alice

NFTRH; TG Holiday Edge, Stock Market Strategy & HUI Status (high priority)

A reminder about what Rob Hanna’s historical data say about Thanksgiving week, per his latest post:

Thanksgiving Week Seasonality – An Updated Look

From 1960 – 1986 someone who bought Tuesday’s close and sold Friday’s close would have seen the SPX decline only 1 time. But from 1987 – 2017 there were 8 instances where SPX did not close higher on Friday than it did on Tuesday. So perhaps the edge became so well known that it was diluted by front-running.

To determine whether the Wednesday – Friday Thanksgiving edge may have been front-run a particular year, you could examine price action. I have repeatedly found that a market that is oversold going into a strong seasonal period will perform better than a market that is overbought going into a strong seasonal period. A very simple metric that could be used in this case would be to see whether the market closed in the top or bottom half of its intraday range on Tuesday of Thanksgiving week.

Rob is managing very short time frames here; day trader stuff. But the market has met the criteria for the TG week Wednesday and Friday seasonal. My plan is to sell the bounce if it plays out (or sell a breakdown below the October low).

Beyond that, with all due caveats about holiday interference with normal market functioning the plan is to await a continued roll over. If a bear market or bear cycle (primary target is after all, only to take back the Trump rally to SPX 2100-2200) is in effect, cash (SHV) or short-term Treasury bonds (SHY) will be my primary position, while continuing to slowly build up holdings in relative quality gold mining stocks.

But for those interested in shorting the market, a bounce would be an opportunity for that too. I have been holding SPY due to the chance of a seasonal bounce (in hindsight, obviously not a good plan) and want to unload, and would like a nice upside move and short setup potentially for an eventual ride down to the above noted target.

So the first objective for SPX would be to fill yesterday’s gap at 2690. The next objective would be to test the SMA 200 at 2760. The SMA 50 is declining sharply (currently 2804) and could offer yet more resistance if a bounce were to get really frisky.

Beyond that the reason I’ve firmed a bearish view is because the pattern that caught the eye of this man who stares at charts has been wiped out. Had a right side shoulder been made, the measured target would have been to new highs around 3000. Now, this mess is in a test of the lows stance with resistance at two key moving averages, with the SMA 50 sloping firmly down and the SMA 200 starting to turn down.

While the negativity has been sufficient to launch this market to a significant seasonal rally I don’t plan to to be greedy in unloading SPY. I’ve been waiting for a bounce to do so and the TG week seasonal may be an opportunity. Generally, unless SPX breaks and holds above the November high of 2815.15 the bear case is in play. Depending on the strength and duration or lack thereof of any bounce I’ll probably trade around the seasonal a bit, both long and short, while looking to position short for SPX 2200, buy gold miners on opportunity and as usual, keep cash equivalent levels high.

spx

As for HUI, from yesterday morning’s update…

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

Well there it is, a short-term gap fill and test of the SMA 50, with a hammer-like candle. Now gold stock traders know that this volatile sector does not usually follow nice, neat TA. But that is the short-term TA of it. The gap is out of there and that’s not a bad thing.

hui

More importantly than TA (and let’s remember that per NFTRH 526 the weekly chart of HUI remains in lockdown below the EMA 55) the fundamentals have started to come in line in a big way as our initial signs and clues have become fairly impulsive moves. Items like gold/oil, gold/materials, gold/stocks, economic signals fading, confidence by the herd likely set to wane and inflation expectations well tamped down now are in play.

If the fundamental backdrop works for gold in making it attractive as a safe haven, that attractiveness is leveraged by the gold miners, practically (ex: fuel costs down in relation to product) and psychologically (ex: ‘why is this sector firm or going up while my stupid FAANGs are going down every day?’ asks the conventional stock market participant).

It’s a process. But my job is to gauge a shifting of the macro, and the signals have only gotten firmer in that regard this week. If/as we shift counter-cyclical, cash is primary. But a counter-cyclical stock sector like the gold miners should do very well. For those who can stomach it, shorting the bloated US stock market could work well too. Meanwhile, I for one do not discount the ability of the bulls to get a big relief story going over the micro term (TG week seasonal) or to  year end (and Wall Street bonus season).

The latter would actually be my preference, in order to be able to position for 2019 with the holidays behind us.

In the meantime, can we get that elusive bounce going?

Happy Thanksgiving to my American friends.