This article is edited slightly from the original to clean up some wording and make points a little clearer.
All through the summer NFTRH had a “top-test” view on the primary US stock index, the S&P 500. We were 100% right on that; SPX spent all summer grinding upward to that test.
That is where the would-be market genius aspect of the analysis ends because it appears that the favored outcome of that test – that it would fail into a correction – will be negated in favor of the alternative outcome, which we have also carried forward. That outcome is a continuation with a measured target of SPX 3000+. So the favored and alternate views have traded places. The alternate now being that the bullish state of things is one big, post-Labor Day bull trap.
Continue reading Pieces of the US & Global Stock Market Puzzle Come Together
The ‘Gold as Inflation Hedge’ Canard
On the one hand you have the sons of Harvey & Erb, who called gold to $800/oz. and caused a stir in the gold “community”. Per Campbell Harvey in this video with Kitco’s Daniella (dig the flowing golden locks of hair)…
“Gold is just too volatile” to be an effective inflation hedge.
Well yes sir, you are right. Gold does not track inflation in any kind of a convenient time frame. Gold’s volatility is a reflection of the volatility of the assets orbiting around it in the constellation of risk.
This cool NASA illustration makes the point. Those planets – like equities, commodities and the various FrankenVestments concocted by Wall Street – are in motion. All is often fine, but when a meteor of risk discovery hits one of them well, it is suddenly marked down vs. gold. See?
Continue reading Gold is the Sun, and an Anchor
We began tracking this negative divergence in NFTRH last year as the leadership of two premier Semi Equipment companies began to decelerate vs. the broad sector.
Over time the ugly patterns became even uglier with breakdowns to new lows. This chart shows that ugliness but more importantly it tries to illustrate AMAT & LRCX as leading indicators for the broad markets. In 2013 it was a big part of the macro signaling that told us to prepare for a coming economic upturn. In late 2015 it told us that the market top of that time probably was no such thing.
Continue reading Semi Sector: A Warning or a Buy?
A general review of the current status across different asset markets. This is not comprehensive, forward-looking analysis as per NFTRH, but it is an up to the minute summary (as of Friday afternoon).
Gold, silver and Gold Stock indexes/ETFs made what I had thought were bear flags yesterday, but today painted them as short-term ‘W’ bottom patterns, in silver and the miners anyway.
This chart of gold (courtesy of Barchart.com) shows a flag breakdown, whipsaw and new closing high for the short-term move. As we’ve noted for weeks now, the Commitments of Traders (CoT) is in a contrary bullish alignment with large Specs all but wrung out of the market (they were fleeced again; don’t believe hype about their increased shorting being some sort of conspiracy). All in all, not bad for the relic. The bounce lives on.
Continue reading Multi-Market Status: Precious Metals, Commodities, US & Global Stocks
By Notes From the Rabbit Hole
There is nothing bullish happening on the gold and silver charts. Nothing bullish on the miner Index/ETF charts. Nothing bullish on the HUI/Gold ratio. In other words, when it comes to a segment as volatile and sentiment-dependent as the precious metals, we are in the kill zone.
That can be read a couple of different ways. First, the inflationist gold bugs are getting exterminated as the US dollar first rose and since has stubbornly refused to take a pullback.
But the time to buy the gold sector is pretty reliably when the bugs are dead or at least hiding deep in the woodwork; so deep that you’d not even know they are still there. Just as you should have caution when gold bugs are trumpeting loudly, you should be brave when they are in full retreat… or worse, dead.
Continue reading Gold’s Kill Zone
By Notes From the Rabbit Hole
The downward plunge never ends when you think it will. There’s always a lower level. That way gold bug spirits get crushed before those left standing can become “joyous”.
Some thoughts from NFTRH 510:
Both gold and silver look like they could be in little daily chart bear flags. Oh no! More bearishness on the way! I am getting bullisher by the week.
Again, that is how it is with the precious metals. Sure, if you go too quickly you get some cuts, scrapes and if too eager, even amputations of fingers by falling knives. But this generally is the type of environment where you stand up and take notice. The gold obsessives – i.e. gold newsletter writers, gold stock experts, “gold analysts” (ha ha ha) and others who want their herds to remain enthralled as if there is no other sector in the markets – are in damage control mode.
Because gold and silver are technically bearish, the gold stock ETFs are on the verge of breakdowns and the world is still risk ‘on’ right now, the amalgam known as the gold “community” may find a need to give the troops the straight scoop, which is that it’s bearish out there. With every fiber of its being the “community” wants not to be saying that, but they have to in order to maintain credibility.
This is when you buy the sector. Period. Now, what does “buy” mean? Well I personally screwed up trades in NEM and AEM. So I am by no means saying that [it] is easy. You have to manage risk while at the same time keeping an eye on the ball, which is a general buying opportunity for anything from a potential strong bounce to a bull phase.
As to that second thing, a turn in the risk ‘on’ world to bearish and/or risk ‘off’ would be the right context. What is happening now is that the inflationists are getting dismissed and the people who buy liquidations within disinflationary backdrops are at the ready. While I am bullish on all counts but the macro fundamentals – which continue to be mixed to bearish – I’d continue to respect the possibility of a final flush before the rally gets going.
Continue reading Gold & Silver: Stuck In Oz; Stock Market: I’ll Get You My Pretty!
By Notes From the Rabbit Hole
No frogs were harmed in the making of this video! At the time of a boil it’s a rubber stunt frog, which gave me a sense of relief as I watched.
As part of the S&P 500 top-test scenario we have favored since February a key component to a failed test would be that the frightened Bullfrogs that jumped out of the pot in February and March would return, settle in and get nice and comfy. Maybe not with the bounce in their hop that they had in January but well, comfy.
The VIX is on a little pop today as Friday’s twitch of anxiety extends. But the move is far from conclusive. VIX has been a good sign that relative complacency and comfort have been restored here in the dead of summer.
Continue reading Checking in on the Slow Boiling Bullfrogs (Market Sentiment)
By Notes From the Rabbit Hole
This article does not speak to gold’s proper fundamentals, which are not yet very healthy (although some positive signs are finally gathering). For the proper counter-cyclical atmosphere to engage gold bulls would need have risk ‘on’ markets and assets crack. Yet, gold’s (and silver’s) price may well bottom before readily obvious fundamental improvement is apparent to a majority (as was the case in Q1 2016).
Far too much analysis is put out there linking gold with inflation. It is true that gold often acts as an effective inflation hedge, but it all too often fails in that capacity.
Far too much analysis is put out there linking gold with war, terror, pestilence and other conditions of human suffering. The surest way to spot a gold promoter, if he is not pumping inflation, is his pitch for gold as a disaster hedge. Yes okay, and I have a little Unibomber shack in Montana to sell you too.
Continue reading You Buy the Fear in Gold
The title is just an excuse to reference an old market saying about copper as the metal with a Ph.D. in Economics. I think that is just so much noise now as is much of the macro market, with all of its man-made stimulants creating a toxic pool of assets sloshing around the globe; copper included. I’d say the actual Ph.D. is the stodgy old man, gold. He of the counter-cyclical indications.
Anyway, ref. CNBC’s Copper — a metal with a history of predicting economic trouble — hits 1-year low, nears bear market
For whatever reason copper is still watched closely by multitudes of casino patrons and here is the state of its daily chart. Utterly bombed out to an oversold situation right to the level of my excellent, genius and utterly “fantastic” call… that was unfortunately only made to one person (i.e. it was not a call, just an offhand remark to a pal).
July 3rd in response to an inquiry from IKN’s excellent mining funda guy, Mark.
Continue reading Doctor Copper Prescribing Bull or Bear?
You have better things to do than read droning macro analysis or long, drawn out investment theses. It is a weekend in the dead of summer and for that reason we go easy this week; real easy.
The 3 Amigos are here to simply say that things are as they have been, with Amigo #2 (long-term yields) getting home and pulling back on cue, and the other two (SPX/Gold ratio & Yield Curve) still in process and indicating risk ‘on’ and ‘boom on’, respectively.
Amigo #1 (Stock Market vs. Gold)
While gold bug sentiment, Commitments of Traders and the historical seasonal pattern all indicate a good potential for a gold rally coming soon, the stock market’s ratio to gold continues to indicate that risk is on and the play has certainly not been to be hiding in precious metals from the stock crash that never arrives. Quite the contrary.
Continue reading A Macro (Amigos) Update for Mid-Summer
On June 26 we provided an antidote to some media hysterics about a “Death Cross” in gold.
On that same day we had an NFTRH update (still password protected, but below is the screenshot of the intro) illustrating for subscribers a developing positive risk vs. reward proposition in gold and silver.
On June 28 we noted the out-performance by counter-cyclical gold miners to cyclical copper miners.
Continue reading Precious Metals Summer Potential
The GDX/COPX ratio has broken above the 50 & 200 day moving averages and is still going, despite gold’s ignominious state at the moment.
Here’s what gold (GLD) looks like today.
Continue reading Gold Miners/Copper Miners Ratio is Interesting