US Stock Market, Precious Metals & US Dollar

The Semiconductor sector was very bullish yesterday and it is a leader.  SOX refused to break down and this relative strength now manifests in a partial market recovery pre-US open today.  The pattern measures to about 690.  Of note, not shown is resistance right here 650 at the current level that would be visible on a longer-term chart.  So while this looks bullish, a push through 650 that holds up would get SOX looking for 690-700.

sox

It would be difficult to imagine Semi’s rallying that high without the broad market tagging along to varying degrees.  Here we recall that the upside range for the SPX bounce has been generally 2000 to 2060, and that one who wants to position for a new bear phase can begin to scale in to short positions from 2020 to 2060 (mental stop loss above 2100).  This with the understanding that it could take quite some time to grind out a bounce failure and trade-able decline.

spx

Turning to gold, let me introduce you to Mr. 1180, which has been an upside target for some time now.  It is also a potential limitation area at the SMA 200.

gold

Gold starts to get bullish for real above the 1220 to 1240 range per the weekly chart.

gold weekly chart

Macro fundamentals continue to be ‘in process’ with gold still only constructive (as opposed to flat out bullish) as measured in major stock markets, confidence in policy making is seemingly eroding very slowly and yield spreads are looking constructive.

treasury yield spreads

Silver as well has come to the SMA 200, which has limited previous advances.

ag

Let’s over simplify silver so that we are clear.  It has risen nearly to a weekly moving average (EMA 55) that has contained it over the last 2 years of its bear market.  That is a point where profit takers take some profits and those managing what they think is a new bull market do ‘not chase’ and await pullbacks and yes, those who would hedge do so.

silver weekly chart

This weekly chart of HUI was created many weeks ago in response to some analysis that was going around selectively using a log scale chart (in support of bearish analysis) to show that Huey had lost the downtrend channel.  Not so said we, when viewing a more ‘honest’ linear chart.  This was in service to keeping a bounce scenario alive as HUI grazed the downside target of 100 (101+).

hui weekly chart

What it does show however, is the upside target around 150.  This is in confluence to the declining EMA 55 and the old ‘160 neckline’ that triggered the spring-summer hard down.

The gold and gold miner charts above show a stark technical image of what is just a bounce within a bear market at this time.  But even if this is a bull market, that is all they could possibly show at this time.  It is a bear market going by the charts.

But TA is only part of the picture.  The real nuts and bolts of an investment case are in the macro and sector fundamentals.  They are in my opinion ‘in process to a positive environment’ and ‘much improved’, respectively.  So I ask readers not to view TA as a be all and an end all.  It is great at telling us what has happened before and what the trends say might happen again.  But it is clueless when it comes to fundamentals.

Speaking of which, I would imagine that the CoT and sentiment data have become more contrarian bearish this week, and it was well on its way to that status last week.  Negative reactions can and will come about, but if/as the fundamentals firm up they can be considered buying opportunities.  A reaction in HUI, whether it were to begin now or after a rise to the 150’s, could drop the index to the August high around 130 down to 115-120, where a daily chart would show more support.  These could be areas  where ‘buy the pullback’ folks would start to do their thing, assuming the fundamentals are still on track.

But the bottom line is that HUI is and has been targeting 150’s.  It remains to be seen whether it can do it all in one lunge or after a pullback.

USD made the lower low yesterday, and the whole world sees it.  I don’t want to minimize it because that is a lousy looking chart.  If this follows through, the US dollar would probably decline to the high 80’s while the Euro bounces to its long-held target of 120.  This could see a multi-month phase of strength in the items that were pressured by the strong USD.  One also looks way ahead and wonders if a bounce in US manufacturing and exports might occur and benefit those sectors temporarily (Wall Street is probably still factoring a strong dollar when analyzing industrial and export companies).

us dollar daily chart

I hope this review of certain items provides a little perspective as we move forward managing events in what ever ways work best for each of us.  A bottom line status of each is as follows…

  • US Stock Market:  Bouncing, but in a long-term downtrend now.
  • Precious Metals:  Macro and sector fundamentals firming, still in a technical bear market, which it would be even if a new bull market is beginning.
  • US Dollar:  Made a lower low to September, which if not a whipsaw move would probably target the high 80’s (and Euro to 120 target).