A Point About The Head and Shoulders Pattern

WPM chart

Chart by Steven Sarnoff h/t stockcharts.com

The Head and Shoulders is a well-known price pattern in markets.  Casual observers and amateur traders frequently misinterpret the pattern.  You can see how it gets its name on our chart of Wheaton Precious Metals above.

The point professional chartists understand is that it is not a pattern until the neckline support is broken.  Until then, it is only a potential Head and Shoulders.

Price projections are made from the top of the head to the neckline.  Some would call for WPM to fall to support in the low-$20s.  It may do that, if the neckline is broken.

Broken support often represents new resistance (supply).  Also, smart traders look to take advantage of false signals.  False signals are powerful indicators, but that is a topic for another article.

Support (demand) from the neckline and three consecutive positive red candles tell me WPM may be ready to take off higher and challenge its summer highs.

I see support at $25-$26.  Resistance is at $26.83-$28.50 and $30-$31.

Until proven otherwise by price action, and with the US dollar weakening, call me a Silver Bull.

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Be careful and measured in your trading.

Good luck and best regards,

Steve

 

Your Weekend Bit of Wall Street Wit & Wisdom

Currency icons

Currency icons: dollar, yen, pound, euro

“A government that inflates is therefore led to try to manipulate the foreign exchange rate. When it fails, it blames internal inflation on the decline in the exchange rate, instead of acknowledging that cause and effect run the other way.”
— Milton and Rose Friedman, Free to Choose

Changes in international currency exchange rates impact asset prices.  An example is oil priced in US dollars.  A weaker US dollar has an uplifting influence on oil.  A stronger US dollar may weigh on asset prices, making them more expensive to our overseas friends, who would buy with other currencies.

When sovereigns stick their nose in via “beggar-thy-neighbor” policy actions, economic risk is raised.

Central bankers are presently facing a daring balancing act, as they try to keep exchange rates under control and manage them to suit their propping purpose.

Keep an eye on exchange rate action for its impact on world markets and the global economy.

Warm wishes for a great weekend,

Steve

King Dollar’s Crown Wobbles

Brian Dykstra portraying King John

Photo by Teresa Wood, Brian Dykstra as King John, h/t broadwayworld.com

by Steven Sarnoff

As the stock market’s decline intensifies, one wonders what central bankers will do.  Will they coordinate to take down the US dollar?  Their objective would be to boost their balance sheets and pump out enough liquidity to prop up ailing share prices.

Will Treasury Secretary Munchkin Mnuchin again call the PTT (Plunge Protection Team)? Stocks are sliding hard.  It will likely take a sizeable sovereign effort to turn the state of the market.

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What’s Going On (In The Market Now)?

whatsgoingon

by Steven Sarnoff

The extended record-setting move up in the venerable S&P 500 is making any self-respecting seller “wanna holler and throw up both my hands,” and many of the weaker shorts are capitulating.  This has my contrarian senses tingling.

Let’s have a look at what’s going on in three important markets, stocks, interest rates, and the US dollar.

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