To answer the title’s question, it feels climactic, with crude oil now leading the charge in the Bear Olympics race to the bottom. -24% in a day. That is breathtaking. ‘Opportunity’ is a wide target and it may mean today or it may mean generally, with patience and discrete asset selection. But we’re in motion and that will eventually bring opportunity.
Gold is doing what it is supposed to do, which not so much rise as retain value and rise hard in relation to cyclical and risk ‘on’ assets. Silver is doing what it is supposed to do in this deflationary event, which is come under selling pressure nominally and decline vs. gold. The miners? They are stocks, and so I’ll be prepared for them to feel the pressure too. The US dollar, which unlike 2008 is not the beneficiary of the global deflationary pressure is tanking and would now finally take out the June low and set a downtrend.
What is happening in macro markets is improving the fundamental and value proposition in quality gold mining operations by leaps and bounds. Gold vs. cost inputs (like oil), gold vs. general commodities, gold vs. currencies… it’s fundamentally bullish for the miners. At some point funda will marry price unless the world is ending, which it isn’t.
SPX is projected by the futures to open at around 2827, which I have marked up on the weekly chart. It’s a marginal new low, which would be normal for a retest of the lows of the last 2 weeks. Is that good? No. Could it bring a climax? Yes. Am I going to buy stocks hand over fist to support that view? No.
I have gold stocks, the fundamentals for which are improving rapidly. But depending on how today, tomorrow and this week go, I’ll keep an open mind to all outcomes, including the prospect of a big stock market reversal and relief bounce. But for now, it’s gold stocks, positions in a few liquid names and high cash levels. I wish I were the type to be short a high risk (both ways) market. But I am not.
It is not shown on this daily chart but the green support line touches the top of the pattern that led into and back out of the Christmas Eve massacre of 2018. You can see its right side from February 2019. It is a valid support area and it needs to hold or we’re talking about a potential crash well beyond this little take-back of the goofy post-Turnstile rally that happened on a poor sentiment profile.
