Update; US Stocks & Precious Metals

The Semiconductor index made a bearish pattern with today’s decline.  If it loses the 10 year breakout line (right about at the blue 50 day MA’s), look out Mr. Market.

sox

The S&P 500 lost support.

spx

It is obvious that the US stock market is ‘do not touch’.  For me, I take that further and include global stock markets, which are hard to imagine rising significantly if the US starts to drop in earnest.  I bought FXI (China) after noting its bullish breakout in the ETF update, but took a modest profit on it today.

Gold was strong today as the USD was weak and unable to accommodate people looking for liquidity.  Gold, Euro and Yen got that bid.

gold

Gold could be in a rising wedge/bear flag, although volume was acceptable. But here again, as a gold holder I don’t care about this.  Its value should shake out over this year to have been well worth holding.  You don’t get that value in a chart or in a metal ETF.  You get it in actual gold.  Even at under $1000 an ounce as some forecasters are calling for.

Silver was okay with some volume, but remains in its little meandering trend.  Not inspiring.

silver

GDX did not nullify the potential bear flag and also put in a bearish engulfing candle.

gdx

GDXJ made an even uglier candle.

gdxj

HUI’s symmetry remains intact.  The index has about 4 or 5 points of downside wiggle room to remain normal this week.

hui

Summary

The US market is in trouble as supports are under threat on the big indexes and leaders are being lost.  Speculation is coming out of this market and if you ask me, that is a good thing.  Under the instigation of the Fed and financial media, this has (in my opinion) gone too far.  This market is due to have its clock cleaned, though we cannot manage a new bear market until some intermediate lower lows start getting made.  That wouldn’t happen until for example, the Dow loses 15,340.  It’s currently at 16,170.

In the precious metals it’s still normal for the big bottoming process.  But if the engulfing candles and/or potential bear flags have their say there could be short term issues.

Engulfing candles usually only need tack on a day or two of downside if there is to be any negative follow through.  So that is no big deal.  The problem is however, a day or two of downside could break the bear flags down and those tend to drop lower than where they began.  In the case of GDX above, that is around 23.50.  In the case of HUI, that is our former key support area of 215-218, from which the current pained rise began.

So it remains a case of ‘bear flags vs. the symmetry picture’.  Meanwhile, the big picture bottom potential is still intact.

Traders need to be on their toes and should be limiting risk while these bear flags are in play.

Intermediate traders (buying down days during a projected bottom) and holders should be watching the bottoming process, which though difficult, remains in play.  HUI 225 is a key support, followed the 215 to 218 area we managed previously.  If the short term uptrend channels prove to have been bear flags, these levels would come under threat and it could be bottom retest city, below 200.

Bottom Line

US stocks are not good and look to correct further.  Cash or shorting opportunities are my personal focus going forward.  Other options include actively managed bear funds like HDGE, and Treasury bonds in a risk ‘off’ environment.

Yet investors should realize that there is no evidence of the end of a bull market, although this bull market is, going simply by the cycles, a good candidate to end soon if it has not already ended.  After being mostly neutral for so long, NFTRH is now bearish with the rapidity of the failed bounce and loss of support by SPX.

Precious metals need to grind their way to proving that they are indeed a counter cyclical sector.  They are getting tossed around in the stock market’s topping action but the potential that the bottom is already in remains in play, technically.

We should remain mindful of risk management however, due to the potential that the current uptrend in gold stocks is a bear flag.  Bullish opportunity could after all, come after a renewed decline.  There are no rules as long as you tune out the cheer leaders.

As noted might be the case, I have cleared out most items and am going to use cash and short term trading (both long and short) until the picture clears.  If and when a gold stock bottoming view exits this short term phase unscathed, my intention would be to ride a trend.  Alternatively, if the play will be ‘buy the washout’, so be it.  2014 should ultimately be a bullish year for the precious metals.

The other side of the plan is to default to cash but also trade the stock market, both short and long as applicable.

I trust you will consider the work above and to date per your own needs.

It is safe to say that the stock market continues too look bound for problems at some point this year, as we have been planning for quite a while now.  That would be part of the ‘macro pivot’ plan for 2014 we have belabored.  At some point the other part of that plan calls for a positive reversal of fortunes for the precious metals.