NFTRH Interim Update 2.8.13, Market Update

Gold Stocks

GDX is shown in the top panel with gold stock bear DUST in the lower panel.  Unbiased technicals have not proven anything bullish yet for the GDX (GDM, HUI, XAU, etc.) other than their ability to levitate for the last several trading days.  And that does not include the juniors and explorers, which are as a group making new lows (by GDXJ and GLDX charts).

These are all groups of stocks; some lousy and some nice.  So they have no bearing on a Golden Predator for example, which is doing some nice things with respect to unlocking its royalty portfolio’s potential.  But all I can do in NFTRH is manage the sector as a whole.


On this chart, GDX is bearish until it proves otherwise and DUST is bullish until it does the same.  A change in orientation would involve GDX breaking upward out of its flag and DUST downward.  If they are bear and bull flags respectively however, they would do what they are supposed to do and the senior gold stocks would break down.

We could say that there was capitulation volume on the GDX as it tumbled out of the former support zone that was equivalent to HUI 420 and the gold stocks could still be in a bottom-making exercise.  But the charts remind us that nothing is proven yet and the recent under performance in the smaller miners and explorers is not a positive.

Broad Market

Please take the above into account as you work your strategy, which could include anything from long and strong, to hedged, to cash.  I am personally not strong anything in this market right now and no matter how bullish things may get from now until spring am focusing on a bigger theme per this post:  This Chart Thinks it’s a Road Map

More and more I want to plan for the big turns that come around every 3-6 years.  NFTRH would plan to adjust to the shorter term (e.g. get more bullish the miners for a hard rally when a bottom looks to be a high probability, and get long a variety of broad market items for a trade into spring) as needed.  But if the market means to get to SPX 1580 all in one big gulp without a cleansing interim correction, I am more than happy raising cash and awaiting the next big macro turn.  Maybe just doing some quick trading until then.

The big money was made by buying the pivot in 2008 and 2009.  We have started a theme that sees bullishness (pending a correction?) out to spring.  But the potential gains appear limited, unless the gold stocks can bottom and start one of their rocket launch rallies.  A problem in the gold stocks is that the same bottom callers keep calling bottoms and that makes me uncomfortable.  Not calling a bottom since HUI 460 broke down has worked so far and until I see those flags resolve, that is just how things will stay.

Another theme we have been carrying is what if the precious metals failure to launch is actually a dark broad market omen instead of some conspiracy against the PM’s?

Bottom Line

The stock market’s risk profile is untenable with stories all over the MSM about “the great rotation” out bonds and into stocks as the public finally warms to the idea of a new bull market.  Hey, it’s only 4 years old after all!  This is the stuff that big macro turns are made of.  The turn could be 6 months out on the horizon.  But caution in a high risk environment beats unbridled speculation.

As stated and personally speaking, I will continue to tighten my game against this backdrop with anything for sale at any time (aside from actual gold) and anything potentially to be bought and traded as well.

NFTRH is not a precious metals booster.  If the PM’s bull we will be aboard.  If they bear we will be prepared for that.  Same goes for the broad market.  But with the stories in media about the “great rotation” and some 15 year old TV star making a killing by trading stocks at a time when the public is finally feeling like the bear market is over 4 years after it actually ended… it just does not feel right.  Especially with the S&P 500 so close to target in the mid-high 1500’s.

Party time can continue in the interim, but the precious metals had better get with the party or we may interpret that the money supply rising in the US is not indicative of global liquidity.  See Tom McCellan’s excellent ECB’s Shrinking Balance Sheet for an interesting look at his dynamic.  “Currency War” is becoming a buzz phrase.  It’s implication is for currency compromising liquidity for asset markets the world over.

So again, are the precious metals telling us that inflationary liquidity is not taking root or that an evil cabal of Banksters is holding the PM’s down?  I don’t have the answer but I do have this answer:

We should manage risk first and speculate second.

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