Precious Metals
Revisiting silver, the current status sees a bounce scenario stretched to its limit. It is now or never for silver to pick up and begin leading. The chart shows the flag at its lowest level of support in pre-market.
Here are the implications once again if silver loses 23. Sub-20 is favored.
On a weekly chart, we find gold once again below the important 1440 level and as long as this is the case, the would be recovery to 1524 is off the table and the lower levels at around 1250 and 1150 are on it.
Finally, there is this ugly view of the weekly HUI.
A drag on the sector is the ongoing bottom calling. I have thought there was at least an even chance of a pop here, but the weekly bear flag is on the verge of breaking down. The chart from NFTRH 237 makes all the points that need to be made; it’s a bear market, HUI is deeply over sold and it can get more so. I suppose when all – and I do mean all – hope is lost, this can bottom.
All of the above is the intermediate picture. If silver holds support right here, and HUI reverses immediately, more leeway can be given to the bounce scenario. But short of that the sector remains under the control of the weekly charts above.
Stock Market
The S&P 500 targets around 1660 and the leader indexes we have reviewed are getting close to measured targets. Here we see SPX breaking above the channel that has contained the rally for the entirety of 2013. That is great for bulls now, but not so great as momentum builds because one day, upon termination, it builds in the makings of a harder correction (or worse) than if it had stayed within one or both of its channels. Think silver in 2011 or less dynamically, gold later in 2011.
The market is threatening a blow off of some kind, and we’ll just have to take it step by step. I will probably try to short at or around the measured targets (trying to have patience here) but anyone recalling 1999 remembers how that worked for shorts; not well at all until one day…
Bottom Line
So just as with the precious metals downside, risk management (and limits/parameters) should be used by anyone trying to go actively bearish the stock market. High cash levels remain a priority right now in my opinion. The ‘death of the dollar’ cult is wrong. Cash is good because it provides short term liquidity and it is the tool required to cobble together a nice portfolio of assets when the time is right.
