Positive development in gold sector

A further positive development has happened in the precious metals sector this last week. Let us revise the charts.

GLD - physical gold ETF
GLD recently bought the 35-39 index and sold the 16-20 index inside its true bull 92-96 buy signal. That development satisfies the SKI requirements for a new leg up inside the bull market. The one thing missing, from the classical TA point of view, was a close above the 164.96. On Monday last week, the price did close above 164.96 and stayed above it for the whole week. We can now officially say that the GLD broke out, first target 174.00.
A temporary danger is a potential double sell 16-20 and 35-39 that can happen in the next 7 days if the price hits 162ish.

SLV - physical silver ETF

After an impressive rally from the bottom of the crash to buy 92-96 SLV made a classic buy sell move to set up a true bull buy. Last week it needed to hold above 16.54 for the buy to generate and it did. It closed the week at 16.63 and thus generated a true bull signal

When the classical TA is taken into consideration, unlike the GLD this breakout is still not confirmed. First, SLV needs to take out the short term downtrend that started on 01.06.20. Also, there is a considerable horizontal resistance between 17.50 and 18.00 which is clearly visible on the weekly chart. If all this is taken care of the next target would be the 2016 high at 19.71 but it is not gonna be easy.

For the next 10 days, there is also a potential for a 92-95 sell signal but I wouldn't be too concerned about it as long as the price stays above 16.50. The reason is that from the 07.07 the 92-96 index will be echoing the March 2020 crash and it will be easy to buy the index back as long as we do not go into another devastating crash.

If the silver price is going to make any progress in the next couple of months I expect it to be a tedious ebb and flow rather than a spectacular rise.

USERX - Gold and precious metals fund

From the three possible scenarios that I described the last week the second one (rise straight up through 16-20 sell signal to reach new highs for the year without interfering with 35-39 or 92-96 index), is unfolding for now. The interference with the 35-39 and the 92-96 is still possible but the window of opportunity will close by 20th July.

The danger in this period is a possible double or triple sell. The triple sell is rather low probability because it needs quite a precise action, not too far down in order to avoid a 16-20 buy and not too fast up, after the potential 92-96 sell, in order to sell 35-39 before the 92-96 buys back. Even if it happens it will need an immediate 12%+ drop to save the 92-96 sell from buying back. Much more realistic bearish scenario would be a strait crash a la March 2020, which I do not find very probable, but one never knows. Here is the chart picturing a possible triple sell.

The reason I do not consider the possibility of a serious crash lies in the weekly chart of the USERX which is looking like a clear breakout with plenty of room to rally. The next medium-term target is 13.75.

XGD Australian gold index

XGD recently broke out of the downtrend line that started at the Aug 2019 high. It is on an xxed out 92-96 buy and the action of the last few weeks seems like a textbook test of the breakout. 10 days ago a 16-20 buy has been generated to support the theses of the breakout test. The buy is working well, the price has advanced 5% since the execution day. The one problem that I have had with this chart was that it has been on 218-222 sell signal but that will be rectified soon if the price can hold above 8000.00.

HUI gold index
HUI broke out of 240.00 level to then reach and breach the 2016 top price and form a little high. The high formed in the shape of a small head and shoulders pattern and then sold the 35-39 index. This head and shoulders pattern can now be dismissed since the 35-39 bought back on Friday. Inside the 92-96 buy, this 35-39 buy usually marks breakouts but the price will need to clear 286.05 again to step into the free territory. 

For the period of the next 10 days, a 35-39 sell will be possible but I wouldn't pay too much attention to it as long as the price stays above the uptrend line that started at the bottom of the March crash.

XAU

XAU bought back the 35-39 index and it looks poised to break free of 114.71 level which served as a price magnet for the last two months. The little head and shoulders pattern can be dismissed now but there is a possibility of a 35-39 sell in the next 10 days which I would tend to disregard as long as the price stays above the uptrend line. 

GDX

Same as HUI and XAU, GDX bought back the 35-39 and looks like it is heading for a rally. The potential 35-39 sell should be ignored as long as the price holds above 34.00.

GDXJ

The same as USERX, GDXJ sold 16-20 index which should be a signal for the new rally. When it closes above 48.57 it will officially enter into the new bull territory.

S and P 500
The SandP recovery after the crash was impressive but for now, it has fallen short of buying back the 92-96 index. The ongoing consolidation will soon generate a 16-20 buy which could mark the short term low. The excessive bullishness is being replaced with some serious bearishness that can be found in many expert's writings of the last week. I find that quite bullish. When I look at the chart it looks like the price is in a no man's land, below the 92-96 but above the 218-222 index. The recent consolidation looks like testing the 218-222 breakout. The support around 2900.00 seems pretty strong. On the other side, the resistance around 3200 looks tough too

To clarify the situation I usually go for the weekly chart to see the big picture and if I do that for the SandP it clearly seems as moving up is the path of the least resistance. 

The weekly chart looks like a bullish flag with a minimum target of 3470.00 (September top ???) and solid support around 2900.00.

I stopped looking for a big correction and a new low that I have been expecting since the recovery started. I expect the SandP to hover between 2900.0 and 3200.0 for a while before the next move is revealed. If gold is right and we will see a rally in the gold stocks it is hard to imagine a hard drop in S and P at the same time. 

UUP dollar

I believe that the answer to the inflation/deflation question lies in this chart. For the last 6 months, there were several times when I thought that we got the answer but every time the price broke up or down it was instantly reversed. Currently, UUP is on a 15 days old double 35-39 and 92-96 sell plus 218-222 sell which, in SKI books, is super bearish. The 92-96 sell and the 218-222 sell have happened on the same day which additionally aggravates the situation but so far this event only managed to mark an exact low. We will see what happens now. Normally the next 16-20 sell would be a shorting opportunity and it might happen in the next two days. 

25.52 Is critical support and if broken could spell a serious crisis for the dollar.

TLT - bonds
TLT has been in a correction since the end of April. Currently, it is pushing against the downtrend and it needs to buy back the 35-39 echo to enter the blue sky territory. The action of the last few days feels like it is trying to break out. 

In the context of TLT I would like to show the chart of U.S. TIPS bonds which are inflation-protected bonds.

TIP/TLT ratio is known for being a good indication of inflation expectations and beside the fact that the ratio is still in a bearish constellation, it is clear from the above two charts that in the last three months TIPS have made better progress and the chart has broken in the blue sky territory while the TLT is still struggling to break out. This indicates that there is a good chance that in the next few months TIP could be rising faster than TLT which would turn the inflation expectations bullish in the long term. 

Inflation expectation
The inflation chart has made some progress over the last two months but there is still no evidence that inflation is dominating the current market because the 50 day MAV is still under the 200 days MAV. Deflation is still in control but based on the above TLT/TIP analysis this might change in the next few months. 

Bitcoin

After the most amazing recovery performed over the last four months, bitcoin has generated a strong, well constructed, true bull 92-96 signal. Currently, it has sold the 35-39 index and needs to buy it back to signal the start of the new leg up. Bitcoin seems very tightly related to the S and P 500. The weakness of this chart is that the 92-96 true bull is currently underwater at 3.14%. 

I am 100% long trying to exercise 'sit tight' strategy. Waiting for some targets to be hit to lighten up again. My general stop loss is USERX 218-222 sell. 

Good luck to everyone,

Branko

GLD triggers an important signal

After a month of nothingness and just using time the gold and the gold indices charts are finally triggering some important signals. GLD and SLV are looking like they are about to overcome recent resistance levels and embark on a new rally.
Let's start with GLD and SLV charts

GLD - gold
6 days ago GLD triggered a 35-39 buy signal inside it's 92-96 true bull signal. That was an indication that GLD might have been in a process of breaking out. In my last post, I suggested that the only thing missing to confirm the breakout is a 16-20 sell signal and a close over 164.96. Last night the 16-20 sell has been generated but the closing price was still below 164.96. It certainly seems like the breakout process is in progress and the new move up is starting. If the breakout fails it will most probably be in a form of a double sell 16-20 and 35-39.

From the weekly chart of GLD it is visible that, if the breakout is successful, the next target is 174.00.

SLV - silver
After an impressive rally from the bottom of the crash to buy 92-96 SLV made a classic buy sell move to set up a true bull buy. If it can hold above 16.54 for another two days the buy will generate.
If the price hovers between 16.0 and 16.5 for a few days and then moves above 16.50 then the buy would be in the form of a double buy 16-20  and 92-96.
When and if the buy is generated the price will have to move above 17.40 quickly. After that, it will enter the territory of a proper bull alignment because indices will be in the correct order and the 92-96 index will be falling sharply passed 07.07.20.

If the correction continues the main support lies around 15.50. There is a lot of support before the price of SLV would be able to get there, i.e. 16-20 buy and 218-222 index support.


USERX
USERX is on its true bull signal since 27.04.20. After achieving a new high for the year USERX has been developing a bullish flag slightly below this high. This flag looks like a test of the breakout from the above. Three scenarios are now possible.
First, collapse straight down to sell 35-39 and 92-96. Not good.
Second, rise straight up through 16-20 sell signal to reach new highs for the year without interfering with 35-39 or 92-96 index. Good.

The third scenario is a bit more complex, after the 16-20 sell there is a possibility for a double sell or a triple sell. If double sell 16-20 and 35-39 happens without 92-96 selling that will still stay in a bullish domain. If you check the chart you will see that for this scenario to happen the price will need to be over 10.61 by 07.07.20. After the 07.07 the 92-96 starts the big drop and there will be a lot of space for the double sell to produce some serious correction without selling the bull. I don't think this scenario is very probable.
The other version of this third scenario is that 16-20 and 92-96 double sell happens first. In this case, the sell would happen below 10.61 and the price would be in a position where it cannot avoid a new 92-96 buy and 35-39 sell. If the 35-39 sell happens first that would make a triple sell but for this to happen the price and time will have to be very precise which is not very probable. It is much more probable that the 92-96 buys back before the 35-39 sells and reignites the true bull, this time in a much more bullish alignment than the current bull. Even if the triple sell happens an immediate 92-96 xxed buy will follow which in my opinion will significantly reduce the effect of the triple sell.
It seems to me that the only really bearish scenario is the immediate collapse bellow 9.50. It needs to happen before the 07.07 because the indices alignment after this date doesn't support the bearish outcome especially if the gold breaks free of 1750.0.

XGD Australian gold index
XGD recently broke out of the downtrend line that started at the Aug 2019 high. It is on an xxed out 92-96 buy and the action of the last two weeks seems like a textbook test of the breakout. 5 days ago a 16-20 buy generated to support the theses of the breakout test. The only problem with this chart is that 218-222 long term support sold but that can be easily rectified in the next two weeks.

HUI gold index
HUI broke out of 240.00 level to then reach and breach the 2016 top price. The top formed in the shape of a small head and shoulders pattern and additionally, two days ago the price sold 35-39 index. Inside the 92-96 buy, this 35-39 sell usually behaves like the support. This support is corroborated with the uptrend line which started at the bottom of the crash. If this support line doesn't hold (not likely) the next support is around 240.00-250.00. If the rise happens and 16-20 sells there will be a period of 2 weeks when a double sell 16-20 and 35-39 will be possible.

XAU
XAU broke out of 107.00 level to then reach and breach the 2016 top. Same as HUI, the top formed in the shape of a small head and shoulders pattern, and additionally, yesterday the price sold 35-39 index. Inside the 92-96 buy, this 35-39 sell usually behaves like the support. This support is corroborated with the uptrend line which started at the bottom of the crash. If this support line doesn't hold (not likely) the next support is around 107.00-110.00. If the rise happens and 16-20 sells there will be a period of 2 weeks when a double sell 16-20 and 35-39 will be possible.

GDX
Same as HUI and XAU, GDX has sold the 35-39 and is potentially in the process of bottoming. If the rise happens and 16-20 sells there will be a period of 2 weeks when a double sell 16-20 and 35-39 will be possible.

GDXJ
GDXJ never sold the 35-39. The next signal will be a 16-20 sell (bullish) or 92-96 sell (bearish).

S and P 500
The SandP recovery after the crash was impressive but for now, it has fallen short of buying back the 92-96 index. Some kind of consolidation will be needed to cool down the excessive bullishness that prevails in this area at present. I stopped looking for a big correction and a new low that I have been expecting since the recovery started. It seems that the strength of this chart is correlated with the weakness of the dollar. Maybe, as some analysts suggest, we will see the melt-up rally in the SandP before the next downturn, who nows? Anyway, 3200.00 will be a hard obstacle to overcome and I expect the SandP to hover between 2950.0 and 3200.0 for a while before the next move is revealed. 

UUP dollar

I believe that the answer to the inflation/deflation question lies in this chart. For the last 6 months, there were several times when I thought that we got the answer but every time the price broke up or down it was instantly reversed. Currently, UUP is on a 10 days old double 35-39 and 92-96 sell plus 218-222 sell which, in SKI books, is super bearish. The 92-96 sell and the 218-222 sell have happened on the same day which additionally aggravates the situation but so far this event only managed to mark an exact low. We will see what happens now. Normally the next 16-20 sell would be a shorting opportunity.

From the weekly chart, it is visible that 25.52 (3.3% lower) is major support and if broken it could spell serious trouble for the dollar. To get back in the bullish position UUP needs to go over 27.20 which this time will not be so easy.

 TLT - bonds
TLT has been in a correction since the end of April. Currently, it is pushing against the downtrend and it needs to buy back the 35-39 echo to enter the blue sky territory. The action of the last few days feels like it is trying to break out.

Bitcoin
After the most amazing recovery performed over the last four months, bitcoin has generated a strong, well constructed, true bull 92-96 signal. The chart is bullish in all timeframes. 

Inflation expectation
The inflation chart has made some progress over the last two months but there is still no evidence that inflation is playing any significant role in the current markets. Deflation is still in control.

I am 100% long and waiting for the next move. My general stop loss is USERX 218-222 sell.

Good luck to everyone,

Branko

Gold bull: breakout or serious test coming?

Most of the gold indices have gained close to 100% since the bottom had been hit at the end of March 2020. During the same period, the price of gold moved by about 20%. Since mid-April, the price of gold is moving sideways in a tight range while most of the gold indices have painted small HandS peak formations or bull flags. We are entering the phase where the new medium-term trend will be revealed. I am 100% long since 1st May and becoming a bit anxious that we might see a more serious pullback to ease the excessive bullishness before the new rally starts.

USERX

After the crash USERX managed to climb back into the rising trend channel that started back in Oct 2019. Along the way, it managed to produce a new bull signal which I described as potentially weak due to some structural disadvantages. It has been 34 trading days since that signal was produced and the price is only 3.52% above the entry price so my skepticism was justified. To sell the signal USERX needs only a 4.4% drop by Wed next week. Last Friday a short term buy signal was generated and this signal could have marked the low for the ongoing correction.

If the current correction continues there will be a lot of support underneath. There are 35-39 and 218-222 echo as the first support, then there is the uptrend line which started from the bottom of Oct 2019. Also, there is the horizontal support that has developed during the first months of 2020 and as the final support, there is the 218-222 echo. My general stop loss is the 218-222 sell not the 92-96 sell.

HUI gold index 

HUI is currently on a short term buy signal and also it is touching the uptrend line that has emerged from the bottom of the crash. If the support is going to hold the time to move is now. If this support gives up there is a 5-10% space for a drop to touch the 92-96 echo. There is much more space to breathe than in USERX, the price can go down as far as 235.00 and not damage a bullish picture. If this move happens technically it will look like a test of the May breakout.

XAU gold index

Same as HUI the setup is there to drop and touch the 92-96 echo. Also, there is an active 16-20 buy to support an immediate move up to avoid all problems. 

I didn't mention it before but the top formation looks like an HandS top with the target around 100.00 if the neckline is breached. 

GDX gold etf

Same as HUI the setup is there to make a move to touch the 92-96 echo. The top formation looks like a HandS top with the target around 28.50 if the neckline is breached. If the trendline is going to hold the time to move is now. The 16-20 buy generated 6 days ago might help to do exactly that.

GDXJ - junior miners

Same as USERX, a bullish flag has developed over the last two weeks and an imminent 16-20 buy might help to overcome the current resistance. If the support is broken then 218-222 needs to hold till the first week of July to sell and rebuy the 92-96 and transform it into a properly constructed bull setup.

GLD - gold etf

GLD is a bit different animal than the USERX. It is moving sideways since the mid April and is currently bumping against the major resistance around 165.00. Last Friday the 35-39 buy signal has been generated for a potential assault to challenge the resistance. The only thing missing now is the 16-20 sell to mark the breakout. If this happens a quick move to 174.00 should happen. 

A 35-39 sell would probably mean a quick drop to test the 92-96 support which would present serious trouble for the gold shares. 

SLV - silver etf

Silver is currently up against some serious resistance. It needs to hold above the 35-39 till mid July to transform the setup into a true bull.

TLT bonds
TLT has been in a correction since the end of April. Currently, it is pushing against it and it needs to buy back the 35-39 echo to enter the blue sky territory. 

UUP
UUP definitely seems like it is breaking down but in the last six months every time it produced a significant signal it was inverted. The current double sell 92-96 and 218-222, which is as bearish as it gets, has come at the apex of the converging triangle and so far has marked a low. It will need to replicate the last March kind of recovery to whipsaw the signals again. If this happens I suspect we could see a similar style carnage in the general market too.  

Bitcoin
After the most amazing recovery performed over the last four months, bitcoin has generated a strong well constructed true bull 92-96 signal. The chart is bullish in all timeframes. 

Inflation
The inflation chart has made some progress over the last two months but there is still no evidence that inflation is playing any significant role in the current markets. Deflation still rules.

I am 100% long and waiting for the next move, hopefully to the upside. I wouldn't be surprised to see a further 10% drop in gold stocks. My general stop loss is 218-222 sell.

Good luck to everyone,

Branko