The last time I had published my overall view of the markets was back in February when Aussie gold stocks were breaking through the 218-222 back prices which, I suspected at the time, could mark some kind of a low. After that post, there were another couple of weeks of falling prices before the bottom started developing, I wasn't sure if that would be a short term bottom or something long-lasting. Some important signals have been generated this week, suggesting that the February bottom might have been an important one, and that it should last for months to come. Let's go over the charts and comment in more detail on each one of them and the related sectors.
GOLD AND SILVER SECTOR
GLD - gold ETF
Since the August 2020 top, gold had been in a correction. The end of the correction was marked with the double bottom in March when the GLD price touched the uptrend line from May 2019 and sold and rebought 218-222 index. 30 days ago GLD price generated a bullish 35-39 buy signal which had the potential to confirm the longer term low if it was successful and indeed it was, the signal was followed by an immediate surge in price and five days ago GLD price crossed the 92-96 index which, in my opinion, finally confirms that the March price was the bottom that will last for months if not years to come.
The 92-96 buy has a good structure consistent with bull markets but it is off the path of trades and XXed out. This can change quickly if we get an instant drop to $172ish level to sell and re-buy the 92-96 index for a true bull signal. That is not really required, since the current 35-39 signal is quite bullish, but it would be nice. If the drop happens it would coincide with the test of the 200 days MAV breakout, which is again a standard bullish behavior.
I personally expect that gold will attack the resistance at $1960 first before some more significant correction occurs. This correction should go down to 16-20 buy signal or 35-39 index sell/buy sequence.
HUI - gold index
The HUI has painted a similar pattern as the GLD except the HUI 92-96 buy signal has properties of a true bull signal which is even more bullish. I'll pay attention to a detail that hasn't happened with gold yet but it has had with most of the other gold indices. The 218-222 index has sold on Friday, which could be worrisome because it served as the final support back in March. My opinion is that because the whole price support structure below is already in place we shouldn't be worried too much about this event. There are 16-20, 35-39 and 92-96 SKI indices below to stop the potential drop, also, the uptrend line and the top of 2016 level to act as the support if needed.
A touch/break of the 16-20 index might happen this week which should reinvigorate the uptrend.
XAU - gold index
The XAU is the most bullish looking of all gold indices. All the SKI indices are already in the correct order and the price is above all of them and above the August 2020 high price. Nothing but bullishness in this chart.
USERX - gold fund
USERX is on the 39 days old 92-96 buy signal (13.8% up), on the path of trades and XXed out. While many will pay much more attention to the XXing than the index alignment I am of the opinion that the index structure is more important. In this case, the structure looks bullish. The price is above all SKI indices and they are aligned in the correct order, 16 on top of 35 on top of 92, while 16 and 35 are rising and 92 falling. That is a standard bullish alignment. For a breakout into the new bull territory price needs to go over 14.75 and stay there for a few days. It might take a few weeks for this to happen but the picture looks good.
In the next two weeks, there is still a window of opportunity for a bearish outcome if the price can fall below 12.75ish to generate a double sell 35-39/92-96 and then continue further down. I do not give this scenario more than a 5% chance of happening.
ASA - gold index
similar to the XAU it is in a true bull market. This index is the first among the gold indices to generate the true bull signal, 42 days ago, currently at a 16% gain.
GDX - gold index
Similar to HUI, true bull configuration since two weeks ago.
GDXJ - gold juniors index
Similar to the GLD chart. Price is on a 35-39 true buy followed by a 92-96 buy. There is a setup for a potential transformation into a true bull market but I do not think it is very important for this scenario to come through.
NEM - Newmont mining
Newmont chart has been a leading indicator since the March 2020 low, breaking out/down ahead of everything else in the sector. For that reason it is interesting to show how, similar to the XAO, it has been in a true bull market (39 days,17.88% up) and it already has exceeded the August 2020 high.
XGD.AX - Australian gold index
Australian gold index has rallied from the March low to, along the way, generate a 35-39 buy signal on the path of trades, not XXed and then, last week, generate a 92-96 buy. This 92-96 buy should be the confirmation that the March low is going to last for months.
The 92-96 signal is XXed out and off the path of trades but if the price can stay under $7377 for another two days and then resume the rise, the 92-96 signal will be transformed into a true bull signal. During this process, the 35-39 index needs to hold.
The price is well situated inside the rising channel but it still needs to get over the 200 days MAV (currently $7530). Let's see what happens.
SLV - silver ETF
Silver is on the verge of a major breakout. It has been on a 92-96 buy signal for the last 45 days (11.35% up). The signal is XXed out but on the path of trades. Short term the price has fallen off the narrow uptrend channel and it seems it is due for a short correction. If the correction has already ended and the price goes straight through the resistance at 26.50 (28.55ish silver spot) it will breakout and possibly attack the Augut 2020 top in a week or two. If it holds off for another two weeks it will buy 16-20 and then sell/buy the 92-96 index to transform the current XXed out signal into a full-blown true bull market.
The bearish outcome would be selling the 35-39 index which, togather with a 92-96 sell signal would constitute a double sell and return of the bear market. The 35-39 support is not so far away, currently at 24.50ish (-5%) and it needs to hold.
Conclusion:
The gold and silver sector looks like it is on the verge of a breakout that should then lead to a renewed bull market that should last for months. All across the sector, there are SKI 92-96 index buy signals already in place or about to be generated. One more week of the sideways or moderate down move will align all indices into a true bull configuration. From my experience, the most viable bull signals come simultaneously across different sectors and that is the case here.
Having said that it is important to point out that, like always, there is an opposite setup embedded in the bullish setup that I am describing here. As you have seen from the silver chart and as you will see when I describe the dollar chart and the Treasury yields chart there is a viable scenario for the whole bull set up to turn around and go in another direction, not very probable but still possible.
OTHER MARKETS
UUP - dollar ETF
The UUP as a representation of the dollar is in the most interesting place, a truly important junction. Since the March 2020 peak, the dollar has been in a bear market represented by the long red downtrend line. This line has been broken to the upside in March this year when the dollar bottomed at the same time when the gold market did. It is important to notice that gold and dollar price had been moving in unison since August 2020 till this bottom. The breakout was marked with a 35-39 buy signal and the price of the dollar then rose to buy the 92-96 index but then it sold immediately and it has been rejected by the index ever since, all the way down to touch the bottom price of the March low. It seems like the dollar-gold correlation is back to normal, they appear to move in the opposite direction now.
Two days ago the price of UUP finally broke out of the downtrend represented recently by the 92-96 index back prices but it still is under the support line emanating from the March low. Now, a small move down will lead to a serious breakdown with an immediate target down at $23.24. On the other hand, if the price moves a little bit up it will generate a true bull 92-96 buy signal with the potential for an instant run up to $25.12.
If the gold breaks out it would be natural to expect that the UUP chart will break down but given the recent history of gold and dollar moving in synch it is not so sure. Let's see what happens, but I expect that they will disconnect.
To shed more light on what is happening to the dollar lets see the charts that are opposite of the UUP chart: UDN (dollar bear ETF) and FXE (euro Etf)
UDN - dollar bear ETF
UDN looks like it is breaking out. One more day of sideways and then rise will produce a true bull signal, possibly a double buy with the 16-20 index.
Further correction might sell the 35-39 index that will then officially start the bear market.
So, the chart of UDN paints the same picture as the UUP, the price is at an important junction with a slight bullish bias (bearish for dollar).
FXE - Euro ETF
FXE chart is literally identical to the chart of UDN.
TLT - long end treasuries ETF
TLT bottomed in March along with gold and dollar. Since then it is struggling to stage any significant rally but 9 days ago it generated the 35-39 buy signal on the path of trades and not XXed out. This signal should help the price of the TLT to rise up to touch/break the 92-96 index.
This setup is supportive of the potential gold breakout and dollar breakdown. The failure of this buy should make gold longs suspicious of the gold bull setup.
TNX - ten years treasuries yield
Ten years Treasury yields had moved sideways from March 2020 till August 2020 when they started rising. The beginning of this rise stopped the unfolding gold rally in its tracks. The TNX then generated a 92-96 true bull signal in October 2020 and the rise accelerated causing the gold drop to accelerate too.
Since March this year, some kind of a top has been in place for TNX and there was a downtrend resistance developing that led to a first 35-39 sell signal since the bull started. The signal coincided with a break of the uptrend line, which is bearish. If a further correction is underway and the yields are about to retreat further to at least 38% Fibonacci level of the last rally that means we could see yields at 1.24% in the weeks ahead. The 92-96 index position corroborates this projection as the most probable target. Such a development would be bullish for the gold breakout scenario.
Buying back the 35-39 index would be bullish for the TNX and should start a new leg in rising yields which would be bad for gold and treasuries and probably good for the dollar. In my opinion, this is a lower probability scenario.
The correlation with the ten years Treasury yields had the most influence on the gold price in the last 12 months so this is a very important chart that cannot be ignored while assessing the gold market.
S and P 500 index
The bull continues but recently, the price struggled to get over $4200 and stay there. There is a window of opportunity in the next two weeks for a double 16-20/35-39 sell signal. Such a signal wouldn't be bullish for gold and silver since they are recently strongly correlated with the S and P moves, same as everything else.
The whole pattern is taking a shape of a rising wedge which is one of the classic bearish patterns. The price needs to break above the upper boundary of that narrowing channel and it needs to do it pretty soon. A possible double sell, if it transpires, should be taken seriously because it would coincide with the breakdown from the rising wedge and most probably will lead to an immediate test of the 92-96 index support. Such an outcome would be supportive of the dollar bull scenario.
TRAN - transport index
For now, the transport index looks better than the S and P 500, it manages to print new highs almost every week. That is good for the health of the S and P 500 index.
There is no setup in this chart that is analogous to the double sell setup of the S and P 500. That makes the S and P chart slightly more bullish than it looks.
Bitcoin
The bitcoin chart looks bearish, very bearish. The recent fall was initiated by the break of the head and shoulders pattern neckline at around $50000 which led to an instant fall down to the target at $30000. Unfortunately for the bitcoin bulls, this doesn't look like the end of trouble since the head and shoulders pattern, mentioned above, looks like a part of a more complex wider head and shoulders pattern that might be in play. If the price rallies now to sell the 16-20 index and fails at $45000-$48000 level and turns around it will complete a mega bearish complex head and shoulder pattern. If then this pattern is broken to the downside the target is $20000 based on the old trend line levels but if we calculate the target based on the H&S amplitude, as we usually do, the target is sub $10000!! Be aware of deploying your capital to this sector, I wouldn't be surprised to see Bitcoin at $20000 and probably less by the end of July 2021. I've been actively following the crypto market since late last year and have 1% of my net worth invested in it, mostly in ETH. There is a lot to learn and there is this narrative, pushed mainly by the crypto community, that the bitcoin is the replacement for gold and that it has taken away a good part of the gold market and that it will continue to do that. While I can see a lot of similarities between the gold and the bitcoin in regard to their properties as the sound money I haven't seen, so far, that in the market place that plays out because they do not behave in a similar way. While the gold is behaving like a safe heaven asset (risk off) and correlates mostly to the real yields and the inflation expectations the bitcoin behaves like a pure tech stock (therefore a growth asset, risk on), completely disconnected from the behavior of the bond market. To illustrate this I present here the chart of Tesla and Apple. Their charts are in the similarly bad configuration as the bitcoin chart; nothing even remotely correlated to the Treasury yields or the gold chart.
TSLA - Tesla
The same as Bitcoin the Tesla price sold its long-lasting bull market and is now officially in the bearish configuration. The price is slowly being squeezed towards the apex of the contracting triangle and if broken to the downside the target is way down at $275 (from the current $599). See how the long term support is slowly being broken to the downside and how the 16-20 resistance is hovering above the current price threatening to push the price in the downside direction. To make things worst everything is happening under the 50 and 200 days MAV and as time is passing by the pressure to the downside will just increase. I give this chart an 80% chance to break down and when it does hold your hat.
AAPL - Apple
AAPL chart is not as bad as the Bitcoin or Tesla but it is in a bearish constellation. The immediate target for the correction is the 218-222 index but the ultimate target is somewhere around $80-85. To turn things around and go on another bull run it needs to overcome the 16, 35 and 92 SKI resistance respectively and then the previous all-time high, pretty unlikely in my opinion.
RINF - Inflation expectations
Inflation expectations are on the rise. Currently, the chart looks like it is in a sideways consolidation before the next leg up.
I have been invested between 50% and 100% of my trading capital ever since last Easter. Currently, around 60% invested and the rest in cash. Most of my positions are in gold and silver stocks and physical gold/silver (80%). 1% I keep in cryptocurrencies and the rest mostly in uranium and copper stocks.
If the gold and silver stocks manage to break out I will look for an opportunity to add to my positions and will then try to go into hibernation until some kind of a top starts developing. The stop loss for gold/silver positions is a USERX 92-96 sell signal but if the dollar generates a true bull signal and the 10 years yields go over 1.75% again and the gold/silver markets look week I might pull the trigger early.
Good luck to everyone,
Branko
p.s. feel free to comment on the issues that you would like to discuss. Here or on the SKI website doesn't matter.
I've been actively following the crypto market since late last year and have 1% of my net worth invested in it, mostly in ETH. There is a lot to learn and there is this narrative, pushed mainly by the crypto community, that the bitcoin is the replacement for gold and that it has taken away a good part of the gold market and that it will continue to do that. While I can see a lot of similarities between the gold and the bitcoin in regard to their properties as the sound money I haven't seen, so far, that in the market place that plays out because they do not behave in a similar way. While the gold is behaving like a safe heaven asset (risk off) and correlates mostly to the real yields and the inflation expectations the bitcoin behaves like a pure tech stock (therefore a growth asset, risk on), completely disconnected from the behavior of the bond market. To illustrate this I present here the chart of Tesla and Apple. Their charts are in the similarly bad configuration as the bitcoin chart; nothing even remotely correlated to the Treasury yields or the gold chart. 
