alice

NFTRH; Market Update

We looked at the precious metals miner ETFs on Tuesday and the status there has not changed.  They are still below the EMA 12 & 20 but trying to hold the 50 day moving averages, which means they are still in short-term downtrends and intermediate up trends.  For my part, I added a couple items on downside activity (explorer/developer PG.TO just above its MA 200 & royalty/streamer SLW at its MA 50s) but also still hold the DUST and JDST hedges, as noted in the NFTRH 397.  This hedging, which sometimes proves unsatisfying could last hours or days.  As noted in the previous update, the struggle to hold the MA 50s will decide whether it will have been a quick correction or something deeper.

We are using the Yen as one marker on a potential USD-centric ‘inflation trade’.

The Yen is interesting as it started to break down on Tuesday but reversed upward on some hype about a delayed tax in Japan possibly calling into question of the BoJ’s intentions about further easing policy.  But the main thing to note is that while USDJPY can bounce further, perhaps to the weekly moving average, it is bearish on its intermediate trend by this weekly chart.

usdjpy.wk

Here is the monthly chart we reviewed several weeks ago in anticipation of a logical bounce area.  Sure enough, that is where USDJPY bounced.  This chart also portrays USDJPY as still in a larger up trend from 2012, so that is a caution to the ‘inflation trade’ scenario.  If USDJPY loses 105 we would be looking at a breakdown and a green light (by this indicator at least) on further anti-USD trades.

usdjpy.mo

Moving on, gold (daily) is so far holding the critical support area it would need to hold to avoid an express elevator down to the SMA 200 (1164) or possibly even a bottom re-test at 1100.

gold

The weekly chart we have reviewed for many months however, has made a nice touch of the key moving average.  We have made a big stink about the fundamentals taking a turn for the worse lately and they have.  But that is the point, things change and sometimes quickly.  Technically, gold is simply making a test that it was always going to make.  We’ll continue to track the funda situation but this is a classic retest and so far it is successful.

gold.wk

Silver daily is interesting as it has touched the projected support area.  It can settle further and our target ranges from 15 to 15.75.  But a lot of good corrective work has been done here.

silver

Silver weekly makes that point as well.  A near perfect touch of the EMA 55.

silver.wk

Finally, let’s get a look at the US stock market.  We noted the bullish fundamental inputs from the Semiconductor sector and if this economic signal is indeed the Canary I think it is, the play on the precious metals would be inflationary, not ‘economic contraction’ and/or deflationary.  But frankly, I am more interested in quality non-precious metals stocks at the moment (ref. FARO, IRBT, MDT, etc. etc.).

Those and others like speculations in DEPO, LSCC and HUBB are just my picks at the moment.  The point is that it has paid to not be an obsessed gold bug during this correction.

Nominal SOX continues to look bullish and it is also continuing to lead the broader indexes.

sox.ndx

sox

Weekly SPX is still on a moving average up trigger.

spx.wk

SPX and the 30/5 yield ratio have broken up and down respectively.  The Fed has regained the market’s confidence, which makes sense given gold’s month long correction.

spx.30.5

Gold vs. stock markets is still mostly in correction but not breakdown mode.  It is on the verge of breaking down vs. US, Canadian and Australian stock markets, however.

au.spx

Sentiment in gold and silver is no longer extremely bullish but is not yet bearish either.  Meanwhile, people are getting very bullish on stocks, led by our friends in the newsletter community.  Here is the latest Investors Intelligence data showing a big spike in bullishness.

st

Here is the general risk profile based on Sentimentrader.com’s aggregated data.

risk

I want to stress that the things keeping me neutral to bullish the stock market are what I have seen in the Semiconductor sector (bullish) and the technicals (neutral).  A bullish newsletter herd is a gathering contrary negative and Semi info aside, price and technicals are different from fundamentals.  If technicals break down again, the market would be ripe for a good drop as sentiment becomes over bullish.

Bottom Line

What I see above is precious metals still in correction, but at points that should hold if this was to be a healthy but relatively light correction.  Watch the 50 day moving averages in the miners and the weekly EMA 75 (gold) and 55 (silver) in the metals.  This is also the gateway to something that would be much deeper and more challenging to the still somewhat self-assured gold bug community.  Sometimes the best time to buy is when gold bugs are ready to hang their leaders from the yardarms.

It seems that any future appreciation in the precious metals could be led by silver as part of an ‘inflation trade’.  But this is not yet indicated by USDJPY nor gold vs. commodities (and silver), which have not broken down (although gold-oil remains very weak).  Gold is still in control for now.

The economy and by extension, stock market got a real shot in the arm with the AMAT report and Semi book-to-bill.  These are positive leading indicators.  I don’t think bears fully appreciate this.  But we can continue to gauge funda and technical as the two completely different things that they are going forward.

This holds true for counter-cyclical gold and cyclical stock markets (and commodities).  What’s more, we will watch for signals on inflation, which would be very key in determining where to invest/trade.  For now, the gathering over bullishness in stocks is worthy of at least a measure of caution as is the as yet not confirmed key support levels in the precious metals (gold EMA 75 @ 1197, silver EMA 55 @ 15.82 and HUI breakout support @ 200-211).