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.
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.
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.
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
No comments:
Post a Comment