Market Update

What a week; and I am not talking just about the markets!  I spent all day on jury duty yesterday and by the time they finally unshackled me I saw just how volatile things had been.  I also saw that my ‘bounce’ gains had evaporated into the close.

Today was a little better schedule-wise, but I was only slightly less tied up.  The upshot is that it was probably for the best because not ghoulishly watching the markets all day has allowed me not to out think myself and by extension, not to send you information from a whipsawed market participant, which is probably about 99.8% of everybody right now.

After all the hoopla, not much has changed from yesterday’s pre-market update.  With regard to the S&P 500 we noted:

“1975 and 2050 are the key levels to watch on SPX.  This market only goes bullish with a rise above these two resistance levels and then the 50 and 200 day moving averages.  So, bounce aside, SPX is operating to a bearish plan.”

That is still the plan as the market grinds up and down on a daily basis.  Amazingly, as the MSM trumpets the “biggest one day gain since 2011” the broad US market is still below Monday’s high.  SPX currently sits at 1940.51 and remains a candidate to continue to bounce.  The trend remains up long-term and down in the short and intermediate-term.  While lightly playing a bounce, I continue think the next big trade may be to short (SPX 2050?).

Gold closed at 1124.80 (support is around 1120) and silver got hammered to below 14, closing at 14.08.  HUI is back to the lows at 105.  This gives me a chance to repeat again that fundamentals are one thing (and they are improving) and price/technicals are another.  In 2008 I bought HUI support at 250 and improving fundamentals.  I then puked in my mouth and bought support at 150 and compelling fundamentals.

If the market were rational in real time, it would have seen how bullish the sector was going to get.  But the market is often really dumb in real time.  Those of us buying 250 then suffered an immediate paper loss of 40% before a big time bottom and final buying opportunity.  Another quote from yesterday’s update…

“I ask you not to focus on the gold sector as if it is the only sector out there.  It is in a bear market and elements are coming into place for it to end its bear market.  But everything is in motion right now.  Traders sold the bounce and investors understand that it is a bear market and a process.  That is the story and I am sticking to it.”

I am not really trading the sector.  I was a light holder and a hedger and now, given the lack of hedging, am just an extremely light holder with more interest in the regular stock market, both long and short, because I can read its technicals better.  There are and have been no significant technical parameters for the gold stock sector to hold onto since HUI lost 160, which was our final straw for any constructive technical case.

As parroted all along the journey, I need either a complete and devastating wash out (current low target is HUI 75, who knows what happens when gold bugs spit the bit?) that comes with compelling fundamentals (ref. Q4 2008), technical readings I can make sense of and illustrate to you as implying more than just the likes of the recent ‘bounce’ or significant upside work that takes out key resistance levels.

Short of those things, I’ll take a try here and there, realize this is the sector that is probably going to set up to be a massive risk vs. reward play one day, and be patient.  If gold holds support 1120, the sector could just as easily put in a double bottom here as tank if gold loses support.  I am not in a gambling mood just yet (and this is where having actual metal is a psychological support to patience).

As for the US dollar, a post was made this morning showing the situation there.  Commodities just can’t get out of their own way, yet long-term interest rates zoomed upward today (making our TBT call about a week early) and the TIP-TLT ratio is spiking as well.  So the final ingredient would be for USD to get that memo and maybe commodities (and precious metals) can get relief.

tyx.tip.tlt

On a related note, rather than shorting the long bond I added the Bank ETF KBE with the thought that if yields continue to spike they can get a good bounce with the market.  It is just part of the group I am using to lightly play a bounce.  No commitments whatsoever in this market.

A few more charts while we are at it.

Today was bad for the gold sector, but gold is still elevated vs. SPX.  So the barbarous relic has not yet been banished back to the hell it came from.  Yet Au-SPX has not proven anything beyond what it did earlier in the year either.

au.spx

Silver vs. gold remains in lock down and despite any inflationary signal the bond charts above may try to instigate, the trend is still deflationary across macro markets.

sgr

That means players can play if/as they want, but the default position should continue to be caution and cash.