NFTRH+; Update

Here’s an in-day update that is hopefully coherent, given that I’m doing everything in real time. I’ll post it first and edit it second.

It is not lost on me that the 30 year yield is approaching the 1st (but not likely last) caution zone of 2%, where we had projected the potential for some turbulence. Assuming the general rally continues beyond any disturbance that may (or may not) develop here, the ‘out of the pool!’ point as I see it is the red line limiter, currently 2.7% and dropping (rounding it to 2.5% considering its future projection).

The yield curve continues to steepen and risk is of course, high due to crazy over-bullish sentiment.

One thing I don’t like about the gold/precious metals correction today other than the obvious short-term pain is that the PMs often lead the pack. Gold bottomed first earlier in 2020 and the other stuff followed. So if gold and silver get clubbed here beyond ‘normal’ pullbacks and get technically broken (not yet), it is an eventual warning on everything else as well.

Also today SPX got within 25 points of its measured target. I am so tempted to buy volatility or short something, but am for the moment holding off, raising cash and trying to be balanced within sectors that make sense.

Here are the mostly still bullish sector charts for the US market.

As for the precious metals, here is the state of the situation.

HUI looks pretty heavy at the moving averages. I have been taking back positions I was out over my skis on to raise cash until this decides between a hold here or a renewed drive to the 2nd target of 260 +/-.

It does not feel like such a great thing at the moment but the HUI/GLD ratio is hanging in there so far.

As for gold, well now we know the result of that unpleasant CoT situation we reviewed in NFTRH 636 last weekend. It’s a good old fashioned dope hammering. Those who were aboard the last bull market remember these events all too well. The bull market selloffs can be more brutal than bear market selloffs. The test of the SMA 200 is on.

A subscriber advises that CNBC is gold prognosticating thusly and asks me for comment this weekend.

“Democrats’ control of the U.S. Senate has fueled hopes of large stimulus measures, underpinning gold’s appeal as an inflation hedge. But higher inflation bets and bond yields have also bolstered Federal Reserve officials’ hopes that their new monetary policy approach is taking hold. If the Biden administration is able to push through a significant fiscal stimulus, that will push yields higher and could force the Fed to look to tighten policy earlier than expected, clobbering gold, said Michael Hewson, chief market analyst at CMC Markets UK.”.

Gold as an inflation hedge is mostly a canard. Inflation drives prices of other items (incl. silver) up higher and when inflationist gold bugs start selling, boy do they puke.

First let me note that this weekend it is road trip time again (bringing daughter back to NYC after a nice long stay with Mom & Dad) and NFTRH 637 will be shorter than usual, although I’ll hit the important issues. Secondly, it’s CNBC and it’s someone speculating and drawing conclusions that are like throwing darts at this point. If the reflation succeeds into a new and grand economic cycle, gold and the miners will be sent back to the hell they came from. We are far from any confirmation of such a thing right now.

But that is the reason we are using the chart at top. It is especially good at predicting when the Fed will go hard again. Fed risk has risen, but it appears there is plenty of leeway to a dovish Fed as well.

Let’s toss in the chart of silver, which has taken the hit all the way to the SMA 50 as we noted possible in this morning’s update. It’s not the preferred outcome, but it’s not broken either. The precious metals are on the verge of going abnormal and are no longer comfortably in short-term correction mode. But the last bull market had these events periodically. This is where you get the gold bug generals screaming to the troops about how “they” attacked gold (and silver).

As for personal portfolio management, I have been looking for excuses to do some selling to get back in balance and unfortunately that excuse came in the form of big red candles today. If you were with us all during 2020 you remember some days like this along the way to a very successful year. This year will be completely different, but the hits come and the need for balance and risk management is pretty constant.

See you Sunday.