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