Two Sides of the Same Coin?

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By James Helliwell, Chief Investment Strategist

Hi everyone

I hope you’ve all had a good week! It has been another busy but productive one here at the Academy, with both our new Monthly Checklist Report and a special live webinar falling in and amongst the usual action taking place in markets. Our newly updated Checklists are showing some interesting changes to the scores as we head in to August, with a number of markets including gold and the US dollar, specifically, warranting closer attention in the coming weeks. Unfortunately I cannot disclose all of the scores here today out of respect to our paying members, but if you would like to join them in accessing the full set of Checklists along with this week’s video analysis you can do so immediately right here!

It is often a challenge in the first week following our monthly update to strike a balance between sharing what I would like to share with you in this blog, and preserving the value of our premium content. For now, I’ll leave you with a partial view of the gold and US dollar Checklists which I mentioned were of particular interest when we reviewed the new report midweek.

First up, is gold. Every man and his dog seems to be bullish, almost solely on the basis of new ‘liquidity’ being added to the financial system (a view that I certainly don’t contest!). As you can see from our Checklist below, this is understandably supportive of gold and is scored as a ‘+1’. Beyond this the scores become a little more mixed, with ETF flows rated ‘0’, whilst the real interest rate and futures positioning argue against owning the precious metal. Of course, we don’t consider any one factor in isolation as our process assesses a broad range of fundamental and technical drivers of gold (you can of course see the rest of them, plus the total, as a member of our Trading Club).

The chart looks absolutely brilliant for gold bugs, who have seen a significant appreciation in the past couple of weeks which further extended the current bull run. As I noted back in February, the technicals suggest that an initial target of around 2250, before a run up towards 2500 if the market makes a new high.

As for the US dollar, this is seen as the opposite side of the same coin by many investors, but most notably those who perhaps only focus on ‘liquidity’ as the single driver of each market. Again, I don’t deny that liquidity is indeed a key driver, however, there are also a number of other factors that should be considered (as per our Checklist!) which often determine the shorter-term tactical trading in the market. Although economic surprise and futures positioning are obscured along with the total in the screen below, you can see that it is by no means a sea of red for the other factors that are scored in our process...

And here’s the chart of the dollar index. It has been a one-way bet (clearly, bearish!) in the past month or so, yet there is clear potential for a tactical rally in the near-term. Of course, this would need to be validated by the fundamentals presented by our US dollar Checklist, which Trading Club members received the inside track on earlier this week. Without giving too much away, it is certainly something that I’ll be looking at closely during August – whether it be for a long or short setup given a potential retracement.

If you would like to join us for our full analysis including new insights each week, or learn from the ground up with online tuition from Lex in our MDT online course, then head to milliondollartraders.com and take your financial knowledge to the next level right away!

Have a great weekend,

James

Disclaimer: For educational purposes only. Even though we do our best to provide reliable data, you should not trade based on this information. For more information go to www.milliondollartraders.com

© Copyright 2020 Lex van Dam Financial Education. Further distribution prohibited.

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