Tag Archives: market sentiment

NFTRH 228 Out Now

Watch commodities and the ISM’s ‘prices paid’ trend; watch out for sink holes in Goldilocks’ path as she happily skips along; watch chest beating gold bears who think they know how to read long-term charts*; watch the silver CoT (but silver bulls might want a certain loud technical analyst to refrain from making huge proclamations about it… jeez, let it breathe, silver has lower to go first); watch to see if the stock market already took its ‘healthy’ correction or has further near term downside in order to make a solid base for a final drive to SPX high 1500′s.

* TA big papa, stockchart.com’s John Murphy is becoming bearish on gold; as in possible ‘end of bull market’ bearish. He certainly does know how to read charts and is not included in this dismissive comment.

Anyhow, watch this writer continue to manage risk as fully as needed to remain good to go for coming events; and they are coming my friends.

Gold Bears Out of the Woodwork and Into Your Head?

You know what I mean… the rising tide of gold bearish articles now flooding the blogosphere. Smart writers far and wide schooling gold bugs about how gold is going to 1400 or even 1200 as the economy strengthens and the disaster premium is removed or as a deflationary spiral takes hold. Talk about opposite ends of a spectrum from which to bear talk the monetary metal.

Yes guys, gold became sponsored by the dumbest, most knee jerky money on the planet… 1.5 years ago at the height of the euro crisis! Now you pile on and try to school the masses on contrarian theory? It really looks a lot like trend following and wanna be heroism to me. But whatever.

So where were these contrarians in summer, 2011 when when people should legitimately have been concerned about gold’s dangerous sentiment structure due to the big knee jerk into the metal? Where were the know-it-alls just after the recent QE3 when this was inserted into our newsletter?…

Sentiment is over bullish in the precious metals. Public opinion is over bullish,
Hulbert’s HGNSI is over bullish and the CoT data show that the little and big
speculators are over bullish. This should be cleared out before we renew our bullish
enthusiasm on a risk vs. reward basis. Broad stock sentiment is in a better state than
in the precious metals. It is mostly neutral.

Well, that brief summation has now been flipped over on its head and risk vs. reward is bullish in gold, meaning upside potential is now significantly better than downside potential.

Speaking of newsletters, here’s the graphic evidence to the “suicidal” gold newsletter writer sentiment (HGNSI) we noted recently. The most recent reading at Sentimentrader.com had been -6.3% and I noted earlier in the week that a friend had anecdotally advised -12.5%. Well, here it is.

The time to be taking a warning on a gold correction was summer, 2011. Nothing is sure in this screwed up financial world. But risk vs. reward is positive now and the growing legion of bloggers talking the metal down does nothing to challenge that notion.

[edit] Adding a chart of GLD for visual perspective. While yesterday’s hype out of Europe was a big nothing, GLD is filling a gap it left yesterday. This could also be another in a line of Bear Flags. The daily trend is down and this is the stuff that emboldens the gold bears.

New lows (to that of last summer) would kill the intermediate trend but as of now, this remains a correction to a new intermediate up trend, as hard as that is to imagine at the moment.

[edit #2] Well what do you know? The Commitments of Traders are out and it seems like the trend here continues to be gold’s (and silver’s) friend on the long road away from risk and into reward. But never let some facts get in the way of a good story. So, with gold due to continue in its strained (and bullish) consolidation, let the smarty pants gold bears have their day in the sun. They really do sound smart because they have 1.5 years of consolidation/correction to make them sound that way.

Au CoT

Ag CoT

Twitter, Free eLetter, Notes From the Rabbit Hole

Risk vs. Reward and a Ramble

The general operating plan has been toward a market that can drag on into spring with a bullish bias. But in the short-term, over bought markets can continue to correct. I have taken profits on some overbought global positions and would like to watch for re-entry.

Interestingly though, the various ‘Gold Bugs’ data compiled by Sentimentrader.com show an embattled sector that has scrunched even further to the left on the graph above and is the lone item sitting in a good risk vs. reward stance.

The implication is that the gold sector is preparing to disengage itself from the broad market, just as it was disengaged in the 2000-2003 time frame to launch its bull market.

Another implication is that bigger picture precious metals corrective activity could linger into spring (perhaps after a bounce or rally to relieve the current sentiment condition?) if indeed the sector is in the process of going contrary the broad market. Could we get some QE’s 3 & 4 inspired economic gains and more stories about Goldilocks, low inflation and gold’s loss of luster as a disaster/inflation hedge? You know the mainstream media; of course we could.

When you see Ben Bernanke heralded far and wide in the media as a genius and the hero who brought us back from the brink without much inflation, you’ll have the signal. This would be the opposite condition to the one that was in play in the spring of 2011 when Pimco shorted the Long Bond (expecting ever higher inflation) and Bernanke’s head was being called for by angry, pitchfork wielding mobs of austerity.

But the facts for the short-term are that the gold sector is in a good risk vs. reward stance (both through technical proximity to important support levels and what looks like washed out sentiment) as more and more people come to believe it’s ‘bull over’.

Have patience dear Gold Bugs. The time may be coming now, off of this sentiment crater or it may be coming for real in the spring. Just play the game and manage risk. The real panic could come later when the economy starts to grind down again and a Federal Reserve that jawboned us last week about its QE exit plan is forced to promote QE’s 5, 6, 7… Gold’s massive consolidation/correction is providing the inflators with the cover they would need.

The loss of confidence in monetary autocrats at such time could be awesome to watch – and be positioned for.

A Few Tidbits From Sentimentrader

From the estimable sentimentrader.com, whose premium service I find very valuable in navigating this mess:

Biotech, energy, financials, gold bugs, housing, tech and utilities are good ‘n scared. I am not sure what data they use, but I am amazed at how quickly the gold bugs went from dangerously over bullish to this… epic under bullish. Individual indicators like public opinion and Rydex fund flows did not look over bearish on the precious metals, however (and there is you’ll recall, the CEF premium to NAV issue). Maybe there is a time lag in reporting in play. I’m not sure.

See? Hulbert’s gold newsletter writers are a little too peppy still.

Hulbert’s tech newsletter writers got good and bearish though.

And then there is the long-term T bond, rising per a previous post (TLT to 131) toward target amid really peppy sentiment among newsletter writers. Treasuries could be a good short when they hit upside target with sentiment registering over bullish.

Finally, a look at the ‘smart’ vs. ‘dumb’ money. It’s not as contrarian bullish as it was in May, but the dumb money is finally puking out.

Share this:

Share this:

Share this:

Share this: