From the Desk of Ian Culley @IanCulley

One week, the buck is breaking down. The next, it’s ripping higher.

With commodity currencies rolling over, the dollar-yen sliding lower, and the US Dollar Index $DXY failing to hold its recent breakdown… 

What’s it going to be this week? 

So far, the Bulls are in control. 

But that could change if dollar bears violate these critical levels…

First, track the 1.0915 zone for the euro: 

A decisive break above that level will apply pressure on the buck and set an upside target of 1.1125.

Next, keep an eye on the pound.

From the Desk of Ian Culley @IanCulley

Gold’s failed breakout is testing investor resolve.

But let’s consider last week’s action before unearthing our bullion.

Check out the failed breakout with a bearish momentum divergence in the lower pane:

Waning momentum and failed breakouts go hand in hand. Gold futures proved an excellent example of momentum diverging from price, one of the reasons we track RSI readings.

But just because momentum confirmed the failed breakout doesn’t mean we should turn bearish gold and precious metals.

Remember, gold posted a new all-time high last week. New all-time highs are bullish in my book, no matter how you slice them.

Plus, the March breakout remains valid, and the underlying uptrend is intact:

From the Desk of Ian Culley @IanCulley

Risk assets are taking a hit.

The major equity indexes are seeing red. Crude oil is slipping below eighty bucks. And gold is failing at new all-time highs.

Perhaps the markets are navigating the summertime blues – a tune base and industrial metal investors have been humming for months.

Remember copper’s failed breakout in May:

Oof!

Dr. Copper is living up to the trading adage that from failed moves come fast moves in the opposite direction.

The futures continue to fall – down almost 8 percent this week. 

Meanwhile, track the 4.16 level for potential support:

From the Desk of Ian Culley @IanCulley

The bull market is back! 

The major indexes are hitting new all-time highs, and so is gold. 

Small-caps are ripping. Crypto is ripping. And the most heavily shorted names on the street are squeezing higher.

I’d expect the US dollar to break down as stock market bulls rush to put their greenbacks to work. 

Instead, the US Dollar Index $DXY is holding steady. Dollar-yen is refusing to roll over.

And risk-on commodity currencies – the Australian, Canadian, and New Zealand dollars – are failing to trigger buy signals.

Stock market bulls don’t seem to care about the lack of risk-on signals from global currencies. 

From the Desk of Ian Culley @IanCulley

Precious metals might be the most straightforward trade on the sheets right now.

Gold is 10 bucks away from a new all-time high. Silver and platinum are holding above critical breakout levels. And mining stocks are ripping.

Close your eyes and take a swing. You’re bound to hit a winner.

But your odds of success (and potential payout) improve if you forego shiny rocks in favor of buying gold and silver mining stocks.

Check out the Gold Miners $GDX breaking out relative to the Physical Gold Trust ETF $GLD:

GDX outperforming GLD speaks to risk-seeking behavior – a bullish environment for mining stocks and physical metals.

From the Desk of Ian Culley @IanCulley

Today’s analyst meeting was one broken record after another as we ripped through the most important charts on the market.

Not a top, never hit oversold…

Not a top, never hit oversold…

There’s a raging bull market on Wall Street right now. 

But the fun and games will come to a screeching halt if the following chart rolls over.

Check out the economically sensitive Home Construction ETF $ITB:

ITB checks both boxes.  It never hit oversold levels and is only a top if it breaks below 97. 

Plus, it’s ripping! 

Of course, we need a decisive resolution above the March high of 116.34 to confirm our bullish bias. 

But if the next bull run has legs, ITB will post new all-time highs. 

That also means lumber futures have to stop falling.

From the Desk of Ian Culley @IanCulley

Will the Fed finally cut interest rates?

We can’t say for sure… 

All that matters is what the market thinks. And following Powell’s testimony this week, investors are increasing their September rate-cut bets.

Let’s review a few of our recent bond trades, as US treasuries could rip in the coming weeks.

Our entry point for T-bond futures was 117’27:

Price triggered a buy signal last month, but the breakout has been far from decisive.

If you haven’t taken a long position, you can move your risk level to the May 15 close, trading against  118’08.

Or, you can wait for buyers to take out 120’12 (the June 14 close).

Entry tactics aside, we’re targeting last December’s high of 125’30.  

From the Desk of Ian Culley @IanCulley

The talking heads are forecasting choppy market conditions and a significant correction for Q3.

News flash: The market has been messy for months. And we already experienced a stealth correction beneath the surface.

I’ll keep an open mind, but if commodity currencies start breaking out…

Forget about it!

Stocks have weathered the US dollar’s recent rally. 

Imagine how they’ll perform once the dollar rolls over, especially against risk-on currencies like the New Zealand dollar.

Check out the NSD/USD pair coiling within a symmetrical triangle after retesting its 2020 low:

From the Desk of Ian Culley @IanCulley

It doesn’t matter whether we’re talking about markets or summer vacations –  I always avoid the crowds and aim to beat the heat.

No lines. No traffic. No fake, overpriced food.

It also means dropping those hot semiconductor names and reaching for silver mining stocks…

July is by far the best month of the year for gold’s crazy cousin. And it’s not even close:

Unsurprisingly, silver futures gained roughly seven percent last week. They also eclipsed the previous month's high and printed their highest weekly close since January 2013 – a stellar way to start the month.

On the flip side, June takes the cake as Silver’s most challenging month of the year.

And what did Silver do last month?

It only fell by three percent, finding support at a critical shelf of former highs:

From the Desk of Ian Culley @IanCulley

Forget about the selloff in Bitcoin for a minute.

Coal stocks are ripping!

Perhaps they’re giving back some recent gains today, but most stocks are.

More importantly, Monday marked the largest one-day rate-of-change for our Coal Index since 2020…

If you’re wondering why we created an index of coal stocks, the answer is simple: The December 2020 delisting of the VanEck Vectors Coal ETF $KOL forced our hand.

They shut down the only coal ETF just as commodities began ripping (many toward new all-time highs). You can’t make this stuff up… 

One of our favorite names – Alpha Metallurgical Resources $AMR – has gained over 4,000% off the December 2020 lows. Unbelievable!

Almost four years later, the rally isn’t over for these names. 

Our coal index is on the verge of kicking off the next leg higher:

From the Desk of Ian Culley @IanCulley

Chop, chop, chop…

Yields on sovereign debt are chopping sideways across the globe.

The US, France, Germany, Spain, and UK benchmark rates are well below their respective 2023 peaks.

But in Japan, the JGB 10-year yield is hitting its highest level in over a decade. 

Check out the Japan benchmark rate cruising above 100 basis points: 

Earlier in the week, the Japan 10-year yield reached 1.10 for the first time since July 2011. 

While the Bank of Canada, the Swiss National Bank, and the European Central Bank began cutting rates this year, the Bank of Japan (BoJ) may hike later this month. 

You can blame it on a plummeting yen or the BoJ’s Yield Curve Control policies. 

From the Desk of Ian Culley @IanCulley

The smart money is snatching up Canadian dollars.

Last month, commercial hedgers extended their Canadian dollar exposure to their largest net-long historical position.

While positioning represents a condition – not a signal – we can only view the hedger's appetite for the loonie in one light…

Bullish!

Notice that extended commercial long positioning (the bright blue line in the lower pane) coincides with critical inflection points:

These market turns preceded extensive rallies in 2016, 2017, and 2020.

Before boarding the loonie’s next rip-roaring rally, price must provide a well-defined entry with a favorable risk-to-reward profile.

But the past two years of sideways action look more like a topping or bearish continuation pattern, not a bullish reversal: