Please excuse the crudity of the title, but it’s how I see things at the moment. I wish I’d seen and considered the VIX signaling a little sooner and had time to do more cash raising before I had to leave my office (I’d done a fair bit while markets were positive and more at the end of day), but that’s the markets. The point of the VIX update was for us to realize that a potential bear signal was still in play as bullish market participants were feeling pretty well gratified (myself included).
The hit came and it whacked the miners, Tech and reversed some of the reflation trades in-day. It also put a bearish engulfing candle on the primary party-goer, the TSX-V.
This came as the USD held support after faking below it. Maybe it’ll lose that support tomorrow or maybe it’ll turn, burn and bring the Gold/Silver ratio with it, reversing the potentials we’ve noted for the reflation stuff. It’s one in-day move in several markets. Could be nothing… could be something. When considering the VIX situation, it feels to me like something. But I’ll remain open minded.
SPX filled its immediate upside gap and reversed to red. Dow faked above and reversed back below its SMA 200. NDX and SOX put in big bearish engulfing candles as with the TSX-V. Let’s remember that in and of itself, a bearish engulfing candle need only have an effect for a day or two. So while this may have been a kick off to a summer bear phase, it may also only be a blip. We’ll find out soon enough. Of more importance, in my opinion, are the USD and the VIX.
As for the gold miners, they of course were not spared the hammer. The more speculative end of the sector (stocks in the ‘TSX-V’) could get some real pressure as many have been going off like bottle rockets lately. But if a wider stock market correction ensues we’d look for the gold sector to see improvement in the macro fundamentals once again, as in the spring.
The Gold/SPX ratio has not yet broken its consolidation and we want to see that to signal a clear next leg up in the sector’s macro funda.
Interestingly, unless silver put on a real head fake it is becoming more constructive vs. SPX.
The Silver/Gold ratio closed the day still in a constructive stance. Was this the end of the up move or just a blip? I cannot answer that. But if silver does continue to lead gold and both of them lead the stock market I don’t see a problem with the precious metals at least, and possibly other commodity areas.
The HUI/Gold ratio also got whacked but remains in an uptrend above the SMA 50. As it stands now it is fine. It’s a reaction.
Here is the daily chart of HUI from NFTRH 611. Today Huey smashed initial support, which we noted as comfort support. More important support is lower at the rising SMA 50. So consider HUI at initial support but with the violence of today’s market reversals the odds that it may get a test of the 280 area have increased markedly.
Okay, I’ve updated you to death today, starting when things were fine and dandy, continuing through a concerning VIX signal I saw in-day, and finishing up after the fallout of this active day.
I am going to have a difficult week with another appointment on Wednesday and a road trip on Thursday and Friday. So communication may be sparse after tomorrow. Please let me know if you have any questions about points that may be unclear.