NFTRH+; Pre-Market Signaling

It appears that the downward market reversal on Monday was another sentiment resetting micro twitch after all. As noted, these happened fairly regularly in 2019. Inflammatory stuff gets in the news, hits the market and the negative efficacy lasts a day or so. If this follows through it appears SPX and the Dow are still on the upside gap fill express. Those would be the respective gaps just below the all-time highs, where NDX is already flying around.

Speaking of Tech, you can see that the biggest bids are going to the biggest beat downs, the Dow and the Small Caps. Silver is again gaining while gold sits and waits. The leaders – like gold and Tech – lose the relative bid as the morning headlines are filled with COVID-19 vaccine hopes. 2020’s COVID jitters/relief are much like 2019’s Trade War jitters/relief. Insofar as I am involved with stocks I am not at all ready to give up on my Tech bias because thus far this is just a resetting of leadership, not an abdication of it.

Interest rates are bouncing with the relief and the inflationary plays would benefit over the deflationary/inflation neutral/defensive plays (e.g. Silver/Gold, Copper/Gold, Industrials/Tech, Stocks/T-Bonds, etc).

Copper/Gold is hanging tough in its break above the 200 day average.

Silver/Gold is too.

I worked us all over aggressively on Monday when first we noted signaling much like that above, then I saw a concerning signal in the VIX, which was just before a negative reversal in the markets, and wrapped things up with thoughts about how it may have been a negative sentiment micro-twitch instigated by the short-term news cycle. We noted that the reflation signals like the above were still intact. From the last update on that busy day…

I have been catching up with what went on in the last hour of the regular market session (while I was out) and I just saw a news item claiming that the markets reversed on COVID-19 fears and renewed US shutdowns due to rising cases. Okay fine, VIX and other sentiment indicators covered in NFTRH 611 certainly were not standing in the way of a market correction.

But considering the bearish engulfing candles (and their tendency of a 1-2 day efficacy) on NDX, SOX, TSX-V, etc. I would not discount that this could be jittery reaction to an inflammatory news item. Apparently there was a side of US/China tension in the news as well. In 2019 that stuff consistently reset over-bullish sentiment and sustained the stock rally.

So here we are. It’s a tough market on which to overlay a sensible ongoing narrative, with some indicators at odds and the news cycle aggressively driving short-term sentiment. The signaling is ‘bounce still on’ and let’s keep in mind that per several updates including yesterday’s, as long as this is the case the potential remains for an extended inflation/reflation play within an overall deflationary big picture structure (against which Central Banks continually try to inflate, but that’s a story for another day and another update or public article). The alternative is for the likes of Copper/Gold and Silver/Gold to fail, which would push out a greater inflation trade to late 2020 or 2021.