NFTRH; Market Update… US Stocks & Gold Stocks

US Stock Market

SPX has now hit and exceeded 2100.  This was the rough measurement of the ‘W’ pattern and with a +/- tolerance, the general upside limit of what could be considered a ‘bounce’.  Several weeks ago in one of the weekend reports we noted that fewer companies were warning against expectations heading into Q3’s reporting season.  Add in the reduced expectations, the unsustainable bearish sentiment and Mr. ‘W’ pattern here and well, it is not so surprising that SPX has attained these lofty heights.

spx daily chart

Sentiment is gaining momentum to the over bullish side as well and risk vs. reward is fading fast for the bull case.  In late September on the downside re-test, it was stellar.

But one thing I cannot reconcile if I want to go actively bearish is all the bottoming (bounce) patterns we have seen in various stocks and stock markets.  Last week NFTRH+ reviewed them in GS and BEN.  This week we reviewed them in DXJ and FANUY.  Then there is the Russell 2000, which crept above 1180 yesterday.  As noted in NFTRH 367, if a break above that level holds, RUT could pop to the high 1200’s in a big catch up move.

So what I want to do is see these bounce patterns either get expressed toward targets or fail before taking a net bearish stance.

Gold Stocks

HUI did not hit the target zone before reversing and bouncing a bit yesterday.  Gold bugs may get excited about the gold stocks leading gold (which was down yesterday) aspect, but these one day wonders are just that.  Can we at least get a trend of a few days?

hui daily chart

In short, I don’t trust this yet because even during bull markets in this sector the corrections usually don’t just conveniently end after a few days of relatively moderate downside, right at or above a target you have laid out.  So in the event that it is not different this time, we will keep on looking for 115 down to 110 and we will remain irked by the state of gold and silver’s Commitments of Traders and say “show me” to those who would say the CoT could be fixed in just 1 week.

Gold and silver are down slightly in pre-US trading.  If the gold stocks make a second day in the green we can start to take note, given that gold and silver are nearing reasonable pullback targets.