NFTRH Update 8.9.13, Precious Metals & Broad Market Review in Charts

gdx
GDX daily

GDX MACD is crossed down but importantly, TRIX is above zero and not triggered.  Yesterday’s volume was good.  We can either be freaked out by the similarity of the candle to the late June candle (and associated volume) or we can interpret that late June was the bottom and yesterday was an initial shot off of the secondary bottom after a shakeout.

Nothing is certain in the this market, but I think yesterday was a statement that a bottom is in.  To confirm this GDX must get above the 50 day moving averages.  Importantly, many of what I consider the quality items in the sector already are.

silver
Silver daily

Silver, which we want to see lead, had a good day.  Now get above the 50 day averages wild man!

silver-gold
Silver-Gold ratio, daily

Same with the Silver-Gold ratio.  Must clear the 50’s.

gold
Gold daily

Gold also stopped at the 50 day averages.

hui.gold
HUI-Gold ratio, daily

HUI-Gold ratio, after getting blown up on the recent correction, made a strong move.  But it too resides below the 50 day averages.  The ratio had a successful bottom test yesterday.

Precious Metals Bottom Line

I have stated all through the precious metals correction that NFTRH will not be among the bottom callers when the time finally comes, so I will stick with that.  That is because to my view of market management, grand statements are irresponsible and reckless since they are made by fallible humans.  Just as I write this a very popular commentator (and gold salesman) shows up in my inbox with an editorial submission “Futures Market Signals Gold Ready to Erupt”.  Seriously.

I have gone from simply having contrarian feelings about this kind of stuff to actually having very negative feelings about some of these guys because their constant bullishness has been exposed as dangerous to peoples’ financial health over the last 10 months.  This is part of why the ‘guest analysis’ publishing has been cut down at the site.  I don’t trust too many people anymore.  I’ll take my own b/s detector.  I trust yours is in good working order as well.

Anyway, the bottom line is that it looks like the precious metals complex has bottomed but we still need confirmation by getting above the 50 day averages and then making new recovery highs above the late July highs.  As a ‘stop loss’ on this line of thinking, we can use the early August lows as a Fail-safe limit.

Stock Markets

hgx
HGX daily

I have rarely seen an uglier chart than that of the Housing index.  Yet with sentiment rivaling that of the gold sector (at 10 as of Aug. 7 while the rest of the market was over bullish) I wonder if they will spin declining interest rates as a “buy the Homies!” tout.  I own puts against ITB with no undue hopes for success.  But if there is a breakdown it could be hard and fast.

ust.usb
10 year & 30 year US Treasury Bonds

Declining interest rates – despite the Fed’s taper talk – of course means rising bonds.  It is notable that the 10 and 30 year T bonds have refused to make new lows amid the Jawbone blitz in the media over the last week or two.  A contrary setup?  Could be.

bkx.spx
BKX-SPX ratio, daily

While Home Builders might get a tout, the banks would not like a declining interest rate situation.  Nor would the ‘taper to carry’ theme.  The banks are shown leading the S&P 500 but this leadership could be rolling over.  But an uptrend is intact until the 50 day averages – conveniently right at the uptrend channel line – break down.

spx
S&P 500 daily

It is obvious where the S&P 500’s critical short-term support is.  This market is now sponsored by the dumbest money that is braver than it has been since 2007 at least.  They have been shepherded by the ‘it’s a new secular bull market’ callers.  Think about how the average person was traumatized, even terrified by the post-2008 stock market.

When did the average person become bullish the stock market, this spring?  Will the rolling MACD manifest in another blip of a correction, a major correction or no correction at all?  I have not the faintest clue on that because this market is on robo drive, pure momentum.  But I will tell you here and now that the risk profile sucks.

stox
Euro STOXX 50, weekly

Europe is a funny one.  It is megaphoning above support with resistance at 3000+.  I still have questions as to whether STOX can rise while the SPX corrects.  We may find out soon.

fxi
FXI daily

The China 25 made a strong move at the 50 day averages yesterday and remains bullish above the 50’s.

Commodities

copper
Copper daily

Look at Doctor Copper!  A headline commodity breaks out.

wtic
WTIC daily

While crude oil, another headliner breaks down.

cci
CCI daily

Meanwhile, the CCI commodity index merely maintains support above the absolutely critical 500 level.

gold.cci
Gold-CCI ratio, daily

Gold vs. commodities took back the 50 day averages yesterday.  This ratio is likely to help fill in the blanks not only on the state of the gold sector, but also the broad markets and the greater economic contraction.

Bottom Line

I am not a precious metals investor/trader because I enjoy it.  I am in it because changes are anticipated to a big macro picture that sees the public heavily bullish the stock market and heavily bearish against gold.

The public were tended by the media to become way over bullish in 2011, buying in on an epic knee jerk and in my opinion the last two years has been all about culling them back out again.  The precious metals are opposed to the broad US stock market and in my book that is a good thing.  We think we may be seeing a bottom now, but this is not yet confirmed.

The US stock market is vulnerable, but we are going to keep open our timing of 5 years to match the two previous cycles.  So that means we’ll for now keep open the idea that the ultimate top in the stock market may not come until sometime in early or mid 2014.  That, like everything else we do will be subject to revision as new data points come in.