The reason for the title of this update is simple; if that which has been very bullish is pulling back (Semis, Small Caps, etc.) and leading the broad stock market to a soft patch/correction/bear phase, then that which has been very bearish could stand to gain some relief. At least if the real or imagined laws of symmetry hold true. Remember, stocks are OVER bullish and gold/T bonds are OVER bearish, sentiment-wise.
With the FOMC coming up in 2 weeks to raise rates a whopping 1/4 point, the popular stories are that gold will be hammered (it went up after last year’s token hike) and that the T bond bubble has burst (it has not, the long-term trend is fully intact). Fine, but for each of these items, stock market weakness is a primary fundamental.
Now, pertaining to the gold sector, if there is to be a bounce we should keep in mind that the HUI has maybe 40 points upside within the ‘bounce’ parameter before it can change the daily trend to up. Would that not go well with a drop in the stock market that is just a healthy pullback to clear the manic inputs of the post-election time frame? It would.
So if a positive move manifests in the precious metals, I would continue to call it a bounce only, no matter how strong it would be, pending a change of trend and new macro developments which, in a high speed, information-infused market comes in more rapidly than it did in Grandpa’s time. But as most stock market items not called the Dow continue to weaken, I thought we should be aware that counter-trend moves could be at hand (stocks down within an uptrend and gold sector up within a downtrend). Trade (or not) accordingly.