alice

NFTRH; SPX/Gold Ratio… What If? (priority: high)

Reading Callum Thomas’s ChartStorm this morning something occurs to me that can benefit NFTRH and therefore me, and maybe you as well. Callum uses this chart to speculate that SPX may have much further to run vs. gold from a cyclical perspective.

He also notes another aspect we’ve covered, which is the high ‘beat rate’ for stocks this earnings season.

We had planned to gauge the tenor of the market’s reaction to earnings and to me it seems split. The market is really driving up the ‘beats’ and seems to be killing those that don’t beat or worse still, fall short. The result has been a grind upward this earnings season for the S&P 500 and a still intact ‘top-test’ scenario.

What I want to do, while we are still 100% on track to said top-test scenario is again acknowledge that there is a scenario ‘B’ in play, which is new highs and a target of 3000 on nominal SPX. I, and possibly some subscribers can get caught up in a plan that is playing out well, to the point where we begin to feel it is a fait accompli.

I want to stop that bus right here! While some make predictions I find it is in our best interests to have favored and alternate plans. Okay, so I don’t get to join the Guru Olympics. Fine by me. I just want us to end up on the right side.

While I think a macro disturbance is likely overhead by this chart and by other indicators that are fading the good times, SPX/Gold could spike to fill the upper gap shown below or it could just keep on going. Either way the bull would rampage, at least in the short-term. It is so important that we all realize that I or any other service provider is simply spec’ing out probabilities and projections. Reality will be what it will be.

It seems as though a perfect juncture for a market correction is fast approaching. We have noted that a strong USD need not be feared by gold bugs if it is attended by a stock market (and economic) rollover of at least a concerning degree to a majority. That would be an environment in which to buy gold and gold stocks. But what if the ratio and the good times keep on going? Gold bugs would have to wait… again. It’s as simple as that.

Bottom Line

The stock market is playing out nicely to our current plans. Therefore we have the benefit of asking ‘what if?’ while not under pressure but rather, while on plan. Stock market beat rates are going great and yet stock market momentum is starting to fade while certain indicators (ref. NFTRH 511’s Market Internals segment and the McClellan Summation Index in the Sentiment segment) are fading. Gold is out behind the woodshed getting slaughtered and the setup is in place for a contrarian turnaround event.

But – and this is a really big but – existing trends are still in place and change, by definition, has not happened until it happens. There is an alternate scenario. I look forward to fleshing out the incoming clues to further our existing plan or if need be, highlight the alternate view.