Last week I was hoping that if the prices of gold indices are going higher that we will see slow 'wall of worry' type of action that will eventually lead to a breakout sometime between the first and the last week of January. So far so good. All of the indices stayed in their uptrend channels as required and some started breaking out of the contracting triangles (USERX, ASA, GLD, SLV). Some signals have been generated during the week but given the nature of the market, I think they should be disregarded because they haven't been confirmed neither by the traditional TA nor by other gold indices. Regardless of the positive action, I do not feel comfortable, but I guess that is exactly how I should feel during climbing the wall of worry phase. I am 100% long goldies. My stop loss is the November low.
USERX
USERX pushed higher but did not overcome the resistance yet. I suggested last week that it will take time. The price is breaking up out of the contracting triangle and is buying and selling 35-39 index along the way. That is what I expected would be happening while the price is finding its way through the Christmas cluster and I said I would ignore these signals.
After the 35-39 buy is generated this week I will move my stop loss to a 35-39 sell signal.
HUI
HUI price has not reached the upper resistance level yet like USERX did. It has tested the strong support at 286.05 but is still in the vicinity. If another test happens there is now an additional level of support by a possible 16-20 buy signal and a potential double buy if the 16-20 comes true.
XAU
Like USERX there is a potential 35-39 buy signal looming that, should it happen, would release some positive energy and push the price towards a 92-96 signal.
GDX
Like HUI, there is a potential for a new 16-20 buy on the path that could be easily followed by a 35-39 buy for a powerful double buy.
The firm support lies at $31.79 and it should hold if the bull case is to survive the next few weeks.
GDXJ
GDXJ is basically the same technical picture as the USERX. The price is squeezed at the apex of the contracting triangle and there is a high potential for a buyable 35-39 buy signal this week. This buy, together with the break out of the apex should lead to a serious move, probably to reach the 92-96 index level.
GLD
GLD ended the week before the last week with the generation of the 16-20 sell and then spent the last week slowly breaking through the resistance. It needs to hold the current level for another two days before the 35-39 resistance is broken. If the price falls down to buy the 16-20 it will create the potential for a double buy the same as HUI and GDX.
Everything is fine as long as the price stays inside the uptrend channel. After the 35-39 buy has been generated the sell stop must be changed to a 35-39 sell because such a sell would coincide with a break of the uptrend channel hence very dangerous.
Silver changed from the most vulnerable chart two weeks ago to the best looking chart today. After generating the 35-39 buy signal it moved further up and is breaking the resistance line (I hope we see the similar move when other indices generate the 35-39 buy). There is plenty of room to move up or down in the next few weeks before it eventually breaks through the 92-96 resistance. The 35-39 sell signal is the stop loss for this chart.
S and P 500
S and P moved further up and I'll just repeat the last week's comment.
S and P is in an uptrend and the price is moving along 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 I am waiting for the gold and the transport index to confirm.
TRAN - transport index
Nothing has changed, I will repeat the last week's comment.
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's 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. Two weeks ago 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 dollar is clearly in a downtrend and it has broken the weekly support level. The next target on the downside is $23, February 2018 low. However, it is important to say that it is so oversold on all time frames that it wouldn't surprise me at all if it started some kind of a rally soon. Such a rally could bring the price back into the uptrend channel quickly and negate the breakdown. My gut feeling is that this would be a trouble for gold but if the dollar, gold and long bonds keep the positive correlation from the last few months maybe we will see them rising together for a while. That is what happened back in 2005 before they decoupled and gold went up while the dollar sank.
TLT - long bonds ETF
My feeling is that the long bonds have bottomed here. The 16-20 sell has been generated and the chart structure is very similar to gold, a buyable 35-39 buy signal is probable this week. If avoided even more bullish double buy is possible in the next two weeks, 16-20 and 35-39.
If my feeling is wrong a break of the December low will be the signal of the things going south.
Bitcoin
Boom, boom!
XGD - 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.
It is worth mentioning that the price is currently playing with the long term 218-222 index and that this index should hold otherwise we are in big trouble.
RINF - inflation expectations
Inflation is 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.
For the first week of 2021, we need a repetition of the last week's action, more climbing the wall of worry. If the opposite happens and we get a drop it must be short-lived and shallow otherwise we might be heading for trouble.
I am 100% long, the stop loss is November low. If the 35-39 index buy is generated I will change my stop to a 35-39 index sell.
Good luck to everyone!
Branko
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