alice

Road Ahead: Precious Metals, Bonds & Stocks (near-term)

A look at the road directly ahead using daily charts.

Gold has been in a clear series of higher highs and higher lows in 2017. That is bullish. I’d expect it will make another higher high to keep the trend intact. We should also get some GOLDEN CROSS! bull horning in the media as the SMA 50 moves above the still declining SMA 200 and as noted in yesterday morning’s update, some noise about the long-term breakout from the falling wedge as well.

Do not discount the possibility that this rally in the precious metals sucks in the “bearish bulls” (gold bugs at heart who’ve been bearish lately) as one astute subscriber calls them, only to then begin a logical new down leg within the uptrend. Gold is fine, but all things in due time.

gold

Silver is much sloppier but in rising above the moving averages – assuming it holds the 17.40 to 17.60 area – I think it can get to around 18.60, the area that limited the last 2 rallies.

silver

Here is what is not happening with this rally; silver is not leading gold, aside from a very muted bounce.

sgr

A look at the weekly chart shows how furiously silver out performed gold from the 2016 low to high and it also shows the ratio approaching thick resistance, currently. While this may have a negative effect on the precious metals sector after its rally completes, it could also hurt the broad markets (ref. our recent Gold/Silver ratio and US dollar analysis).

silver-gold ratio

HUI had a big pop yesterday and as we’ve been noting, several large and small miners and royalty companies have exceeded their February highs. That is an ongoing bullish divergence in the sector’s breadth. But the HUI index, is at the declining SMA 200. Yesterday felt impulsive and to make things even more enticing for the “bearish bulls”, might not Huey break through here? It might. But the fact is that HUI is at a parameter of resistance. The next is the April high around 215 and then finally, the February high. So nothing has changed when taking this index at face value. Individual stocks will have to be treated as their own individual situations and I continue to think that they are a forward positive divergence.

hui

On to Treasury bonds, this week we get some jawboning from China and herds are getting nice and comfy in bonds, especially with the stock market starting to wobble. We have reviewed the gathering contrary bearish sentiment and CoT profile but markets, at the momentum of the herds, always seem to persist beyond the initial warning signs. So it is with Treasury bonds, currently.

Here is TLT which, like gold, is a risk ‘off’ asset (of much different characteristics). It too is exceeding the still-declining SMA 200. Volume is building and it looks like the gap at around 129 can fill. At that point, in my opinion, T bonds would be a short or an extreme ‘avoid’ and people might prepare for rising long-term interest rates (in my case by covering the Financials short, at least).

tlt

The US stock market has all the reason in the world to go down; over valuation per Yardeni’s home cooked global macro fundamental formula, post-2012; its recent conspicuous separation from the Citi Economic Surprise Index, recently burgeoning margin debt, the S&P 500’s elevated P/E ratio and whatever else bears want to come up with.

But the chart remains bullish and will continue to be that way until the SMA 50 is taken out for real on the downside. It is currently at 2381 and rising.

spx

The Euro STOXX 50 has just about met the SMA 50, which would be the 1st buy area for a Europe bull. However, let’s also realize that the April gap up can fill and still maintain a ‘higher low’ in the 3425-2450 [correction, 3450] area.

stox

Just a few pictures and perspectives for you to consider on the near-term. It has been an exciting week but as I let the dust settle in my own mind I wanted to give you a calmer picture of how things are stacking up. We may indeed be in a 1999-2001 style transitional period on the big picture, but first things first; the daily technical situation will have its ups and downs.

I am a gold bull at heart (and holding the real thing). But practically in the casino, I am a profit taker, risk manager and ‘steady Eddie’ sort of player. While I may not take profits on some individual miners, I will try to protect them through hedging if this rally gets hysterical with “bearish bulls” getting gung ho. Meanwhile, beyond any coming reactions the gold sector is slowly making some positive strides (especially where those positive divergences in individual names are concerned) with the ultimate goal to confirm new trends and do more holding than trading.

As for the stock market, I am going to watch individual charts along with the index views and take it week to week. As an example, PNR annoyed me yesterday in dropping further than I’d have liked to have seen per the big picture breakout scenario we’ve been following in the ‘Notes’ segment of the weekly reports. But in holding its daily SMA 50 I want to let it prove to me it will go bearish instead of panicking about it.

Generally, I am in no mood to give back profits from 2017, unspectacular as they have been so far. Considering the late June seasonal (weak, on average), risk management across all sectors and assets is back in play; especially if our view of USD finding support proves out.