Below is a somewhat scattershot update written completely off the cuff by a market participant who went out at 9:15 and got back in at 11:15 (ET). Please take it for what it’s worth as I try to gather my thoughts. We’ll smooth things out in NFTRH 485 on Sunday.
The precious metals are getting hammered with everything else today and that makes sense because they have been in the party for the seasonal play, not locked on the outside looking in. In other words, they have been part of the ‘inflation trade’ and so, the inflationist gold bugs have got to be addressed.
However, it may be time to focus on the gold sector now because its best role is going to be when it gains the counter cyclical advantage as cyclically positive cost input commodities (sector fundamentals) and cyclical stock markets (macro fundamentals) top out in relation to gold, if not nominally.
Rising yields, which are completely on our plan right now, do not have to be antagonistic to gold as long as the yield curve is steepening. The larger trend is still toward flattening but the 10-2 curve is still in bounce mode. That is logically coming with some bad stuff in the stock market.
Of course, our Semi indicators had already told us to be on alert for this market disturbance per a previous update. Here is the current state (weekly view) of our 2 premier Semi Equipment companies vs. their broad industry (Semiconductors) and tech. The trend breakdown continues.
Again, that is the most sensitive cyclical indicator I can think of. The sensitive edge of a sensitive industry. Its bearish message is being furthered this week.
Sure, I’ll look forward to charting bearish setups in the stock market when they come about. But just as with the Real Estate (IYR) short, I don’t want to talk about shorting a hard down. I want to talk about shorting the 1st big bounce as with IYR. Let’s let it breathe a bit.
Now, as for the counter cyclical sector, HUI, it’s gap fill time as we suspected when it showed unwanted weakness in testing 195 again. As of now I am holding positions because of the possibility of a changing macro and because of the long-term view (HUI monthly) that appears to be in a consolidation to the first leg up from 2016.
Moving on, TNX has gotten awfully close to the long standing target of 2.9%. So close in fact that it has got me a bit on tenterhooks. I droned on and on about the 10yr to 2.9% and now it is just about here and I think the ‘inflation trade’ could be blowing off now.
The 30yr is breaking out and has a ways to go before the 3.3% target. But targets are not gospel, they area plots made by faulty humans.
Regardless, the play is maturing and I have to make a decision about profit taking in the Industrial Metals. For now, I am holding them. But we are getting close to a time when hysterics about inflation are going to get louder than you can stand. While that may be the doorway to a great new inflationary cycle, it would also be a logical point for the whole thing to fail. Nobody is looking for deflation in 2018 or 2019, after all.