Survived For Now

On December 1st I wrote, "If we manage to go above the USERX 9.1 next week I will change my sell stop from the 92-96 sell to the 35-39 sell. I would, of course,  still prefer not to sell the 92-96". Last week, we sold the USERX 92-96 but then shot straight up through the 92-96 and bought it back. I didn't sell. The Australian gold market that I am mostly invested in had finally a few good days and my major holdings gained back between 10% and 25%. I am still fully long and from this side of the pond, it seems the bottom is in, at least for a few weeks. 
My major concern now is how to reconcile the USERX and the Australian XGD action of the last few months and where are we in the big picture. 
The Australian gold started its bull market 6 months before the USERX (HUI). I think this is due to the rare phenomenon of gold and USD  price going up together. This had boosted up the price of gold in AUD much earlier and more than in USD which consequently benefited Au gold mines much stronger than their counterparts in the USA. The Australian gold bull market started earlier, lasted longer and went higher than the USA gold market. This came to an end in August when the AU gold peaked first and the USERX (HUI) followed three weeks later. Halfway through the correction, the USERX bottomed and the AU golds kept relentlessly falling until the index hit the 200 days MAV seven days ago. I have never seen such a disconnection between the two since I have started trading gold markets 20 years ago. I have seen one rising and the other going sideways and vice versa but have never seen one rising and the other falling for a prolonged amount of time. This lasted for two months from mid-October to mid-December.  In hindsight, I would deem this to the gold-USD relationship reversing back to being inverse as normally they should be. Also, the AU golds, being much more overbought, needed more time to deflate. This put more pressure on AU gold shares vs USA gold shares so they kept correcting until all the advantage of the early bull had disappeared. We can corroborate this renewed inversion with the charts of USERX and UUP. The USERX has bought back the 92-96 while the dollar (UUP) has finally sold its bull market and is on a double sell which officially puts it in bear territory.  We can, also, explain the strange behaviour of the USERX bull in the same fashion. Since the USERX is composed of many international gold mines, including significant Australian component, the very poor performance of the Aussies had a major impact on the USERX selling the 92-96 bull market. We can see this in the charts of the HUI and XAU which haven't got many AU listed miners and for that reason had performed much better than the USERX. They did not sell their existing 92-96 buy signals. 
The question is now, what can we expect of this new USERX buy signal? 
My main theory in applying the SKI indices to a wide range of markets is that if the signal is right it will be confirmed by similar signals from other markets. For example, it would be a reasonable assumption that if the HUI is in a bull market then the USERX wouldn't expected to be in a bear market. The corollary is that the best/strongest signals are happening simultaneously on multiple indices and this could be used as a filter to recognise false or weak signals. The best example of this is the 2005 true bull when all the indices gave the bull signal at the same time. The other example is the infamous life run low of 2008 when 5 days into the signal the GLD and SLV were flashing double sells while we all expected prices to explode upwards. We all know what happened after that and how the signals aligned in the end. In the light of this let's analyse the current situation. Different gold indices were aligned until recently when some sold the ongoing bull signals and some kept the bullish position. The division is clearly between the USA based and the AU based companies. HUI and XAU are at new multi-month high and look like they will hit some kind of a top soon. USERX and GDX/GDXJ are coming out of dangerous 92-96 sell signals and to me, they look like they will have to go through a period of struggle to stay above the 92-96 echo and, more importantly, the 881-885 echo. In this process, I wouldn't exclude another 92-96 sell before the true bull is reinstated. A very similar situation is with GLD and SLV which also have to go through process of transforming current signals into the true bull market through a series of buy/sell signals. The AU XGD index has, in my opinion, hit the intermediate-term bottom but is clearly in a bearish configuration. I expect it to rally for a while but to change the bearish configuration it needs to buy back the 92-96 echo which will require months. 
Overall I think that the gold market will have a bullish bias for a while but I do not expect a spectacular rise to start anytime soon, not until the signals align again for different indices. The bullish bias is supported by the recent dollar double sell and quite overbought general market that should have some type of a correction soon. 
I expect HUI, XAU, USERX, GDX to hit the targets that I originally expected for the bull market and then have a correction before heading higher. These targets are, for USERX 10.28, HUI 286.05, XAU 114.71, GDX 31.79, GLD 148.53, AU XGD 7200. While heading toward these targets I expect them to morphe into proper bull signals. I also expect that some dangerously looking selling and buying of the 92-96 echo could be in the cards, similar to what we have seen this last week. For this reason, my stop loss on USERX will still be on the 35-39 sell rather than the 92-96 sell. The time frame for the rise is mid-February. 
This upcoming year is all about presidential elections in the USA and I expect this to be the main factor that drives the markets. As it looks now it seems that Trump is due for reelection. His election in 2016 wasn't great for the gold market but wasn't bad eighter. Gold went sideways for almost three years until it broke out in June this year. The dollar is where it was at the time of his election and the SandP is way up. I cannot expect a major sell-off in the general market as long as his chances to be reelected are high. How that corresponds to the gold market is the question? Why did we break out in June this year? I think the answer is in inflation as it is picking up. We already see this in the inflation chart where at the moment the 50mav is about to cross the 200mav. This is also corresponding with the double sell in the dollar chart that I mentioned before. So my prediction for 2020 is Trump wins the elections, the market peaks in November/December, gold is steady to up, dollar weakens. That is if everything is business as usual but I wouldn't be surprised to see a major disruptive event at some time in the next 12 months. 
I am long sitting on good profits yet again and firm not to give up this position. I will make some adjustments if we reach the targets that I described above.

INFLATION expectations

This chart bottomed in August, three months before the GLD signalling upcoming turnaround. It is about to make a major long term bullish cross 50mav over 200mav. Probably this is a clue what is happening with the gold and the dollar and is corroborating my positive bias for the gold market.

USERX
USERX is back in the bull territory. Needs to be above 10.28 by the mid-February to avoid crossing the 881 echo. 10.28 is also my minimum target for this move, if exceeded the next target is 13.75. I wouldn't be surprised to see another sell/buy of the 92-96. I also wouldn't be bothered with it, my stop loss is a 35-39 sell.

USERX long indices

HUI

HUI is bullish, immediate target 286.05. If exceeded then the next target is 375.

HUI long indices

XAU

XAU is bullish, immediate target 114.71. If exceeded then the next target is 140.94. 

XAU long indices

GDX

GDX is about to buy the 92-96 echo but it will be xxed and off the path. It needs to sell and re-buy for a true bull.

GDX long indices

GDXJ

GDXJ bought back the 92-96 echo but it is xxed and off the path. It needs to sell and re-buy for a true bull.

GDXJ long indices

XGD Australia

XGD Australia is in a bear market configuration. Needs months to buy back the 92-96. I think it needs at least 7200 soon to set up for that to happen.

XGD Australia long indices

Very nice looking long term chart, better than the others.

GLD

GLD went from the best setup three weeks ago to the worst at the moment. It needs a push to buy back the 92-96 in order to set up for a possible sell/buy sequence to morph into a true bull market again. 

GLD long indices

Very strong looking long term.

TLT

TLT is showing some weakness here. Currently, it looks like it is more probable that this weakness is going to continue. If it does that would be another fact pointing to upcoming inflation that I spoke about.

UUP

UUP finally sold the bull. It also broke the uptrend line going back to the beginning of the 193 days rally. It seems like the inverse relation to the gold is back. The 221 index is an obvious target.  A weak dollar means more inflation and support for the gold market.

Pay attention to how a single touch of the 2008 high was a kiss of death for the bull. Will we go back to test it again?

Bitcoin

Still struggling and deteriorating. Looks weak for now.

Merry Christmas to everyone and a very happy New Year!

Branko