Tuesday, 29 August 2017

Bullish Gold Ratio Charts

I begun writing this article on Sun 27 Aug 2017 before the gold broke out of its pivotal $1300 in the following day, which simply strengthens these bullish charts. You could say that these charts are supportive of the breakout (I didn't want to write about the $1300 breakout so soon for fear that this may just be another false breakout just like the June's false breakout).

So all these charts are 2 days old.

Instead of actual gold price chart, these ratio charts provide different perspectives and insights into the gold market.

 Gold to DXY Ratio 

Monthly Gold / DXY Ratio Chart from 2002 to 2017
Monthly Gold / DXY Ratio Chart from 2002 to 2017
(Click chart to enlarge)

Gold and US Dollar (based on DXY) has an inverse relationship with each other. I.e. when the king dollar or DXY falls, gold tends to go up.

Looking at this very long term chart, the gold's bull market is corresponding with the rising chart from 2002 to 2011. The gold's bear market from 2011 to 2017 can also be clearly seen in this ratio chart (as well as the gold's spot price chart as described in my article series entitle "The Gold Bear Market's Last Technical Resistance".)

I also highlight the bear rally in the chart, which i repeatedly said in the article series  "The Gold Bear Market's Last Technical Resistance" that the rally in the 1st half of 2016 was nothing but a bear rally. This chart clearly illustrates that in another way.

More importantly, based on this ratio chart, we have broken out of the downtrend, or that the gold bull market has begun for 4 months! (Each bar is a month).

 GDX to GLD Ratio 

GDX to GLD Ratio Chart from 2011 to 2017
GDX to GLD Ratio Chart from 2011 to 2017

These ratio chart clearly shows in another way that a double bottoms were formed in the late 2016, which also marked the bottom of the gold 6-year bear market. It's this reason that led many to call this as the start of a gold bull market. Well, the end of a bear market doesn't always followed by bull market. In our case, it was followed by consolidation. It's not until 2017 that many more signal are flashing that a bull market has begun as indicated by many technical yardsticks.

One of these many signal is the GDX to GLD ratio chart where the downtrend just broke out of the downtrend since last year August high.

The Risk-On and Risk-Off terminology are often used in describing the risk appetite in the equity market or simply investment money in general. In this case, i apply them to the gold market specifically.

In other words, when the gold traders seeing that the gold market is bullish, they put on a Risk-On trade. Otherwise, they put on the cautious Risk-Off trade. So the recent breakout indicates bullish price action.

 Gold to Silver Ratio 

This ratio chart is an oldie but goodie chart. A perennial classic. When this ratio hit above 80s, gold is very bearish, and marked its bottoms. These 3 ratio tops corresponding to 3 price bottoms.

There's nothing can better illustrate than the gold to silver ratio in terms of the Risk Appetite in precious metal markets because when gold is bullish, silver bugs are in general more - let's call them enthusiastic - than gold bugs.

Again (and again, and again, and ...), in the 1st half of 2016 after gold price bottomed, it did a moonshot, which sent this ratio down to the mid-60s. But this was too fast too soon. And the correction was equally dramatic leading to this ratio to march back its upper range. But the shooting star formation is bullish, reversing its bearish price action.

Things are looking up for gold market after some disappointing price actions in the 2nd half of 2016. While prices in 2017 have not yet broken above 2016 prices, technically, it's better than the price actions in 2016 with its steep price rise that could only be described as a relief/bear/sucker rally. The consolidation in the last 12 months are more constructive, technically.

Friday, 25 August 2017

Royal Palace of Madrid, Almudena Cathedral and Plaza de Oriente

We stayed in Hotel Palacio de los Duques, which is only some 15 mins away from the Royal Palace of Madrid (Palacio Real de Madrid). I would be remiss to miss it.

In front of the Royal Palace is the Plaza de Oriente (Oriental Square). This is where we walked through to get to the Royal Palace proper. It's actually sandwiched between the Royal Theatre and the Royal Palace.

Dunno if the "Oriente" refers to the "Middle East", or the "Far East" like China or Japan. I suspect the former. Regardless, i couldn't see any evidence of either. I must be missing something.

A fountain among the greens of Plaza de Oriente

Monument to Philip IV, Plaza de Oriente, Madrid, Spain
Statue, Plaza de Oriente, Madrid, Spain
Top:  Statues that franked the main avenue.
Left:  Philip IV on horseback.

Panorama, Royal Palace, Madrid, Spain
Panorama, Royal Palace

Facade, Royal Palace, Madrid, Spain
Facade, Royal Palace

If you don't want to look at the Palace Guards stand motionless like robots, you may want to see the Changing of the Guards where they move like mechanical robots. Who doesn't want to see that?

We arrived just a few minutes when the Changing of the Guard started its rounds. We were just lucky.

According to an official website, this is their schedule: "Every Wednesday and Saturday of the year from 11 am to 2 pm (except July, August and September: from 10 am to 12 noon, and those days on which an official act is being held or weather permitting)".

We were prepared to visit the Palace, but when i saw the queue for the Palace. Which looked like an anaconda to me. The fear of "queuing to see a palace" (there should be a name for this fear as it's such a common affliction among travelers) was born in my 1st visit to the Palace of Versaille in Paris. There was where i experienced 1st time the 1st hand displeasure of standing in a 1.2km queue (the link above shows how i calculate the length of the queue as made good use of our waiting). The virgin shock of the Great Visitor Queue of Versaille was reinforced by the following year when i visited the Hermitage in St. Petersburg. The queue was shorter, but the condition was made stronger with a large sprinkle of rain, few gusts of freezing wind, and an usual pinch of nature call.

Visitor queue to enter the Royal Palace, Madrid, Spain
Visitor queue to enter the palace

Actually the queue was only some 50m long here, and the sun was shining as usual (as per Catholic blessed sunny Mediterranean country), which should silence my deafening nature call. But nothing scares me away like the sight of an anaconda line (don't get confused with conga line). I gave the palace beeline conga line anaconda the flick. It's a case of twice bitten, thrice shy. I could only comfort myself that once i've seen 12 European palaces, i've seen them all.

Courtyard,  Royal Palace, Madrid, Spain
A peek of the Palace Courtyard from outside the gate.

Gate, the Royal Palace, Madrid, Spain Facade, the Royal Palace, Madrid, Spain

Rather than leaving the Palace empty handed, we decided to visit its neighbour Almudena Cathedral instead. With the ticket, we could get to see a museum that housed inside the cathedral, got to its rooftop to gain a panorama of the surrounding and the Palace, as well as the backs of the heroes of saints of the Bible.

Entry ticket, Almudena Cathedral, Madrid, Spain

Facade, Almudena Cathedral, Madrid, Spain
Almudena Cathedral and its dome. This beeline is for the Palace, not the Cathedral.

Belltowers, Almudena Cathedral, Madrid, Spain

The 2 most important Christ's Apostles - Peter and Paul - adorning near the entrance to the Cathedral (although Paul is  2 Man/Saint/Apostle/VIP, he's the more important of the 2 because he was the 1 who spreads the words of Christ by compiling the New Testament (with plenty of artistic license, according some Bible historians)).

Statues, St Peter and St Paul, Almudena Cathedral, Madrid, Spain

St Michael slaying Satan, Almudena Cathedral, Madrid, Spain
Statue of "St. Michael slaying Satan"

The statue of "St. Michael (or San Miguel since we're in Spain) killing Satan" perches precariously on a ledge. But if you're telling me that i'm mistaken St. Gabriel for St, Michael, i won't defend myself about this Defender of the Church. Both are archangels, and both have the same depictions of slaying Satan (which there's only 1. So surely only 1 of them can claim to be the Satan Slayer? So whodunit? Was it the verger with a candlestick? Or the cook with a monkey wrench (a knife seems too obvious)? Did Satan reincarnate? (Oops, wrong religion). It's a mystery in Biblical proportion (or as Winston Churchill who didn't really say, "It's a riddle wrapped in the Bible inside Christianity").

Aerial View from Almudena Cathedral of the Royal Palace, Madrid, Spain
The Royal Palace as viewed from the mezzanine of the Cathedral. Note its shadow cast on the ground.

The rooftop (which located just below the dome) that the visitors can access and view are in square shape with its sides facing almost precisely the 4 cardinal directions. (FYI: the cathedral is built along the north-south axis with its altar at the south. This is a practical but atypical architectural plan for a church).

Panorama from the southern face of , Almudena Cathedral, Madrid, Spain. Basilica of San Francisco el Grande can be spotted in the centre
Panorama from the southern face. Basilica of San Francisco el Grande can be spotted in the centre.
(Click photo to enlarge)

Aerial close-up of San Francisco el Grande as view from Almudena Cathedral, Madrid, Spain
Aerial close-up of San Francisco el Grande

Statues of saints and Biblical heroes adorn atop the fence of the rooftop at inter-cardinal points.

Statue, Almudena Cathedral, Madrid, Spain Statue, Almudena Cathedral, Madrid, Spain Statue, Almudena Cathedral, Madrid, Spain

Statue, Almudena Cathedral, Madrid, Spain

Rooftop's vista towards West with River Manzanares running across the middle of the photo toward the top. The bushy area between he river and me is the Palace Garden Jardins del Campo del Moro. The green area in the middle of the right of the photo is Temple of Debod, Almudena Cathedral, Madrid, Spain
Rooftop's vista towards West with River Manzanares running across the middle of the photo toward the top.
The bushy area between he river and me is the Palace Garden Jardins del Campo del Moro.
The green area in the middle of the right of the photo is Temple of Debod where i visited a day earlier.
(Click photo to enlarge)

Eastern vista towards city centre with some prominent churches' architectures dominate the skyline, Almudena Cathedral, Madrid, Spain
Eastern vista towards city centre with some prominent churches' architectures dominate the skyline.

 , Almudena Cathedral, Madrid, Spain Close-up of some of the church buildings. The closest church in the foreground is Iglesia del Sacramento (Church of the Sacrament ). It's a military church., Almudena Cathedral, Madrid, Spain
Close-up of some of the church buildings.
The closest church in the foreground is Iglesia del Sacramento (Church of the Sacrament ). It's a military church.

North facing view of the main facade of the cathedral and the Royal Palace, Almudena Cathedral, Madrid, Spain
North facing view of the main facade of the cathedral and the Royal Palace

Ceiling of the dome, Almudena Cathedral, Madrid, Spain
Ceiling of the dome
Oh, did i mention there's a museum inside this place?

Monday, 21 August 2017

Mind the Bear Traps, and Bargains Hunting Season

If you ask a 10 year old if this chart of SPY since Feb 2016 is in the uptrend, sideways or downtrend, i think you know they will say uptrend. I'll take their words for it.

SPY price chart from Feb 2016 to Aug 2017
SPY price chart from Feb 2016 to Aug 2017.
(Click image to enlarge)

The market has been in the uptrend since Feb 2016, and its prices are confined within this light purple uptrend channel. Especially since Dec 2016, prices have been moving in an even narrower channel between the channel's center-line (marked by dashes "-----") and an upper line parallel to the center line. Notice how well the 200 DMA (in red) hugs the channel's bottom starting from November 2016? And the more volatile 50 DMA also waltzes around the channel's center-line.

There only 2 times where prices move outside this narrow well defined channel.

The 1st time is around March 2017 in the circled area that i call "False Trump Rally Breakout" (as supposed to Trump Rally's False Breakout. The difference is subtle but significant. The word "False" refers to the so-called Trump Rally, not breakout. The realisation that Trump's pro-growth won't be implemented anytime soon during March 2017 pulls the Trump's euphoria back down to the channel's center-line).

The other time occurred on Thursday 17 Aug 2017. During 2017, the center-line has been a strong support. Every time SPY prices being pulled towards the center-line, it bounce off and move to new highs. That is, until last Thursday when the prices dipped below it.

Will this be the beginning of a reversal? Anything is possible, but not equally probable. I would give the probability of this being the start of a reversal (from bull to bear market) a 1% chance, and the probability that prices get to the bottom of the channel = 200 DMA would be a 20% chance. I think SPY has bottomed last Friday (18 Aug), in the short term. (well, late September, early October is another matter). SPY may go down for one more day or two to say, SPY about 240, maybe, but that's it.

During the bull market, you need to be aware of bear traps. Don't get too excited about shorting the market because it dips below 50 DMA. In my article Trump Victory and the Stock Market Roller Coaster Ride, i warned about bear traps in this market with a chart, which i've reproduced below.

S&P 500 price chart 2016 showing bear traps
S&P 500 price chart 2016 showing bear traps

The stock market shows its resilience last year when it faced multiple headwinds ranging from Brexit to the uncertainty of election, but it manages to march upwards. The stock market's resilience is once again demonstrated this year with the constant D.C. dramas being played out in Washington. In fact, the market is more resilience this year given the more political background noises from French Election, North Korea and constant slip-ups by the dysfunctional Trump Team.

All this market resilience is just another words that global growth is sound, and so market is more willing to ignore political noises. When economy is weak (or market volume is thin), market becomes jumpy, and jumps (actually drops) at every political shadow (side)show.

Just today, the polls show that Japanese manufacturers most optimistic in a decade. European economies are also improving, emergent economies are powering ahead, China has been stabilizing for a few years (just look at Dr. Copper, which is probably China's best economic indicator).

Percentage of global copper demand by Top 5 countries

SPY may drop another day or two from here (although i'll bet it's over since last Friday until the next pullback in late November or October). In any case, i've put my money where my mouth is. My cash position was 50% at the start of the month. On 10 Aug, i deplored 20% of this cash to pick up some bargains, and last Friday (18 Aug), i've picked up some more bargains. And by the end of today, i'll be 100% in equity (this is not my recommendation to anyone. You should make up their own mind).

I think the downside, in the short term (i'm a swing trader), is limited. Trying to pick the EXACT bottom consistently is a fool's errand. It's wiser just to pick bargains during this pullbacks. If you can't stomach the ups and downs during the volatile August to October months, just stay out the market until November. But to me, these 3 months are the Stock Market Sale Season.

Friday, 18 August 2017

Gold's Bull Market Final Technical Resistance - Part 4

When i wrote part 3 of this 4-part series (on 6 June 2017), i said it was the final part in this series. It turned out not to be. Well, i did say that maybe i was making this call too hastily. I wrote the article on the day when the price finally poked up the 6 year downtrend line. What i should do was to wait for a few more days to see how prices play out, and the breakout turned out to be a false breakout.

Gold prices showing 2 breakouts from the long term downtrend line.
Gold prices showing 2 breakouts from the long term downtrend line.

The green horizontal line marks the previous as well as height for YTD. Gold prices tested this horizontal green line and went back into the long term downtrend line after i wrote part 3. So how is this latest breakout different than the previous false breakout in June?

There're 2 things.

1.  Gold prices didn't drop back below the long term downtrend line, instead, it retests the downtrend line and bounces off.

2.  While the June breakout pokes its head briefly above the downtrend line in the daily chart, but if you look at its weekly chart, there was no breakout at all. See weekly chart below,

Weekly chart of spot gold from 2011 to 2017 showing breakout
Weekly chart of spot gold from 2011 to 2017 showing breakout

While it's a very positive development for gold bulls with this very eagerly long-awaited breakout of the long term downtrend, the next important level to watch is clearly the green horizontal line of around $1295 level. If we could convincingly break above this level, preferably $1300, and proceed to stay above $1305, which is the November high last year.  Once this target is clear, we'll once again having the kind of bullishness that we experienced in the 1st half of 2016.

Now that we've seen the technical reason for gold's bullishness, there's also a positive support from its fundamental driver. As i mentioned in last previous article Reflection of Reflation Trade? and argue that reflation is good for gold prices, and how both the copper and gold was trapped under similar 6-year downtrend. We have just seen a rather convincing and sustained breakout of Dr. Copper from its 6 year downtrend line for 2 months. Zinc prices, too, are doing something similar. All these bode well for gold prices going forward.

Monthly copper price chart from 2010 to 2017 showing breakout from 6 year long term downtrend
Monthy copper price chart from 2010 to 2017 showing breakout from 6 year long term downtrend

And ah yes, gold is now, for the 1st time since 2011, is entering bull market territory, based on this long term downtrend line. All that occurred in 2016 was nothing but a relief or bear rally (again, from this long term downtrend point of view). Although the best name for the rally in 2016 is Sucker Rally because it sucks many eager bulls into the rally that keep falling since its peak in Aug 2016. Many bulls that bought it in Aug and Sep 2016 are still losing money. If you lose money in a market after 12 months later, can you really call it a bull market? The market is basing in the last 12 months (actually since start of 2015) is the best characterization.

In the short term, i expect gold prices to stay below the green line or $1300 (because DXY is oversold), and so this basing continues, but with a slight bullish bias now that it breaks out of the long term downtrend line.

Saturday, 12 August 2017

Funny Caption 50: President Trump's Sound of Fury

"How about 'fire and brimstone' ?"

"How about 'bing bing bing bong' ?"

"What about adding a trade war with China ?"

"What about a rapid-fire of tweets like the world has never seen?"

"...full of sound and fury, signifying Trump presidency."

Tuesday, 8 August 2017

Funny Caption 49: QE2's Dominion

queen Elisabeth II

"I love headgear. This one is my favourite."

"Yes dear, I own Australia, Canada, New Zealand, etc, etc, etc..."

"Let me assure you, Illuminati or the Rothschilds are nothing to be afraid of...muahahaha!"

"Despite having dominion over 1/6 of the world landmass, I still have no control over what comes out of the mouth of the Duke of Edinburgh..."

"If you want tips on winning horse races, talk to me."

"Shhh...don't tell the British public that I am a German descendent."

"And the next country goes to..."

Monday, 7 August 2017

Inaniwa Yosuke (稲庭養助): The Silkiest Udon I've Eaten (in Singapore)

435 Orchard Road  #04-45
Wisma Atria Shopping Centre, 
Singapore 238877

 The Place 

It's located in Japan Food Town in Wisma Atria shopping mall. It's the 1st time i visited there, although Ada reminded me that i've been there before. I take her words for it. The Japanese establishments here are in general more upmarket and its bill-of-fare consists of high priced dishes. This is why lowly foodie like myself frequent there in low frequency. Hence my strange familiarity of the place. The 50% off have lured me there today like bee to honey (or candy to kids or white powder to 17th century French visconte or Japanese geisha). We booked it through the eatigo app.

Inaniwa Yosuke, Singapore

Inaniwa Yosuke, Singapore

According to their literature, their secret Inaniwa udon secret recipe was developed in 1665 (just a year before the Great London Fire) only to serve the imperial court members. It wasn't until 1860 that the udon went public. So a lowly (but extremely humble) pleb like myself feel doubly (because of the half price) honoured to taste their udon today.

Below is a poster on their wall.

Inaniwa Yosuke, Singapore
Look up the wall...it's a harp...it's a loom...it's ramen!
I too love to play with food. Does it play Sakura, my fave Japanese folk song?

 The Food 
Inaniwa Yosuke, Singapore

Inaniwa Yosuke restaurant, Singapore
From top left to bottom right: soup base with ingredients, the famous udon, raw egg, garnishes, peanut desert, and extra soup

I ordered the Beef Tsuke Nabe Udon. The udon didn't disappoint. It's the silkiest udon i've ever sampled, in Singapore (i emphasized Singapore because i did taste smoother noodles in Osaka, if my memories served as well as the Japanese waitress. Flying to Osaka for a good udon is bad for wealth). So no head is rolled today (if we're living in 1665 - 1855). The soup is delicious, but slightly sweet for my taste buds (which prefer bitterness. Like owner like palate). It could be described as "I'm sophisticated, but modest and understated because i'm Japanese." Take a bow(l).

The beef - while it's not from the wagyu cows that received massage (probably an urban a countryside legend) - it's still nice enough. I actually much prefer these leaner beef over the fat brown cows any day. Of course, if they put wagyu beef into the soup, my wallet will lose a lot of weight after eating the fatty beef. Call me crazy (or healthy, wealthy and wise. It's up to you), i love a fat wallet and lean beef.

The desert is mildly familiar, but kept me in suspense as to its ingredient. Since i don't have peanut allergy, i can't swear to its existence.

If they keep up the half price, i'll keep up twice the visits. Deal?

Overall score: 8 / 10.