You can either hit the curve or you cannot. In this baseball analogy, a robotic and up trending market is like a fastball right down the middle of the plate. Very predictable and hitable. Outlier events that manifest out of nowhere are like change ups and inflammatory geopolitical events put ripples in the market; and what is a curve ball other than a ripple?
Some headline components of the stock market attained new highs recently but these highs were immediately reversed by the standoff of the belligerent otherwise known as the Trump/Jong-un war of words. Yesterday I took a look at the VIX in consideration of selling stocks I’d added for the expected post-anxiety bounce (per the short-term contrary bullish sentiment) or even shorting a select area or two.
Look at how badly volatility got hammered back down (daily chart). But then I took a look at a weekly VIX chart and decided that given the hysterics in play and the nature of previous VIX spikes and pullbacks, it would be best not to do anything, especially short just yet. I’d prefer to let moderate precious metals positions weigh against stock market positions (and high levels of cash which, if nothing else is a way to be long the still-favored US dollar bounce view), since they are setting up again as counter-cyclical, for better or worse.
But that was a short-term problem for the gold sector. If what went down on N.K. hysterics was due to bounce, what went up on those same hysterics would pull back.
Here is gold in real time, having retraced roughly half of the rise that came on geopolitical fears (never, ever… EVER a reason to buy gold in real time). 60 minute chart…
So this is actually a good thing for the precious metals. The longer they’d have pumped on geopolitical noise the worse the fallout would have been. I think gold can retrace the entire Trump/Jong-un pump into the 1250s, but even if it does, it would still be okay.
Anyway, things are back to normal and here comes Bloomberg to tell us the reasons well after the fact, as we needed to be ready for a bounce last week, not per Bloomy’s eye-catching headline this morning…
On a bigger picture, the market was thrown a fairly routine curve and I’d bet lots of players were able to hit it (as the VIX spiked in an unsustainable manner on the short-term). But this could also be the first ripple of more to come out into Q4 per our market pivot view. First I guess, the Billionaire Bears Club (including, horrifically for the bears, Dennis Gartman) needed to be cleaned out, as the Macro Tourist highlights.
Subscribe to NFTRH Premium for your 40-55 page weekly report, interim updates and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com. Also, you can follow via Twitter @BiiwiiNFTRH, StockTwits, RSS or sign up to receive posts directly by email (right sidebar).