the individual or corporation could be a moderately slow and dangerous “bleed-out” event leading to bankruptcy.
_B. The efforts of localized governments and global banking institutions initially attempt to mitigate the risks of such an event. This is usually done by providing greater capital resources to certain industries, the general banking system, and in other ways/sources. Currently, within the US, a number of forbearance programs have been initiated to take away certain pressures for homeowners and others. Still, the economy must continue to operate within normal boundaries and bills must be paid. With an extended economic collapse, such as we may be experiencing with the COVID-19 virus event, the problems for consumers and corporations grow bigger and more dangerous the longer the economic contraction event continues.
When you really start to understand the cycle of these events and then begin to understand the domino-effect process that may already be playing out in some form, skilled technical investors should already be preparing for extended price volatility and unknowns over the next 6+ months or longer. Allow us to explain, in simple terms, how this cycle plays out…
_ Local consumers/workers are laid-off or fired from jobs. This puts immediate earnings pressure on local families and individuals and it pushes them into a protective mode where they suddenly must decide between essential items (food, medicine, personal care, transportation, and other essentials) vs. non-essential items (movies, dining out, travel, discretionary purchases, and others). Currently, there are more than 35 million unemployed people in the US (roughly 10% of the total population.
_ The COVID-19 shutdown within the US has disrupted the earning capabilities of many businesses over the past 3+ months. As consumers slow down their purchases and businesses close because of government shutdown orders, the problems amplify for many business owners and employees. If you have ever owned your own business, you understand the risks involved and the ongoing hard costs associated with owning a business. Just because the governor orders a “shutdown” doesn’t mean that your hard monthly costs are going away too. This ongoing problem sets up another crisis event in the making – the Business Owner risk factor. How long before these individual business owners simply can’t sustain their operations any longer and are forced into bankruptcy?
_ Local governments derive their operating budgets from taxes and revenues generated within their communities. With the COVID-19 shutdown crippling these revenues, we estimate that Q3 and Q4 2020 will become a point of “bleed-out” for many local governments. They may be able to manage their budgets for a few months within the economic contraction period, but we believe the longer this economic contraction event continues, more and more pressure will be put on local and regional (city/state) governments where revenues have likely collapsed 25% to 45%+ recently.
_ The bigger cycle start to take place. (A) With consumers laid-off and/or fired from their jobs, their income levels drop dramatically and their spending decreases dramatically. (B) With business owners struggling to survive with hard costs and payroll in a depressed economic environment, these businesses will either find a way to survive or fail – laying off more people and creating further disruption in earnings/revenues for workers and local governments. (C) With local governments slow to react to the economic contraction (and mostly hiring under contract), the decreases in revenue over time may present a very real issue for government agencies and become a real problem 4 to 6+ months into the economic contraction.
_ When businesses and governments suddenly realize the scale and scope of the economic contraction, they will attempt to balance their books by adapting (developing new sources of revenue: products, services, taxes, fees) and/or begin to contract themselves. Either of these two options is fraught with risk and could potentially increase the risks of a more extended economic contraction event. Raising taxes or fees on consumers/businesses within a massive economic contraction event will likely push more individuals/businesses into bankruptcy – further decreasing the government revenues. Developing new products/services and marketing them to consumers requires capital and resources. If the product is not a success, the business takes a huge risk making these aggressive transitional moves – which may lead to increased economic concerns. As long as the consumer is struggling and not earning sufficiently, the foundation of the economic structure is at risk of collapsing even further.
This cycle is sometimes called the “death cycle” in economic terms. It is a cycle where economic contraction leads to further economic contraction. The process of breaking this cycle is simple, the entire economic engine must “unwind” sufficiently to remove/reduce the overextended valuation and “fluff” within the system. Once this has happened, then a new economic foundation will begin to establish where growth and opportunity will resume within local and regional economies.
IMPORTANT ECONOMIC DATA
Now, let’s look at some of the data that supports our research.
The World Uncertainty Index has recently skyrocketed above 50, the highest level over the past 60+ years. Since the low point, in 1985, the World Uncertainty Index has continued to rise with higher peaks and higher troughs over the past 30+ years. Currently, this index suggests there is a massive amount of uncertainty throughout the globe related to economic function, central banks, geopolitical issues, and humanitarian issues.
Bay very close attention to the peaks in this index and the dates of these peaks (2004, 2013, 2020). The 2004 and 2013 peaks occurred roughly 3 to 4 years after a major stock market bottom setup. The current index high would suggest a market bottom may have set up in 2016 and a peak in this Uncertainty index may still be 12 to 24 months away. This suggests we may still experience a moderately high degree of uncertainty and a number of unknown global and economic crisis events over the next 12 to 24 months.
The US Federal Reserve has recently begun another massive quantitative easing phase and actively begun to purchase various forms of debt, bonds, and equity within the financial markets. Paying attention to the rallies in the Fed buying activity and the World Uncertainty Index, you’ll see the peaks in the Uncertainty index align with the midpoints of the Fed activities. Generally, the uncertainty levels rise as the US Fed intervenes and executes QE policies to support the global markets.
This Global Commodity Price Index chart highlights the recent collapse in raw commodity prices and illustrates the incredibly depressed level of commodities related to global economic activities. Over the past 20 years, the only time when commodity prices were lower was in early 2000~2005 – just after the 9/11 economic contraction. The current Commodity Price Index level suggests we have entered a new deflationary price cycle with the peak setup near August/September 2018 – just before the big downside price contraction started in October 2018. Our researchers have continued to highlight that point on multiple charts as the true peak in the US and global markets
At this point in time, developing a safe and protected strategy to ride out these uncertain times is essential. We’ve been advising our clients to stay safely away from the global stock market trends and we issued a Black Swan warning on February 21, 2020, telling all of our clients to “get into cash immediately”. Since then, we’ve advised our clients to move their capital into selected sectors to take advantage of hedging opportunities and targeted trading opportunities over the past 3+ months.
We continue to believe the best way to profit from these market trends is to develop a super conservative investment model where Cash is King and proper hedging is essential. There are plenty of great trades to select from – assuming we want to take on the additional risks associated with these trades.
We believe the next 3+ months will result in a massive volatility spike, likely seeing the VIX move above 50~60 again, as Q2and Q3 earnings and expectations continue to shock the investment community. We do not believe this potential “V-Shaped” recovery is sustainable and continues to advise our clients to be prepared downside price reversion.
Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.
Chris Vermeulen Chief Market Strategies Founder of Technical Traders Ltd.
NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research. It is provided for educational purposes only. Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.
