NFTRH; USD, Stocks & Gold Sector (high priority)

USD is breaking its very short-term uptrend this morning, meaning that it is currently below yesterday’s low and the daily EMA 20. US and some global stocks are pulling back from yesterday’s joy fest while precious metals are positive again, going anti-USD along with the oversold and bouncing commodity patch.

SPX gapped up on market hype but did not quite hit the key resistance area (top of a potentially bullish ‘W’ pattern). It may be a normal consolidation to be overcome during the trading day or it may pull back to fill the gap and test the SMA 200. Either way, SPX only goes short-term bearish if it drops below the SMA 200 at 2762. As a side note, if the pattern activates by getting and holding above short-term resistance we’d have to assign a measured target of 3000, same as the previous potential Inverted H&S that did not materialize.

A bullish stock market would not be in the best longer-term interests of the precious metals, which can rally with a global asset party but would likely need the party to end (or at least end in ratio terms as measured in gold) before a real, set it and forget it bull cycle can get going.

But it is interesting to note that gold is positive again this morning while SPX is negative. As for yesterday’s curiously low volume on this chart, I don’t know the reason (anomaly, data error?) but silver and GLD had normal volume on yesterday’s up day so I am not concerned by it. A realistic target for gold is the declining SMA 200 (currently 1262.11).

Silver closed above the SMA 50, which has been its resistance. MACD is sneaky positive and RSI is positive. Silver is trading at around yesterday’s high in pre-market and another daily close above the SMA 50 would be positive. Clearing 14.95 would set silver on its way to test the declining SMA 200 (currently 15.59).

GDX is also back above the SMA 50 and thus, constructive. It’s been dancing above and below that moving average for weeks now. If it follows gold and breaks the short-term trend it’d probably being going for a test of the declining SMA 200 (currently 20.83).

Bottom Line

There is a chance that asset markets, including precious metals, will party against a weak US dollar. An inflation (relief) trade of sorts. But the stock market has not generally undone its damage and yesterday’s trade hype and oil hype news was probably in the bag all along. In other words, market moves based on inflammatory news (whether bullish or bearish) rarely change and establish new trends.

But bringing it back to the SPX chart, the parameter is clear. SPX remains below key short-term resistance. A rise above that resistance and a drive to its target would wreck the weekly H&S top scenario we’ve (well, I’ve…) been theorizing on. A hold below resistance or a rise above that does not reach a new high (a target being just a target, not a directive after all) keeps the weekly H&S alive.

The precious metals have been expected to bottom sometime during Q4 and/or tax loss selling season. While gold has remained relatively constructive, silver and the miners have had funky and not bullish looking charts. But they are improving on the short-term and we have established markers for them to clear for a test of the SMA 200.

If the precious metals rally, they can rally hard. But we’d likely have to hold back on a real bull market view until such time as the stock party peters out again. Commodities and inflation signals after all, have been beaten down and are due for a bounce. The gold sector certainly can and likely would bounce with it. This could even be part of a very extended bottoming process and turn to a new bull. But we should do what has served us well all along and that is to be wary of the duration of any rally that occurs along with the cyclical risk ‘on’ trades.

If the precious metals continue bullish in the very short-term the initial targets for all items will be the declining 200 day averages. If the macro fundamentals are proper at such time (and stock markets weaken again) we can improve the view. If not, then that will likely be a sell area, assuming a rally gets going here.