NFTRH Interim Update 2.27.13, Market Review

The gold miners are on the expected bounce from very over sold conditions.  As you can see, HUI, GDM and XAU are all dealing with resistance at the ‘neckline’ to the would-be massive topping pattern.  Weekly chart:

HUI, GDM & XAU gold stock indexes

The HUI target of 100 measured off of this pattern is not the favored scenario.  I am leaning toward an A-B-C correction to the cyclical bull out of 2008.

HUI weekly chart

The question is whether ‘C’ would come at the solid support zone in the low 300’s or lower at around 250.  I lean toward the low 300’s, but…
HUI monthly chart

The monthly chart shows that if this is a major secular bull market retrace, the 250 level (62% Fib is 265) is doable.  Keep it in mind.  Alternatively, the miners can get back above the necklines, hold strong and call the correction done at the recent lows.  The neckline is a parameter and it has not yet been registered.  Thus, the downside targets remain active.  In resisting bottom calling, we have been right since HUI 460 broke down.  But be aware that this tack could prove wrong at any time.  In the absence of strong bottoming evidence I am going to go for keeping us safe first, and making ‘coin’ as speculators second.  I am going to stick with the parameters shown above.

Gold daily chart

Gold is gold.  I sleep soundly.  But for those keeping score at home, the metal has risen hard toward a notable resistance zone.  Gold has been beaten with the ugly stick in the media and it is becoming fashionable for buttoned down financial houses to be calling the end of the bull or lower targets or whatever it is that trend followers and manipulators do.

On the other side, the gold “community” is revving over the leveraged short speculators story and is a little too frothed up over, and aware of the deplorable sentiment in gold.  This is a bit of a concern because really, did the majority of gold bugs suddenly become effective contrarians?

Copper daily chart

Copper dropped to a notable support level and reversed.  This combined with the VIX rising hard to fill its gap causes me to wonder if this week has already seen the ‘healthy’ correction to the stock market.

VIX daily chart

We’ll stick with the low 1400’s as a reasonable target for the SPX if it is going do the right thing and unload some momentum players before a renewed rise to potential upside targets.

S&P 500 weekly chart

Most US and global markets look like they can go lower, technically.  But nominal junk bonds have not broken down, nor have their ratios to investment grade bonds and Treasuries.  This implies that the will to speculate is still intact.

After the current bounce attempt, we will see if the stock market resumes its decline.  That would be the more sustainable thing for it to do.  But the VIX is a concern for bears because it has already satisfied its upside objective in closing the Fiscal Cliff gap.  Could bulls use this week’s mini hysteria to pump a final leg to the bull market?

Euro weekly chart

The Euro’s post-crisis recovery has gone hand in hand with global asset rallies.  Euro has declined of late and is now just about at our target, while…

US dollar, weekly chart

Uncle Buck has invalidated the H&S pattern on the weekly chart.  USD could be the bringer of ultimately bad news for asset markets, but it is over bought by daily – if not weekly – charts.  This could be another hint that markets will not decline to the equivalent of SPX low 1400’s and instead resume the rally to termination some weeks or months down the road.

Bottom Line

The precious metals are in a sometimes on, sometimes off contrary stance to the stock market.  Yesterday it all went up.  Gold stocks are still dealing with very important resistance and sector sentiment aside, the picture does not (yet) look good.  Gold is in a supreme sentiment setup, but can chop and grind around for an indefinite period within a trading range between support in the low 1500’s and current resistance in the low-mid 1600’s per the chart above.

This remains – in my opinion – a trader’s market until signals become clearer.  A big macro pivot still remains the theme for 2013, but it is not yet indicated to have arrived.  We continue the weekly process of defining and painting the picture going forward.