alice

NFTRH; SPX and HUI… One Way or the Other (high priority)

Not being a bear trader (in my opinion that’s a certain type) and not having the time or inclination to babysit a net short portfolio (as a full time weekend worker, I have to squeeze in a life too, during the week) by watching the market all day I have to basically illustrate what I see with the market and make the best of it from the perspective of my circumstance, and assume you are able to make the best of it too from yours.

Dividend-paying T-Bills and short-term T-bonds are my preferred way to go. Can’t lose, at least in the interim as markets shift and modest income is collected. My goal is to ride a small cyclical bear market to SPX 2100-2200, but first the pattern has to resolve on SPX. The symmetry of the right side shoulder to the left side held me back from getting beared up over today’s loss of the SMA 200 (for the 2nd time).

Indeed, I even started a position in SPY. But if this becomes a failure that position goes out the window and SPX 2100-2200 comes to the front burner.

Now, let’s end the discussion by a faulty trader and begin the discussion of where the real money could be made, for we unaccomplished bear traders, anyway.

First, a look at the putrid chart of the Gold Bugs index. As noted previously, the pattern targets long-term support around the 120 area.

There is a possible echo of Q4 2008, when the miners went down first and hardest and then the broad market followed. If that is what is happening now it’s been in super slow  motion because the miners have been declining since 2016. They are nowhere near the value trap they were into 2008.

The other echo could be to 2000, as we reviewed a couple of weeks ago in NFTRH 523. That is the analog where SPX failed an upside test of its breakdown below the SMAs 50 & 200 and upon that failure, HUI made its final bottom. Here again is the chart. Interesting how that happened in November.

It was surely no joy ride as HUI plummeted to its final low. I clearly remember it not being a joy ride in 2008, when I was buying with both hands and having them severed routinely. But here is where the big picture thinking comes in. Those buys worked out incredibly well because I had the commitment of knowing I was buying real fundamentals. First the pain, and then the gains. Although this time I am attempting to take minimal pain because the traditional running of the gold bugs always seems to take longer than you think it will. Regardless, a failure by the stock market would be a big check in the miners’ fundamental column.

Bottom Line to this update is that while the bears will have fun first – and I would hope I could participate in that once I get this confounded would-be bounce pattern off my screen – and traditionally Treasury Bond and US dollar bulls get the bid first, the best bid may yet be out ahead in gold stocks. But first they have to bottom. If SPX fails to bounce here we could get mass recognition about a failed stock market sooner rather than later. And with that the next bottom in gold stocks could be the bottom, if 2000 is an accurate guide. Meanwhile, a heaping helping of patience is recommended. The miners are not yet oversold enough.