NFTRH; SPX, Gold Miners and more

Yesterday’s projected open for SPX during pre-market was 2827. Today it’s 2850. That was a lot of noise and angst for going basically nowhere in the last 24 hours.

Weekly RSI is now as oversold as it was on Christmas Eve 2018. But this is a different animal. That event had been rolling over for several weeks and then had a final capitulation and washout. This one gapped down from near all-time highs into the ‘crash’ that is scaring everybody now. It is a flash adjustment and the snap backs are going to be violent.

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I am trained not to respond to fear as the herd would. Managing risk? Oh yeah, massively. Afraid? No. In fact, I am seeing this more each day as opportunity being presented. The variables to that are in where the opportunities will be best, when the inflection points will be, etc. That is where I, the faulty executor of the analysis (like most faulty humans) come into play. Mistakes will be made but risk will always be managed first and foremost.

The market is bouncing on Fed stimulus hopes according the blurb on the lower right side of my Investing.com screen. That is just media assigning a reason for what the market would be doing on its own. Today the market supposedly decides that the stimulus that was known to be coming since well before yesterday will have a positive effect, but yesterday it was Armageddon 2020? I don’t think so. Those headlines should be tuned out, as should the COVID-19 spread counts and death counts.

The chart above shows 2950 as the first key hurdle for SPX to clear. This chart from NFTRH 582 created back in December shows that we had this pig set up to top out at one of our upside targets (3200, 3300 and at an extreme, 3500) after a roughly equal rally to the December 2018 mini crash. Now it’s back to the bottom of the mid range zone (shaded blue) and preparing to bounce.

On the daily chart SPX aims to take back the support from the top of the pattern coming out of the Christmas Eve 2018 mini crash. Per the first weekly chart above we noted 2950 as the first key resistance area. After that would be the area from the gap at 3000 to the 200 day moving average at 3050. Note the little positive divergence on RSI & STO.

If SPX is unsuccessful in taking back some meaningful resistance parameters this monthly chart, also introduced in December in NFTRH 582, continues to ask about some unfinished downside business.

Personally, I am feeling un-bearish but am tempered by my wildly successful 2008 experience because it was very painful before it was proven successful. I am trying not to buy as many falling knives this time in the gold sector and am in fact using this correction to consolidate down to the most core positions, adding to them while culling out the riff raff (2 riff raffs remain, NGD & AKG) if they go the wrong way in the short-term.

Miner prices will do what they will do during this event. But using this chart of the gold/oil ratio as one example, the fundamentals are on steroids as gold’s real price (vs. commodities) skyrockets. We used similar charts in Q4 2008 to gauge that coming opportunity. This situation in a sector fundamental is more extreme.

While the ratio of gold vs. broad stocks (what I call a macro fundamental) is much more tame looking, the caution point that this chart had begged has been completely erased as HUI has eased, Gold/SPX has risen and the two have met to eliminate the divergence that was similar to the 2016 divergence.

A weekly chart of the HUI/SPX ratio shows an uptrend since 2018 with a series of higher highs and higher lows. I have little concern about the miners from a fundamental standpoint as they get tossed to and fro with the greater markets. What we are watching for is when the average participant will notice gold stock out performance to broad stocks. That could take the sector out of our hands and put it into the hands of the animal spirits.

As for the regular stock market, I added Healthcare yesterday and also got rid of the last of my smaller stocks, story stocks, etc. when their charts did the wrong thing. I am holding large, liquid items like QQQ, GOOGL and AMZN. But folks, it is not as easy as simply hunkering down for a bear market. The panic in play now will bring extreme actions from the Central Banks and I don’t know about you but I personally cannot quantify what the results could be.

The inflated souffle’ could drop and never come back or it could use this event as a massive sentiment burst to the upside (the Fed is cheapening money, after all). Keep options open.

By the end of the update I notice that SPX has shaved 30 points off of its projected open.

By the end of my proof read (hopefully not leaving too many typos) it’s taking some of that back.

Ah, volatility and panic.