NFTRH Update 7.11.13, Precious Metals & Broad Market

Precious Metals

The discount to NAV at which Central Fund of Canada’s gold and silver was selling on the open market was noted in a public post yesterday:  They Hate the Central Fund of Canada.  That is a sentiment-based fundamental positive from a contrarian standpoint.

Gold, silver and the HUI have held the late June lows despite the happy jobs report and strong stock market.  That is a positive macro fundamental divergence which, along with the technical divergence shown below on the HUI’s MACD, keeps the sector in play for a bounce that may be better than the usual bear flags that have marked its 9 month decline.

hui
HUI daily

Of course technically, nothing is proven until HUI gets through the EMA’s 10 and 20 and then later, the 50 day averages.  But again, rallies have got to start somewhere and I would say zero bullish sentiment, macro fundamental divergence and technical divergence give the sector a shot.

Ironically, the fact that today’s bounce is coming at the behest of Bernanke’s jawbone is not a positive in my opinion.  News or hype driven events are not catalysts for real turns.  But again, given that the June lows held through the recent economic bull fest, a bottom of some importance – even if just a strong rally that goes beyond those that have preceded it – remains a possibility.

I have added some items this week – first and foremost, CEF – in line with this view and am going to see about adding a couple more if the HUI continues to sag after its initial Bernanke inspired opening thrust.

Broad Market

Curiously, the Yen is strong and a negative divergence to broad markets; or maybe just against the USD, which we noted could be ready for a correction.  Other than that, junk bonds and many other bonds of various flavors look to continue bouncing.  This implies ‘risk on’ is back, at the behest of the US Fed chief.

I sold the bank ETFs yesterday as noted in the update, and am looking for exposure to some of the usual broad market items.  Unfortunately, I may have let Singapore, the sound financial center that is usually my first target on the global stock list, get away from me.  Other aspects of the global and emerging world may be interesting for a trade.

The point however of the broad market update is that the bearish summer appears to be off the table, at least for now.  The bearish pattern in the VIX was the tell.  How often have we seen such things just snowball into all out bull fests?

Summary

Manage risk as always, but be open to asset market appreciation, including in the precious metals (and commodities).  I am however, nowhere near proclaiming the precious metals bear phase over beyond any short term rally that generates.  That would only be known in hindsight, with the HUI above 375 or so.