NFTRH; Stock Market & Precious Metals

US Stock Market

The stock market is down again in pre-market.  We are at a point where technicals will start breaking down or another big bounce reversal will begin.  For a picture of a technical breakdown, see this post that includes a chart of the XLF Financials ETF breaking down and this NFTRH+ update on same.  Other markets have not yet broken below their December lows, so this morning’s red pre-market is key to a reversal or downside follow through.

A subscriber asked me to alert when things go technically bearish in order to short the market, and that is what I did with XLF.  The best way to go about shorting a market is to wait for a breakdown and then patiently wait and wait some more for bounces and breakdown re-tests.  As it is, the broad market is negative, but not broken.  The ugly patterns and wide ranging up and down volatility can be considered a bearish condition, however.

The SOX index provides a nice example of what I am talking about.  It is a bearish looking pattern, but it is at support.

sox

Intel is making headlines for less than stellar guidance for the first half of 2015.  Here is a chart showing its level in pre-market (blue arrow).

intc

As you can see INTC is not broken either.

Yesterday’s post about Bank leadership and Treasury bonds gives another view into the stock market.  It looks like T bonds are getting over baked, which means risk ‘OFF’ could be getting over done.  If so, watch the banks for a bounce that could lead the markets, along with dropping T bonds.  We are talking about the potential for a bounce here, not a big new bullish phase.  Again, we should know shortly.  BKX-SPX ratio is right at the channel bottom and nominal BKX is at critical support.

bkx.spx

bkx

US Stock Market Bottom Line

Macro indicators in bonds and in gold vs. commodities have been bearish for quite a while now.  Economic data have started to slip.  The global macro appears to be shifting (Swiss currency news, etc.) and the stock market’s charts and volatility have a bearish lean to them.  If they break down and trends shift to down, the regimen will shift to shorting the bounces (or holding cash, managing risk, etc. depending upon individual orientations and asset allocations).  But we are also at a decision point, which means the decision could be for another market bounce or rally, ala the two previous ‘V’ rallies.

Precious Metals

Very simply, gold made a higher high to October and thus measures to about 1340.  Remember that 1250-1260 is a very key resistance area.  So there is a very short-term decision point for gold as well as the stock market.  Note the inverse situation?  Gold is at a decision point for higher prices, while the stock market decides whether or not it will break down.

gold

One thing this does tell us is that our counter-cyclical gold/gold mining view is on track.  It could get dinged if the stock market rallies and pervasive fear dissipates, or maybe the precious metals will churn higher even if the broad markets get relief (if policy makers start dovish jawboning and roll over on rate hike talk, continued pressure on short-term interest rates would be bullish for gold).  But plain and simple, gold targets 1340 as long as it does not go back below the neckline shown above.  Roughly, I’d like to see it hold the 1230 area.

HUI held support and targets 210, which is the equivalent of GDX 23, which we noted in an NFTRH+ update during the gold stock correction on Wednesday.

hui

Silver held support at 16.60 and if it clears 17.40 or so, would become very bullish.  Meanwhile, it remains conspicuous for not yet leading.

silver

Precious Metals Bottom Line

A year ago we talked about a potential ‘macro pivot’ for 2014.  This would see a change in character in the markets that would favor the precious metals (esp. gold and gold miners) and disfavor the stock market.  I believe it tried to happen in October, but this impulse was buried by landslide of policy maker jawbones and actions.  Today, it feels like the same thing is again trying to happen.  Like the US stock market above, the precious are at a decision point.

Summary 

The counter cyclical view has been making progress for months and now we have drawn closer to some important support levels for the cyclical stuff and resistance for the counter-cyclical items… HUI 210, gold 1260 and we’ll throw silver in with the counter cyclicals for the short-term… 17.50(ish).