Source: Clive Maund for Streetwise Reports 10/27/2017
Technical analyst Clive Maunds discusses the outlook for the dollar, euro and precious metals sector after the predicted major dollar breakout occurs.
Yesterday saw one of our most important predictions become reality—the dollar broke decisively out of its Head-and-Shoulders bottom. We can
clearly see this breakout on the latest 6-month chart for the U.S. dollar
index shown below. Fundamental reasons for this are believed to include
the current (weak) trend to higher rates in the U.S., and perhaps more
importantly, the euro starting to unravel if Catalonia succeeds in its
push for independence from Spain. Whatever, this chart says the dollar
index is going to advance to our target in the 97 area.
The importance and validity of this breakout is emphasized by dollar
proxy UUP also breaking out yesterday on the highest upside volume for
A big component of the dollar index is the euro, and not surprisingly
the euro broke down from a Head-and-Shoulders top yesterday that is the
inverse of the Head-and-Shoulders bottom in the dollar. The European
Union is threatening to fall apart, and if Catalonia succeeds in
breaking away from Spain, it is likely to close the lid on the euro’s
While gold and silver valiantly struggled to hold up yesterday, the same
cannot be said of precious metal stocks, and the Market Vectors Gold Miners ETF,
GDX, dropped away quite hard, so we can expect gold and silver to follow
suit as the dollar rallies.
Finally the Gold Miners Bullish Percent Index shows that there is still
quite a bit of bullishness waiting to be wrung out of the sector. Those
long PM stocks should hedge their positions and the most cost effective
way to do this is via Puts in something like GLD, which have good
liquidity. With inverse ETFs you can be swindled out of your due gains
as they often do not perform as they should. GLD November or December
118 or 119 Puts will serve the purpose. Or if you are nimble you can
simply step aside and buy back cheaper when the dollar rally has run its
Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years’ experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.
Want to read more Gold Report articles like this? Sign up at www.streetwisereports.com/get-news for our free e-newsletter, and you’ll learn when new articles have been published. To see recent articles with industry analysts and commentators, visit our Streetwise Interviews page.
1) Statements and opinions expressed are the opinions of Clive Maund and not of Streetwise Reports or its officers. Clive Maund is wholly responsible for the validity of the statements. Streetwise Reports was not involved in the content preparation. Clive Maund was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
Charts provided by the author.