NFTRH+; Machines Gone Wild, the Day After

Broad Markets

As noted this morning to subscriber R.D. who emailed talking about the rotation to value and how it appeared machine driven. R.D….

It does seem obvious to me that you have to pre position your value bets for the unpredictable day that the machines change their minds. 

Me…

EXACTLY. It felt like the damn machines to me too. Pre-programmed for covid.cure=rotation.to.value

I had just on a hunch bought CVX and XOM last Thursday preparing to be dumb. But the machines made me smart for a day.

R.D. wonders whether yesterday was the first move of a new process. I do too. It was impulsive which, pending any backing and filling, could well have been the ignition.

NDX/SPX and IGX (growth)/IVX (value) are both in position to roll over but importantly, have NOT rolled over yet. Meanwhile SOX/NDX and SOX/SPX each touched new highs before recoiling, in-day.

People think of the Semis as Tech, which they are. But Semi cycles tend to lead the economy, which makes them indicators of all the cyclicals that would follow (all the stuff that was impaired by economic shutdown). Those would include airlines, industrials, energy, etc. Also the banks, which benefit if/as long-term yields rise during reflation.

As noted for the broad markets over the weekend, follow-through is needed for the long cast aside cyclical/value items. They have not yet escaped downtrends generally, but going forward we’ll see if the machines meant business or were just at play for a day.

Precious Metals Pictures

HUI/Gold ratio held up just fine but remains in a down-biased bullish consolidation.

HUI/SPX ratio has finally dropped to a definitive point where you can call it a viable low, at the up trending SMA 200. Could it be that simple? Could be. But we are allowing for the indignity of a break through it as well. Only if the ratio were to take out the June low would things start to get concerning from a macro perspective.

I put a lot of importance on the Gold/SPX ratio as a macro driver for the miners. It’s at a support point but the gap yawns. The gap could provide support or beg to be filled. Either way, the fact that gold stocks are out performing gold is important and will be important to maintain moving forward. Per the first chart above the HUI/Gold ratio would remain intact even with a test of the up trending SMA 200, as per HUI/SPX.