Will The Arrest Of Huawei Executive Derail Trade War Truce?

On Saturday, China said that Meng's arrest "severely violated the Chinese citizen's legal and legitimate rights and interests, it's lawless, reasonless and ruthless, and it is extremely vicious." This arrest can have serious consequences depending on how it plays out down the line. The trade war for the past few years has forced China to accelerate their efforts to be self-sufficient and cut reliance on foreign suppliers.

After the news of the arrest came out, market has reacted negatively on the assumption that it can derail trade war truce last weekend. This can also potentially marks the opening of a new chapter of deepening rift between the U.S. and China.

Analysis of Gold to Russell 2000 Ratio

 

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A Gold to Russell Ratio analysis above shows a break above the weekly wedge. It is an early indication that the cycle from 2011 peak may have ended although we need more separation from the low. The implication is clear here and Gold can start outperform Russell in the next few months/years. If cycle from Aug 22, 2011 high has ended, the ratio can at least rally higher to correct the entire decline from 2011 high (a 7 year decline) in a larger 3-7-11 swing.

Analysis of Gold to Nasdaq Ratio

 

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An analysis of Gold to Nasdaq Ratio above also suggests that the ratio breaks above the weekly wedge. This suggests cycle from Aug 22, 2011, may have ended. Again, we need more separation from the low to confirm this. If that's the case, then we can potentially expect Gold to outperform Nasdaq in the next few months/years. The ratio should also at least correct the entire decline from 2011 peak in larger 3-7-11 swing.

Russell Daily Elliott Wave Sequence Technical Analysis

 

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Cycle from 9.4.2008 high in Russell shows an incomplete 5 swing sequence, favoring further downside to end 7 swing. Please note that this is a swing count, not an Elliott Wave label. A 7 swing is a double three Elliott Wave structure (WXY). The Index can see some support at 1367 - 1410 and end swing #5. Afterwards, it should bounce in swing #6 in 3-7-11 swing to correct cycle from 11.8.2018 high (1589) before the decline resumes. This analysis suggests that Russell should see further downside in coming sessions.

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