Chart Of The Day - URA

Like many other sectors, URA chart broke down last week and then went on an immediate rally to reverse the signal. A 92-96 xxed buy signal has been executed today and the market is now structured in a bullish way. We will see if the pattern can hold this time.

The daily chart of URA looks like the price has dived to test the 200 MAV and is now in a process of establishing a new uptrend. Some consolidation is probably in order in the next week or two. 

USERX chart - 1/9/2021

 

USERX chart 31/8/2021

 

USERX chart 27/8/2021

 

USERX chart

 

USERX chart

 

USERX chart

 

USERX chart

 

State Of the Markets

In the face of the government's unprecedented market intervention, the technicals have been more or less irrelevant since last year but let's see the state of the charts anyway. 

USERX 

Ever since the June top, the gold stocks are stuck in a downtrend channel and there is no sign of life in them. The price is at the bottom end of the channel and a short term rally could ensue any moment to relieve the oversold condition but the bearish constellation will be hard to overcome. The target for a potential short term rally is around $12.25ish but given the state of the dollar chart (breakout), it seems that the medium-term target for USERX is down in the 10.28-10.86 area. If this area cannot contain the fall then the next target is $9.67 which is the 50% Fibonacci retracement from the whole 2015-2020 rally. 

I have increased my long position in gold shares in the last 2 weeks but will unload on the way up and go back to the core position

I am adding the weekly chart of USERX to illustrate that currently, the price is at the weekly support hence my long position but the ultimate target for this move is in the 10.50ish area.

GLD

GLD is managing so far to hold the trendline support but the recent strength just managed to set up more bearish scenarios for the near future. If GLD cannot keep up above the rising 92-96 echo it will generate a nasty double or triple sell by the 15th Sep. This potential sell would coincide with a renewed break of the support, and that would add to the potency of the sell signal. On both the daily and the weekly chart the path of least resistance is down, the gold shares are weak, the silver is weak, the oil is weak, the dollar broke out, copper broke down...too many bad omens for gold here while price needs a sustained strength to be lifted out of the danger zone. Not good.

UUP

I've been posting since two weeks ago that there is an ongoing battle between the dollar and gold for the direction of the next rally. The dollar chart seems like it has signalled the outcome of the battle, it broke out, dollar wins for now. If this signal does not revers immediately I suggest that the next target for the UUP price is around 26.4. 

I am also wondering if this breakout is marking a beginning of a correction in the industrial sector, especially Russell 2000 as the bellwether of the US economy. The sector has been struggling since March and it seems like capital is now moving back to the tech sector, cryptos and treasuries. Gold is being ignored regardless of the high inflation and falling real yields. Maybe this is because market participants think that the tech sector and cryptos are better inflation protection or the trust in the FED is still so widespread that investors believe that it can keep inflation under control. 

The other possible explanation is that the dollar breakout is signalling that the underlying monetary conditions are tightening. If that is true, the inflation might be transitory and further monetary tightening could force investors to seek refuge in the dollar and bonds and abandon everything else. This could cause the cryptos and the tech sector to join gold and start a correction soon until monetary conditions ease again. 

Anyway, I have established a long dollar position the night the gold fell $100 and will increase it on any dip this coming week. Stop loss for now 24.70.

RUT - Russell 2000

As I said in the UUP comment the Russell price chart looks weak. The 92-96 echo sold while breaking the trendline and further weakness would imply a breakdown from the consolidation flag that has been developing since the March high. This chart signals a weakness in the US economy. That was quite visible in the economic data during the last two weeks. 

To be fair I have to say that the recent 92-96 sell has set a potential bull market signal if the price can rise to a new all-time high. The setup will be there till the end of August. Knowing how resilient this chart has been since the March 2021 crash it might make a similar manoeuvre again but the odds are to the downside. 

 

S and P 500

The bull market is alive and well. The only sign of weakness is that the rate of rising is declining because the price couldn't keep up above the green trendline. The 16-20 sell signal is 60 days old, which constitutes 3 cycles. The 35-39 buy signal is 198 days old, which is 5 cycles. Eventually, the price will have to drop to a new buy/sell again. We will see if the dollar strength can help with this.

 

 

Nasdaq

Similar to SandP, there are no structural weaknesses in this chart but the signals are getting old. The 16-20 has just been bought and the 35-39 is starting to break. Can we finally get a decent correction, at least on par with the one in February-March this year if not more? 

10 years yield

The ten years yield is in a firm downtrend which in the current situation and according to many monetary experts might be a symptom of tightening fiscal and monetary conditions. Is this what the strength in the dollar is signalling? It is obvious by now that the high inflation cannot stop the S and P rise so the breaks might be activated from the other side, a sudden quick strength in the dollar. It rhimes with the weakness in the gold sector, otherwise falling real rates should be good for gold.

GDX, GDXJ

Gold sector stocks are in a free fall. A short term relief might be in cards but it seems to me that medium-term this drop has further to go. See USERX and GLD for more details. 

GDX

GDXJ

Bitcoin

Bitcoin started a countertrend rally in July and it executed a 92-96 xxed buy yesterday. I think it is still in a bearish constellation until it can form a higher low or break convincingly above 51K. 51K is strong resistance, 61.8% Fibo retrace of the crash. There is a congestion of the echoes in the 40K area and I think that if the price can dip down there and define new support the bitcoin might be ready for a new bull market. If not, the target is still far down at around 20K. 

I have a core position in BTC that I will not touch before the situation is clear what is going on. 3% of my net worth is in cryptos (BTC, ETH, ADA) and all of it is casino's money because I already took my investment out. 

Copper sector stocks

A week ago I published the copper stocks chart in my 'chart of the day' post to illustrate a possible breakout. I even opened a long position with a very tight stop. That setup has quickly morphed into a nasty double sell that now more than anything else corroborates the weakness in Russell 2000. Dr Copper is predicting more trouble for the industrial sector. The chart looks like a triple top in a form of a head and shoulder pattern. The target for a drop would be in the $24 area (-30%).

Uranium sector

The same as the copper sector, a breakdown is now obvious on the triple top head and shoulders chart. Target around 14 (-25%)

Australian gold stocks

Compared to the US gold sector the Australian gold stocks are showing relative strength. A disconnection between the Australian gold stocks and the US gold stocks usually means the reversal is coming but such a condition normally lasts for a few months before the turnaround really happens. The disconnection is fairly recent so I think there is more downside to go before the change of trend. 

Many significant signals have been generated across different sectors during the last two weeks. My interpretation is that they might be showing a picture of the weakening US economy due to tightening monetary and fiscal conditions. This might unfold as a market correction in the next month or two. How deep the correction will be that is to be discovered. 

I am short term long Australian gold stocks, medium-term long dollar and keep a core position in the silver/gold and crypto sector. Let's see what the next two weeks bring. My money is on a small correction in gold/dollar followed by a trend continuation after Labour Day in the USA. 

Good luck to all. 

 

USERX chart

 

USERX chart

 

USERX chart

 

USERX chart

 

Chart Of The Day - UUP, GLD

 Let's follow up on the UUP GLD battle 

UUP

The 92-96 sell, 6 days ago, has so far marked the short term top for UUP. Today a 16-20 not xxed buy has been generated. If this buy marks a low the next signal might be a 92-96 buy, either in the form of a double buy or a true buy. Such a signal would be a start of a new bull run for the dollar, IMHO.  On the other hand, if a 35-35 sell is going to be the next signal, that would significantly reduce the chances of a dollar rally.

The daily chart still favours the dollar bullish outcome because the price is above all the medium term moving averages. 

GLD

I am adding the GLD chart just to illustrate how potent the bullish outcome for the dollar might be. 

The GLD is on a verge of buying the 35-39 echo while on the 92-96 buy. Both buys are xxed, the 16-20 echo poses as the resistance and on the daily chart all moving averages are also above. After 5 consecutive days up and a total lack of life in gold stocks, this seems like a very strong resistance. If gold cannot move away from this level there are two very bearish setups that are in play, either a double sell or triple sell depending on the trajectory that will develop in the next couple of weeks. This chart screams danger. The only way out of it is straight up to buy 218-222 echo.

USERX chart

 

USERX chart

 

Australian XGD update

 

XGD daily chart

$6200 target for the short term low, probably on Monday morning.

XGD SKI chart

Execution of the 92-96 sell could mark the short term low. The next 16-20 sell signal is the upside target. 

The chart is in a bearish constellation.

Chart Of The Day - HUI

If we zoom out on the HUI chart all the way back to the 2018 low, the whole move since the Aug 2020 high looks like a 50% Fibonacci correction. Every time during this correction when the price tried to break out of the downtrend channel it was immediately pushed back into the channel. For the last month, a megaphone pattern is developing on the channel's upper boundary, indicating that we might be short term bottoming before we run into the resistance again, which stands at $280-290. After that, if the price cannot break out of the downtrend, a possible target for another leg down would be around $210-220 (61.8% Fibo), probably in October. I'd be a short term buyer here but would unload at $280.

USERX chart

 

Chart Of The Day - copper

 After faking a breakdown 18 days ago copper instantly rallied to buy 92-96 first and then 35-39 yesterday. The uptrend line held very nicely and the setup looks potent for a rally, at least to challenge the recent high. I am in for a trade. The initial stop loss is at a 92-96 sell. 

 

USERX chart

 

USERX chart

 

Chart Of The Day - UUP, GLD

UUP keeps trying to break out and establish a new uptrend. 

UUP is on a 92-96 sell but, as I described before, it is still in a kind of a 'no man's land' with a slightly bullish bias. Today I will concentrate on very short term technicals. 

The USD/EUR hourly chart is showing an overbought position while running into the major resistance marked with the March 29th peak. This peak needs to be taken out for the higher high to be created on the daily chart. That would be the first daily higher high since the downtrend has started in June 2020. I would guess that this setup is not favourable for an immediate and sustainable breakout (talking very short term, a day or two). 

To illustrate the contest I present the UUP daily chart

Also, the UUP SKI chart, which generated a 16-20 sell signal today that also signals short term weakness ahead. 

GLD daily chart paints the same picture, but opposite. While the uptrend is broken the indicators are flashing oversold conditions. 

Same with the GLD SKIchart. The 16-20 just crossed to buy, not xxed. 

In conclusion, the fat lady hasn't sung yet. 

USERX chart

 

The way support lines are aligned with the 92-96 echo it seems like a possible 92-96 sell might mark some kind of a low.

USERX chart

 

Chart Of The Day, UUP, GLD and SLV

Since my last post, UUP bought the 92-96 echo and then instantly sold but, as I said before, the things are not as bearish as the signals might suggest, on the contrary. Viewed together with the daily chart and the chart of GLD and SLV, UUP looks bullish for now. If the upcoming 16-20 sell cannot stop a new 92-96 buy the UUP will break out and start a new uptrend. The bearish case requires a 35-39 sell before the 92-96 buy.

 Looking at the daily chart shows that the bearish scenario seems less probable for now because it will need the price to cross the 200 days MAV. 

To give the whole picture I'll throw in the weekly chart of UUP, which still looks bearish because of the strong resistance around $25.4-25.6. In the SKI charts that resistance is represented by the 218-222 echo. So, if the 218-222 buys the whole picture turns bullish on all time frames and rally to $27 could be expected.

GLD
While UUP is on the verge of breaking out the GLD is in an opposite position. Nothing has been broken yet but a 35-39 buy would be a sign of relief while a 92-96 sell would definitely mark a breakdown. The worrisome thing would be the price target for such a breakdown which would be around $150 (gold equivalent of $1600).

GLD weekly chart corroborates $1600 as the target if gold breaks down. 

SLV
SLV appears like it has already broken down. The first target $21, the next $19. To negate this setup SLV needs an urgent rise to over $23.29.