NFTRH+; Targets Solidly Registered… Thoughts on What Now

Not only have gold and silver touched the target zones, they’ve smashed into and exceeded them.

Gold hit 1974 (target: 1940) and silver hit 26.27 (target: 24-26). Unfortunately, they did this overnight (for US and Canadian markets) and so any adjustments to be made upon the firm registering of targets may have to come on a day that silver is pulling back (currently -.65) rather than in the midst of blowing off.

It is Fed week and the markets appear to have fully anticipated the latest round of inflationary panic policy, which may simply be a continuation of zero rates as far as the eye can see or more monetary stimulus to come (along with whatever the government is cooking up fiscally). Regardless of the Fed trapped in a box, I don’t like FOMC week because it adds too much noise to what is a pretty clear situation (they are in desperation mode). Man, machine and media act as if the Fed actually has options and should be paid attention to. They don’t. They are inflating.

But our signaling on the macro shows the TSX-V ticking a new recovery high yesterday but entering a resistance zone (ref. NFTRH 613), copper looking suspect (currently 2.88) after failing to get through the key resistance at 3 (ref. NFTRH 613) and the Silver/Gold ratio in a high risk zone that includes the risk of turning the macro inflationary and the risk of failure of the inflation attempt (ref. NFTRH 613).

So these targets are in as well. The indicator markets have hit the ultimate levels they can hit without signaling a shift to a longer-term inflationary macro. While this could well be looked back upon one day as the moment the macro went sustainably inflationary, the risk of reversal is high by definition. That definition is the targeting that was laid out months ago as possible. It seemed more simple to plot targets then (i.e. hit targets, take profits). It never seems as simple once we are there.

Yesterday I hedged by shorting the Euro, which has the opposite sentiment extreme as the US dollar. People love the Euro now in the face of contempt toward the USD. Today I want to look for more hedges and/or do some more profit taking. I am trying not to over react to FOMC week and that is part of the reason why I raised cash last week; so as not to have to get overly stressed about it this week.

Bottom Line

It’s FOMC week and that is a time when market participants (especially the machines) tend to be hyper vigilant. There could a ‘sell the news’ event. There could be a hard reversal and selloff from our macro decision points. Hell, there could be a screaming rally as pure momentum has been in play and may not be exhausted (SPX still has the upside gap, HUI still has the upside target, after all). But risk vs. reward is in a whole other universe from where it was when silver crashed and reversed in March.

Precious metals players should realize that gold and the miners have been going in positive correlation with the inflated macro and the anti-USD trades lately. Silver’s post-March leadership to gold has been emblematic of that. Therefore, despite the fact that gold mining fundamentals will improve if a dis-inflationary or deflationary episode comes from this decision point, they would be subject to the selling of Wrong Way Corrigans of the gold “community”, which is most of them (the inflationist bugs).

I have been manufacturing and churning profits since the March crash and while remaining aware of tax implications in the brokerage account, will be open to more profit taking in the IRA especially. Also, hedging is an option, but that can be so unsatisfying if nice, neat plans like a macro halt and reversal at our indicator limits does not manifest in a conveniently timely manner. If markets keep going up, hedging eats away at you day by day. This is where I have to personally keep in mind that a lot of good has already been done and one way or another, maybe some neutral performance for a while would not be the worst thing in the world.

These are the things I am considering T-minus 1 day to FOMC.