Market Update

Admin Notes

  • Doing a freer flowing ‘market update’ segment mid-week works better for me than the more rigid ETF updates we had been doing and I hope it works better for you as well.  Personally, I feel more engaged when writing about what is ‘front burner’ as opposed to a long list of items, many of which were not a priority at any given time.  This way we can focus on what seems most relevant during any given week, with the option to include other more routine items like certain ETFs, if time allows.
  • I want to remind subscribers that NFTRH+ email updates are on an opt-in basis so that those not wanting extra information about trading will not have the extra inbox clutter.  NFTRH+ updates are always available at the website for your review.  If you would like them by email as well, simply pop me an email to gt @ biiwii.com.
  • Finally, I want to remind you that there will sometimes be public posts that dovetail with the work in NFTRH reports and updates posted at both NFTRH.com and Biiwii.com.  NFTRH.com is however, going to be more focused on protected subscriber content in a clean, ad-free environment while Biiwii is going to dial back on its ‘guest commentary’ intensiveness a bit and include more of my own thoughts and somewhat less formal analysis than NFTRH.  I am finally getting comfortable with how to distribute the content on two separate websites.  Keep an eye on them (RSS, posts by email, etc.) as your time allows.

US Stocks

Yesterday the media made a big deal about Yellen’s trip to Congress with all sorts of ‘what if’s’ like ‘what if she gives some Hawkish hints due to recent stronger econ data?’

What we got was a big nothing and a relieved market went up.  When reading the MSM we should always filter it with the idea that they’ve got to print something and they’ve got to come up with reasons – whether real or imagined – about why the market is doing what it is doing.

The market went up because it was bullish and above breakout support levels after the down day on Monday.  This ‘Yellen relief’ stuff is useless and should be ignored.  This morning’s headlines are all about Nasdaq 5000.  Since it is making news, here is the COMP with a measured target.  Of note, the 2000 high was 5132.52, which the MSM are beginning to amp up about.

comp

COMP is about as far from the daily SMA 50 as it gets so despite an RSI that can stretch a little further, it is getting over bought.

Folks, the market is too bullish… period.  The sentiment extremes we noted in NFTRH 331 have stretched further so far this week.  Of course, we have noted that this type of manic sentiment can go hand in hand with a market that is in blow off mode so the upside could continue.

But this is pure river boat gambling, or a game of Chicken or Musical Chairs.  I do not play games and intend to do more selling into this.  As noted at Biiwii in a post about Biotech yesterday, I have begun the process.  I’ll keep an eye on individual items to trade, but generally I don’t want exposure to what could eventually be a good correction.  I am not an investor in the Fed’s FrankenMarket remember.  That is my personal view.  Yours may well be different.

indicators

For further effect, here is the ‘Smart/Dumb graphic from Sentimentrader.  Risk vs. Reward is very unhealthy right now.

smart.dumb

I am not calling a top in the US market due to this data, but I am letting risk/reward players know that it usually does not get much worse than this.  I am going to stick with a ‘swing’ trading regimen and raise cash.  I am going to review everything for sale, especially items that are sensitive to the broad US stock market.

This is my regimen until the nature of the market changes; a swing trading mentality of selling high risk and buying low risk.  For all we know, this sentiment could get cleaned out nicely in preparation for final highs out into spring (ref. theoretical targets for RUT @ 1350 and SPX @ 2192 and higher).

Regardless of the bullish price activity, the short-term is not a healthy environment for a sustainable bullish view.  People are piling into Junk Bond funds again.  It is risk ‘ON’ out there… but for how long?

junk

Precious Metals

HUI hit a low of 182.28 yesterday.  We have been looking for around 180 as the preferred correction target.  GDX hit 20.21, with the 20 area being the rough target.  Let’s keep it simple and state that while the gold stock correction has allowance down to the HUI low 170’s, it is now a candidate to bounce at least, and to resume its upward rally at best.

gdx

While it fell further than was desirable (curling the MA 50 downward), gold is at support at 1200 and can bounce.  That is all that should be read into it at this time.  When we get a combo of excellent CoT configuration, price support and macro funda, we’ll build a bullish case.  Meanwhile, gold remains in a series of higher highs and higher lows (i.e. a still-intact rally) from November.  1167.30 is the key number not to be violated.

gold

Silver has the same basic status.  15.50 remains critical to a rally scenario.

silver

Bottom Line

Gold as measured in stock markets is obviously right back in the dumps, with the above-noted risk ‘ON’ atmosphere.  Gold is a risk ‘OFF’ asset at this time.  That should be a positive when markets turn.  Given the high risk (of correction) nature of stock markets right now we can watch gold and gold stocks for a bid.

Again, that is all I’d read into it for now.  But it is good to have this sector running contrary to the over bullish stuff.

Side Notes: 

PDAC is next week and I guess that is prime pumping season for mining stock promoters.  Personally, I completely ignore this promotional noise because I have a fairly good idea of what gold stocks I am interested in.  But I thought it would interesting to note the HUI with historical PDACs, assuming the trade show is always in March.

PDAC has marked some pretty important tops in the sector, so maybe it is better that the gold stocks have been weak heading into the show.

pdac.hui

Finally, the 10yr-2yr yield spread has bounced a bit as the market questions whether or not the Fed is going to be Hawkish.  A rising spread would generally be bullish for gold.  It remains in a downtrend but we should keep it on watch.

10.2