Market Update

US Stock Market

After being out for much of the day I returned to the same old, same old.  i.e., a market whipsaw.  This time around the upside parameters are at issue, whereas on Monday it was the bears getting whipsawed.

So the market went up and then reversed back downward today just to keep everyone’s attention.

What I don’t like if I am a bear:

The Russell 2000 is still above 1200 (Diamond breakout), the Banks are spiking upward with interest rates (after holding the critical bull market support parameter we’ve been noting) and the Biotechs (momentum leader) are fully intact despite some issues this week (ref. Gilead).  Also, as noted earlier, over bullish market sentiment backed off to neutral.

What I don’t like if I am a bull:

The in-day reversal back below resistance for the S&P 500 and the potential that this upside burst and over throw by other indexes is just a mirror of the temporarily broken January lows on Monday (before reversal).  Long-term I don’t like much about this market, though I remain net long through a few individual stocks and still primarily using high cash levels for risk management.

Conclusion

Still holding the SPXS leveraged short on the SPX (barring an end of day kick save back upward), and none too pleased with the whipsaw.  It makes me yearn for my old standby, which is cash, until gaining a better grasp on the market’s direction in what continues to be a series of jagged up and down swings; i.e. volatility that seems to want to make everybody nervous until a direction is finally chosen.

I for one continue to seek out balance.  A time will come to step further into a downside reversal scenario or an upside resumption scenario.  But as of 3:30 on Friday, it appears we are going to end the week with a still unresolved ‘swing’ market doing its thing.

Precious Metals

Gold is doing what it should do in a strong economy environment.  This is the unchanged view from early 2013 when we got the first inklings of the Semiconductor and coming manufacturing ramp.  Gold is counter-cyclical.  As for the miners, they are as well.  Their ratio to gold is holding up through this hit.  Remember, key support is HUI 180 / GDX around 20 and it is logical that they sell off on a strong economic report.

More detail will follow in NFTRH 329, but this correction is within expected parameters.  I hold my small group but am not adding until the dust settles (no pun intended).  Again, cash is a valuable tool here.

Economy

This is the key to an eventual bearish US stock market stance and bullish gold/gold miners stance.  ‘Jobs’ came in strong.  Machine Tools are weak, in line with recent decelerating ISM data.

We used a progression of Semiconductor Equipment → ISM/Manufacturing → Employment 2 years ago to gauge the prospects of an economic up-turn, and so it stands to reason that ‘jobs’ would remain strong even though one of the aspects that led future strengthening ‘jobs’ (manufacturing) is showing signs of fading.

But this economy is nothing if it is not financialized, i.e. heavily dependent upon policy and global money flows.  So it could be more complicated than simply looking to manufacturing to lead the economy down now.  Or maybe it is not so complicated at all.

We’ll review this weekend.

Meanwhile, here’s the Gold and Silver CoT data hot off the presses.  There is some improvement, and likely more happening today with the downside hits.  But it could take a while to reverse the trend that came to a bearish flashpoint recently.

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