Update 19.12.2020

Last week I explained how there is a cluster of SKI indices coming together around Christmas day and how such clusters usually behave like price magnets. My opinion was that due to the strong underlying support we are more likely to see the price heading up towards this cluster than falling through the support. This is exactly what has transpired and most of the gold indices have now generated 16-20 sell signals that further solidify the underlying support and will most likely lead to more gains in the weeks ahead. Since there is now a significant overhead resistance in the form of 35-39 index and the upper boundary of the downtrend channel I expect that some work is necessary to escape this obstacle and establish a new uptrend. I would prefer a slow action, the wall of worry type, instead of a quick spike. I think that this would give us a more sustainable breakout sometime between the first week of January and the first week of February 2021. 

I added to my position on Monday and Tuesday when Aussie gold stocks were down. I am now 100% long. My stop loss is at the November low.

USERX

The USERX price has finally sold the 16-20 index and is now facing the resistance of the 35-39 index and the downtrend line. Notice how the downtrend line and the 35-39 would give a buy simultaneously which is the feature of a valid SKI signal, something that was missing from the last 92-96 signal. 

I do not expect that the resistance will be overcome easily but the price is squeezed at the apex of the contracting triangle and right in the middle of the index cluster. When it comes out on the other side the move up or down should be strong.  

If the price manages to stay inside the long term uptrend channel we will see the birth of the new bull market by the end of January. If the price breaks down from the uptrend channel that will coincide with the sell of the 35-39 index with the potential to quickly drop down to $10.35 area. In this case, I will immediately reduce my position back to 50% long.

HUI

The HUI price has tested the 2016 high area support successfully and it has generated the 16-20 sell signal which further strengthens the support ($280-$285). The price is in the middle of the downtrend channel and needs to rise another 10% to reach the upper boundary and the 35-39 index. 

The time frame for the breakout and/or retest of the support is similar to the USERX.

XAU

similar to the USERX. The price is being drawn into the index cluster and the solution will be presented on the other side of the cluster area.

GDX

similar to the HUI. The strong support is present at the 2016 area high. A further 10% rise is needed before the resistance is reached.

GDXJ

similar to USERX. The resistance has been reached. Potential for the breakout and a new bull market in January.

GLD - gold ETF

The GLD price is firmly in the long term uptrend channel, it has just generated the 16-20 sell signal and it is pushing up against the downtrend resistance and the 35-39 index resistance. If the price manages to stay inside the uptrend channel long enough the resistance will be broken and the rise to challenge the all-time high will be probable. 

The strong support lies at the November low.

SLV - silver ETF

The last week the SLV chart seemed the most vulnerable but that now has changed. Silver had a very strong week and the price jumped back inside the contracting triangle. 

Technically the SLV chart is now ahead of the other charts because the 35-39 index has already bought.  The only thing left now for the SLV is to stay above the uptrend line and produce a 92-96 index buy sometime in January.

S and P 500

S and P is in an uptrend and following the uptrend line originated at the 2019 low. It is overbought on all timeframes and probably prone to short term correction. The projected target, based on the break of the cup and handle pattern discussed in my previous blogs, is $4000+. 

I have discussed last time the possibility of a melt-up run to the top if the UUP breaks down through $24.41, gold generates the bull signal and the transport index confirms the bull market by breaking through into the blue sky territory.  The dollar has closed bellow 24.41 but we wait for the gold and the transport index.

TRAN - transport index

The TRAN chart is the most interesting chart at the moment because I think it is going to be the tell, melt up top or the end of the bull now.

On the 24th Nov, the price closed above the 2018 top which is the Dow Jones Theory condition to finally confirm the new bull market. The next day the price immediately fell below the required level and is hovering underneath ever since. Last week the 16-20 buy signal was generated which implies support and so far this signal has marked the low. If this buy signal fails to push the price back above the required level I think this bull in the equity market might be over. If it goes back above the resistance and then falls back again it will generate a double sell signal which might mark the high in S and P, I would short such an event. 

UUP - dollar ETF

The UUP price is in a downtrend and, as I have shown in the weekly chart last week, it is testing the very long term support line that originated in April 2014. 

The critical level for this week was 24.41, the low from two weeks ago and that level didn't manage to hold. It seems that the dollar is breaking down but given the totally oversold condition on all timeframes I will give it another week before I accept that the breakdown is real. 

I took a big long position in dollar with a very tight stop at the Friday close. This is a very short term trade.

TLT - long bonds ETF

TLT chart is in a downtrend and it is threatening to break down the November low. If it does the target is the long term 218-222 index.

Bitcoin

Boom!

XGD Australia - Australian gold index

Aussie golds seem like they have double-bottomed. There is much more job to do to get back into the bull territory than the USERX or HUI. If the gold keeps rising and the dollar shows some strength over the next two weeks that should give the Aussie shares some extra boost that they need to catch up. 

RINF - inflation expectations

Inflation expectation is clearly in an uptrend. Back in September the 50 days MAV has crossed the 200 days MAV and the underlying long term trend is up. This is good news for gold as the ultimate inflation hedge.

It seems the markets are ready to change the gear in January. The covid vaccination started and I expect that the markets will go back to being driven by the basic economic parameters, not the Covid news. The only Covid news that could move the market now is that there is a problem with the vaccines. I hope that doesn't happen. Also, the American election cycle seems over and the market should soon show its hand regarding the new administration. 

I think that the most likely move direction for gold and silver is up and I am positioned accordingly. I am 100% long. The November low is my stop loss.

Merry Christmas and have a good and prosperous 2021 everyone!

Branko

Bottom or Breakdown for Gold?

 Last week was pretty quiet but these coming two weeks should give us the answer if the gold price has bottomed or we will suffer more weakness. My view is that the support underneath is strong and we should see at least short term relief soon. 

The problem with the overall picture is that the dollar is also very oversold and should, the same as gold, have at least short term rally. Can they rally together that is the question? They were able to decline in parallel recently so my guess is it is possible, but I wouldn't expect that to last for too long. They have to decouple eventually. 

USERX

 I combine the SKI charts with the traditional TA and in my opinion, the best way to recognise valid SKI signals is to confirm them with simultaneous TA signals and also with simultaneous SKI signals across the other gold indices. The USERX sold 35-39 and 92-96 but these events have not been confirmed by the traditional TA yet. 

The USERX price bottomed on 24th Nov by touching the long term uptrend line. After the touch, it rallied but it also sold the 92-96 index which is quite atypical because the 92-96 usually sells on the way down. The price is now back into the long term uptrend channel and that doesn't look like a confirmation of the sell signal to me, on the contrary, it looks like the signal marked some kind of a bottom. A short or long term bottom, that is the question? I think that as long as the Nov bottom holds the SKI sell signals are not confirmed. 

There is a cluster of SKI indices coming together around Christmas day and such clusters usually behave like price magnets. My opinion is that we are more likely to see price heading that way than falling through the support. I could be wrong but then we will see a break of the November low soon.

It is worth mentioning that a 16-20 sell this week would significantly strengthen the underlying support.

Here is the weekly chart of USERX. 

It is visible that the 2011 high (upper horizontal red line) behaves like resistance and that the support lies at the lower BB around 12.35. We certainly could try to close the gaps around 10.50 but I think that that is not probable before we see some kind of a counter-rally to 13.50ish to set up for the drop. 

It is worth mentioning that the weekly chart looks like a bull flag with a lot of space for further correction without damaging the bullish structure of the chart (not a prediction).

HUI

HUI is in a similar situation as USERX. 

The November bottom lagged the sell signal by two days. The signal generation coincided with the breach of the 2016 high that acted as the resistance on the way up and now it seems like it is being tested from above. So far the support is holding and a 16-20 sell in the week(s) ahead would further strengthen it. The 38% fibo retracement of the March rally falls in the same support area, as well as the lower boundary of the correction channel. This strengthens the potential for support around this area.

If the support is broken then the 218-222 index is the target, it sits at the 62% fibo level at around 230ish. 

The same as the USERX there is a cluster of SKI indices coming together around Christmas day and I am expecting that area to be visited in the weeks ahead.

HUI weekly looks even better than the USERX weekly. It is sitting at the firm support and even if it is going to break down it is more likely that we will see 330ish before we see 260ish.

GDX, GDXJ

The same as HUI 

GDX

GDXJ

GLD

Back in August the GLD price pierced through the 2011 top level and then peaked and retraced.

In September/October/November the GLD price went sideways (between 2011 and 2012 peaks) and then dropped down to test the 2020 breakout level (green support line). This breakout level also coincides with the 50% fibo retracement of the March rally and the lower boundary of the correction channel. After touching this important support the price immediately jumped back inside the sideways channel. Meanwhile, the 92-96 was sold but this action still looks like bottoming to me especially if it manages to sell the 16-20 soon. 

The weekly chart peaked when the ADX(14) went over 45 like it always did in the 2001-2011 period.

 I have stated that fact before but at the time of happening I thought it might have some more fuel in the tank, probably for another month or two, but it didn't. The correction is now lasting more than 4 months and that is the minimum time requirement for such a correction, therefore we could have seen the bottom already.

The bullish outcome requires GLD over $185 and the bearish outcome requires GLD below the recent low (target around $145).

SLV

SLV has been going sideways since September and if there is a chart that worries me the most that would be the SLV. The reason is that it has just sold the 92-96 and the 35-39 simultaneously and there is no immediate long term support visible. If it breaks $21 again it could quickly drop down to $19. On the other hand, a sideways or an up move would instantly double buy 35-39 and 92-96. We will see but my core position is mostly silver so I don't like this.

S and P 500

S and P is in an uptrend, blue sky territory. As I said last week it is overbought on all timeframes and short term correction might be unfolding now. The next stop might be a 16-20 buy.

TRAN - transport index

TRAN needs to hold above the horizontal red line to confirm the Dow Theory bull market. So far it couldn't do it but a 16-20 buy (probable in the next two weeks) might help. This chart together with the gold and dollar charts imply that around Christmas this year we might witness the launch of a new leg up. 

One detail to support this claim. 22 days ago a new on the path not xxed 35-39 signal was generated simultaneously with a new long term 218-222 buy signal. That is pretty bullish especially inside a 92-96 buy signal. 

The rejection of this level is clearly bearish and such events in the past have been predictive of upcoming recessions.  

UUP - dollar ETF

As I presented in the last week blog the dollar is in the downtrend and any further deterioration could mean serious trouble.  

To illustrate this potential breakdown let's look up the UUP weekly chart. 

The chart shows a giant uptrend that started in 2014 and was dangerously broken two weeks ago but then the last week it has shown some support. If this support is permanently broken we could see the UUP going down to $23 as the first target. 

I mentioned the last week that we might be in a process of starting an insane 'crack-up boom' final stage of the 11 years old bull in the share market. If that is true this chart will signal it by price going below the December low ($24.41). If not, the bottom for the dollar should be close at hand with the first upside target at 16-20 sell ($24.80ish).

TLT - bonds ETF

Bonds have found some support at the major trendline going back to 2018. 

The support has been confirmed by a true 16-20 buy signal that executed 8 days ago and sold on Fri for a nice profit. If a 35-39 buy follows we could see a new bull market being born in January. On the other hand, the break down through the double bottom marked by above mentioned buy signal could lead to testing the long term support at 218-222 index.

BTC-USD - Bitcoin

Bitcoin has been digesting the recent gains after the rally to a new all-time high. On Friday it has generated the 16-20 buy signal but I think it is probable that it will try to break/touch the 35-39 before the bull resumes. I'd be a buyer at about $16000 with tight stops.

RINF - Inflation expectation ETF

Inflation expectations are in an uptrend. In my opinion, the price is more probable to touch the 50 mav first than to break above the recent high. In the short term, we should see some consolidation/retracement. 

It is clear from the charts that we are at a very important juncture and that the next 2 to 3 weeks should decide if the next big move is up or down. 

I have added to my 50% core last week when the Aussie stocks had a very bad day. I bought some RMS and SLR and now am 65% long. I will add on every weak day but will also sell some if the opportunity presents itself. The idea is to increase my trading position and/or cash by Christmas day. I expect some serious moves starting in January. 

My stop loss is at the November low.

Good luck to everyone,

Branko

Update 5/12/2020

I haven't posted since the middle of July when I went for my surgery. Partly this is due to me selling in August and not being focused on the markets so much as before and partly I was just too lazy. I sold all my short term trading positions and 50% of my long term positions. I am sitting on my 50% core ever since and have tried to establish new long positions a couple of times but was stopped out both times.  I have bought a sizable short term trading position on 25/11/2020 when the Aussie golds hit the bottom of the trading channel and sold it this past Thursday so I am again just 50% long my core position.  

Ever since the March low the main development I was looking for was a decoupling of the gold market and the broad market, where gold would start a multi-month rally while SandP would drop further down before it finds the bottom a la 2008/09. It seems the decoupling finally did happen but the other way around, gold is dropping together with the dollar and bonds and the SandP's unstoppable rise continues. The only way I can explain this is that in the current environment gold, dollar and bonds are perceived as safe havens and the SandP and bitcoin as risk assets. This is probably because the traders see the markets only through the covid 19 glasses, disregarding all other risks including inflation, deflation and recession. In the last 3 months, only news regarding the covid vaccine were able to move the market. Gold, dollar and bonds in one direction and the broad markets and bitcoin in the opposite direction. Even the USA presidential elections had no lasting impact, it was just nonevent which really surprised me because I was preparing myself to take some serious positions after the elections. 

This situation is obviously unsustainable but how long will it last we will see. In my last post, I suggested that SandP is forming a cup and handle and if broken to the upside the technical target is $4000. At the time, this seemed totally crazy but, to my great surprise, not anymore. Today SandP is at $3700 and it seems determined to attack $4000 in no time.  

Let's see the charts.

USERX

Userx just sold the 92-96 bull market. Back in July, this seemed like an event that will happen months in the future and at the price far above. Months have passed but the price is around the same level where it was in July. Pretty disappointing considering the action in other markets. When I look at this chart and the longevity of this correction I get the impression that the March crash was just a noise. The trajectory that existed before the crash was regained in no time and then just continued like nothing had happened. Structurally this correction looks like the continuation of the ascend started in May 2019 with the wave one finished in September 2019, the wave two finished in November 2019, the wave three finished in August 2020 (this wave includes the crash) and the wave four finishing about now. 

The 92-96 index has sold but the whole action is not corroborated with the traditional TA, it is happening above the long term support and the price is back into the uptrend channel emanating from the above mentioned May 2019 bottom. That doesn't look like a breakdown. Also, from the TA point of view, the whole correction looks like the test of the July 2020 breakout. I will not consider this 92-96 sell a breakdown unless the low of 24th November is broken to the downside. I will buy every time we approach this level again, with a tight stop below.

When I look at the possible bullish outcomes the first week of January looks like a good setup for reinstating the bull market. The first week of Jan 2021 is, as you will see in the other charts, well suited to bring all gold indices in sync again. Also, if we move up from here it would rectify the discrepancy that exists between SKI indices and the traditional TA. All we need is the price above $14 by 4th Jan 2021 and beyond.

HUI

HUI highlights my points above even better. 

The July 2020 breakout (which is being tested now) actually coincided with the 2016 top at 286.05.  This has been the most important level since 2013 breakdown of the same area. Considering this, I think that the support at the recent low is very strong hence my plan to buy on any occasion when the price dives into this area. 

The first week of January 2021 is a good setup for the breakout, if and when.

XAU

XAU never fell down enough to reach the 2016 high so it looks a bit stronger than HUI but otherwise, everything is the same including the setup for the first week of Jan 2021.

GDX, GDXJ

Same as USERX and HUI

GDX

GDXJ

GLD - gold

GLD sold the 92-96 as well but it is still well inside the traditional TA uptrend channel so the same analysis applies as for the rest of the indices. The first week of Jan 2021 is the window for the new bull market. We need the price above the 2011 high for this to happen. That would require a price surge of 7% or more.

Further decline would be indicated by the breakdown of the recent low. In that case, the target would be around 218-222 index support.

SLV - silver

SLV chart is a bit different than the other charts above. SLV still hasn't sold the 92-96 bull but it looks like it is very probable during the next two weeks. If it sells but stays above $23 by Feb 2021 it will be in the bull market again.

S and P 500

Back in July, I posted the analysis that suggested that the S and P could go all the way to $4000 if the cup and handle formation was broken to the upside. I certainly didn't expect that to happen but here we are, the S and P at $3700 and climbing. All indicators are tilted in the overbought zone so a short term retracement could be in the books but the trend is definitely up. I wonder if that first week of January could be of great importance for the S and P the same way it is for the gold market?

A crazy idea is crossing my mind again. What if we are witnessing a crack-up boom that is going to go into the final stage in the first week of January and will take the SandP far above $4000 and gold to $2500 before everything comes crashing down? In this case, both inflationists and deflationists would have their 15 minutes of fame and after that, with the coronavirus gone we could go back to normal markets driven by the economic parameters.

TRAN - transport index

If you remember back in Jan-Feb 2020 I was using this chart to explain that, according to Dow Jones theory, the bull markets in the Dow and SandP are not confirmed and a recession could be in the cards. Since then the TRAN has managed to reach the new high territory and if it can sustainably stay above it that would finally confirm the bull market. 

It certainly is hard to believe that the crackup boom scenario described above in the SandP section is possible but if the TRAN breaks through and gold breaks through in the first week of January it definitely could be the start of total craziness.  

UUP - dollar

UUP has broken down and 23.5 is an obvious target.

TLT - bonds

The same as the dollar, bonds have broken down and the target is below $150.

XGD Australia - Australian gold stocks

Australian gold stocks have retraced 50% of the rally from the March 2020 low. XGD has found the support at the uptrend line that started in Sep 2018 and coincides with the 218-222 index support. They sure are oversold and should have a short term rally to sell 16-20 index. The first week of Jan sure looks like an opportunity to regain the bull market but it is a tall order compared to HUI and XAU.

BTC-USD - bitcoin

Bitcoin chart looks like we all,  back in April, expected the gold chart will look like by this time of the year. The bull is now 190 days old and the price gain is 102%, more than 0.5% gain a day on average. The 35-39 sells and rebuys produce instant surges as they should in the bull market. Since the bull started there were two 35-39 buys so in terms of USERX that should mean a significant correction should ensue after the next top.

It is hard to swallow the fact that bitcoin is outperforming gold again but it is what it is. I will sure look to expose myself to bitcoin in the future. I had my finger on the buy when the bull was generated but refrained because at the time the gold was already on the bull signal and outperforming the bitcoin. A lesson in diversifying learned. 

Inflation

Inflation is in an uptrend. Inflation chart together with the dollar chart and TLT chart favours the idea that gold should turn around soon and start heading back to an all-time high territory. It is short term overbought but back in Sept, the 50mav crossed the 200mav which should create long term support for higher inflation numbers.

As I said I am 50% long my core position and will add on price reaching the support levels again. My stop loss is at the November bottom.

Good luck to everyone,

Branko

Charts 2/12/2020

 GLD

USERX

BITCOIN