alice

NFTRH; US Stocks and Gold Sector (not so?) Slowly We Turn (high priority)

[edit] In the time it took to write this update the Dow has sheared off over 200 points from my last check. As you will see below, we are drawing similarities to 2000 and in particular the downside leadership of Technology. This blurb was just viewed as a headline at Investing.com. The similarities of 18 years ago and today are interesting, to say the least.

Leaving aside global stocks, which are firmly trending down, the US stock market view has been presenting (to my eye, at least) short-term bounce patterns vs. longer-term breakdowns; the potential for the seasonal bounce to continue vs. a rapidly developing bear view beyond the near-term. Functionally for me, the bounce patterns have gotten in the way of a perfectly good bearish view and the seasonal has also complicated matters.

That’s my fancy way of saying that I have not (yet) distinguished myself in managing the market situation as I am less short and a bit more long than I’d like. On the plus side, cash is the great equalizer and it is and has been the highest priority all year long and that will not change any time soon, regardless of what the near-term holds for markets.

On to some charts, the right side of the SPX pattern is getting heavy. The gap was filled last week and yesterday provided no follow through under the weight of the SMAs 50 & 200, which are turning down and starting to turn down, respectively. I continue to have a healthy suspicion of short-term price activity however, because Thanksgiving week can be a bit funky. But my job is to follow the charts and this one is distorting the only thing it has going for it, which is that confounded bounce pattern.

Making matters worse, the leader (NDX) never really did put in a bounce pattern and is now on a  test of the October low. Which is happening well below the SMAs 50 and 200. Yesterday’s close below last week’s low was not good; not for confidence in a continued bounce. Can it bounce? Sure. But we should respect certain rules and that close is a bearish sign.

The leader’s leader was very heavy yesterday as well.

Here is how the SOX>NDX>SPX leadership progression is looking.

Big Tech continues to roll over in relation to SPX.

SOX tried to bounce in relation to NDX but was halted and reversed back to the intermediate (down) trend marker, AKA the 50 day moving average.

Gold is not blowing the doors off by any means, but it is grinding against the bear backdrop. That is what we would expect as US Treasury bonds get a better risk ‘off’ bid in these early stages.

gold

Silver has risen for a test of the SMA 50 breakdown.

silver

HUI probably needs to fill the gap and test the break above the SMA 50.

hui

Which leads us to again review what could be in play on the bigger picture, regardless of the short-term issues facing both stock markets and precious metals. To turn the macro counter-cyclical and to strap in for a longer-term bull view of gold stocks, these weekly charts (among several other indicators) need to break the downtrends and turn up. Q1 2016 made a big push in that direction, but then failed spectacularly. The ratios are bouncing but all are still trending down, long-term.

But as we’ve been parroting lately, change has to start somewhere and that somewhere would not be on weekly charts. It would be on the dailies. In NFTRH 525 we had noted that Au/Stocks was just pulling back to test the 50 day averages. It has since held that area and turned back up across the board. So far, so good.

And finally, let’s dig up the 2000 analog again to consider what probably needs to happen in order to strap in for a good, long gold stock bull view. In 2000 a major bottom was made in HUI as SPX tested and failed its breakdown from the 50 and 200 day averages. That was after Tech had topped out and begun its crash earlier in the year. Market participants had run to the ‘brick and mortars’ in the Dow and S&P 500 after having been burned by the Tech bubble stories of that era. When SPX finally failed, hope was lost and then there was gold’s stability, and leveraging that, gold stocks.

The process continues. While it is a grind, it appears to have a lot of rhymes with the 2000 time frame. Regardless of the holiday influenced short-term situation, the long-term macro situation continues to grind out potential for significant changes. That’s what the charts say. If they stop saying that I will stop saying that. Simple. :-)