Friday, May 17, 2013

Follow the Leader

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Over the past two years since silver peaked in late April 2011, we have used the asset as a leading proxy for the euro.  Back in 2011, silver broke its parabolic blow-off a few sessions before the euro pivoted down. Today, we believe there presents another example of this dynamic on a much wider timeframe; whereas, silver has led the move in breaking last summers lows - well before the euro. 
Keeping this leading nature in mind - and despite silver marginally breaking its April lows, we feel that it is trading more indicative of a base with more upside potential - than an immediate continuation of the downtrend that began last fall.  
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Similar to its leading relationship with the euro - we expect that the CRB continues working its way towards breaking last summers low.
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Headlining the week, the US dollar index accomplished a major breakout - very much along the lines of its previous breakout in 1997. 
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Remaining within the commodity and currency communities we have had the strongest reads on, the Australian dollar continued its free fall this week - just as the US dollar performed while ushering in the start of the now defunct commodity cycle. 
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*  All stock chart data originally sourced and courtesy of www.stockcharts.com 
*  Subsequent overlays and renderings completed by Market Anthropology