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Due to a holiday schedule (including a round trip to NYC and back this weekend) making demands of your letter writer, #736 and likely a few more reports into year end will be of the online posted variety.

Some people prefer this format, as do I. I also like the formality and structure of the PDF format. But posting at the website somehow allows me to get right down to the points I want to make more succinctly, I think because I just start writing, as I do a blog post (and just see what happens) rather than spending time  planning segments and managing style.

[edit, mid-Saturday] I’m probably half way done with #736 and I have to tell you that my tin foil hat is affixed firmly. I got on the macro and sank my teeth into some closely held and opinionated views. Some conventional market players might see this analysis as lunacy (I am a gold bug, after all), but I think it stands the test of scrutiny.

When I get in this mode the thoughts come quicker than maybe my ability to put them down on paper in the most understandable way. So please don’t hesitate to ask if a point I am making is unclear. Also, don’t hesitate to state opposing views if you have them.

Updated Market View

There’s not much to alter because we are on plan as follows…

US Stock Market & Economy

  • The Fed is following the script as it overcompensates against the inflation problem it birthed. Tardy to stop tightening as it was tardy to begin.
  • Inflation expectations and signals are declining, as yet only into a ‘Goldilocks’ middle ground, where disinflation is perceived as a good thing. Do you remember back in 2020 when inflation was considered a good thing because it was working for the economy? Well today with employment still firm and gas prices and other consumer signals moderating, the market can still choose to focus on intact but lagging economic indicators to put on a festive fairy tale combo of ‘Goldilocks’ (economy) and Santa (seasonal).
  • But first… on the near-term the major indexes are setting about filling the lower gaps we’ve been discussing.

SPX came a hair away from filling its gap at 3818, ticking 3828 at its low on Friday. This came after one of the upside gaps was filled on some news hype. With the decline and near fill of the downside gap on Friday I took lessons learned and covered my shorts on SPX (SPXS) and DJIA (DXD), while still holding Energy short (ERY), which was reentered last week.

spx, s&p 500, us stock market

As to the daily chart above, a clear support area was lost on Thursday and Friday as the gap magnetized the price in a southerly direction. It’s actually healthy technical market activity if SPX does not go on to make a lower low to the November 3rd low of 3698. Getting that lower gap out of there is a good thing in and of itself.

Ah, but the trends. They are down. Please keep that in mind if the party does indeed restart. What’s more, the major trend would still be down if SPX were to fill the upper gap. Despite a proximity above the 200 day moving average (black) that the media would probably trumpet, only a higher high (that holds) above the August 16th high of 4325 would seriously move the needle on breaking the bear market.

  • Meanwhile, with inflation signals fading hard another aspect of our theme is that ‘Goldilocks’ – if she is able to make a short-term comeback – would favor the beaten down, non-inflation (and interest rate) beneficiaries like Tech, Biotech, Growth, etc. over the ‘resources’ trades in commodity-related equities. Seasonally, it helps that these items have lost tax loss sellers a lot of money in 2022 and could be part of a post-tax loss relief trade again, if applicable this season.
  • The rally potential was for Q4 into Q1. Now we are looking to the end of Q4 and the question of whether SPX will hold the important low (3698) and if so, set about filling the upper gap (4219).

But here with all this discussion of Wayne & Garth (partying on), Goldilocks, Santa and seasonal cheer (not to mention tax loss relief and a bullish post-election cycle) it is important to keep in mind the trends.

Bottom Line

The trends the trends the trends. The US stock market is trending down in a cyclical bear. That’s a fact. Pertaining to rally potential, it would be counter (bear) trend until such time as SPX and its fellows take out the August highs and hold them (recall that we observed a bull trap above and below that marker in the DJIA and certain sectors). That’s also been a major component of our plans. Party on Garth, if you will. But party on with one eye on the exit because it’s still a technical bear market.

2023 is expected to morph from good cheer (Goldilocks) about the moderation and decline in public enemy #1, inflation, to something more virulent, like a deflation scare for example. If this plan needs revision along the way, it will be revised. I’ll own up to not having been on the right track. But why on earth, with a strategic plan working out so far and still making sense when projecting ahead, would we not just remain ‘steady as she goes’? Well, we would.

The plan is and has been Q4 bear market rally, very possibly well into Q1> moderation of inflation, viewed favorably by casino patrons (Goldilocks) > speculation about the hawking Fed backing off > and then a more uncomfortable decline in inflation signals which, given that inflation fueled the economy and markets out of 2020, would eventually turn virulent.

Even More Bottom Line

It’s likely not going to be an easy paint-by-numbers process. For example, it may well be that a routine bear market to address bloated valuations will end in 2023 from a normal level like our long held SPX 3200 (+/-) objective. But when I look at an indicator like the M2 Money Supply distortion, as per a December 14th post, I think about the ‘why’ of a still-hawking Fed long past the initial and clear fade in inflationary signaling.

m2 money supply

I also think about the Continuum’s break of a decades-old trend. That is another distortion. The yield spiked in unison with the sublime levels of inflationary monetary policy pumped into markets in 2020 (as per the above). Now the ‘dis’ side of the inflation coin is in play. If the ‘de’ side of flation engages the whole mess could implode.

Monetary policy drove distortions (e.g. M2) and the market has perhaps only partially addressed that, dragging the tardy but now hawking Fed along with it. Using the Continuum view, there is a lot of room to the down (disinflationary/deflationary) side before the 30yr hits 2.8%, which would be a very normal looking big picture test of the breakout in this macro indicator (break down in the disinflationary backbone that I believe has been the Fed’s primary lever to produce inflation).

30-year treasury bond yield (tyx)

So very roughly, these signals tell us that there are still major downside risks in play for cyclical assets, but also the potential for a new and potentially even more inflationary phase out ahead late in 2023 or in 2024 (if the breaking of this decades old macro situation holds up). That would depend on a lot of as yet unknown factors. For now, the view remains dis/de flationary pressure first as the current inflation phase unwinds.

While I see conventional analysis out there extrapolating the next Fed easing cycle from a continuum of them that played out over decades, the chart above, which has broken its long-term (disinflationary) trend, combined with the chart of M2 growth begs us to be open minded in not necessarily extrapolating the outcomes of cycles (and Fed responses) past to cycles future.

Current Big Picture Macro View

We are on a disinflationary easing off of a hysterical inflation phase, as anticipated. This ‘Goldilocks’ environment could easily morph into an out and out deflation scare in H1, 2023.

After that? Well, my late friend Jonathan Auerbach once offered the classic quote “it’s inflation all the way, baby!” in the midst of the Q4, 2008 deflationary episode and market crash (as we were both planning for the Fed to bring the monetary fire hoses). It sure was inflation all the way; all the way through 7 long years of QE and disgusting Fed Zero Interest Rate Policy (ZIRP), which enriched asset owning classes, punished savers and in my not so delicate opinion, furthered the political divides in this country by pitting working/middle/paycheck-to-paycheck classes against the asset owning ‘elites’. That’s my politics, folks. The Fed and a gold-free Keynesian monetary system is at the heart of the problem.

Indicators like the Continuum and M2 above could well be telling of an inflationary future. But a warning on that as well… they could also be telling of broken or damaged tools that the Fed will be loathe to use during the next deflationary event. When you think of the Continuum as a gauge of decades of gentle deflationary pressure and if you, like I, believe the Fed used the implication of deflation to inflate at every Keynesian crisis, well, as pertains to the Great and Powerful Fed (of Oz), we’re not in Kansas anymore.

Bottom Line

While there is likely to be a mix of deflation and inflation in the years ahead, a macro backbone has been broken. That, while not necessarily implying bearish or bullish, is a strong indication that things are no longer what they were for decades, into the 2020-2022 inflationary surge and pullback. Events since Q1, 2020 have blown out tools like the Continuum and produced grotesque monetary distortions like that implied by M2.

Ironically enough, if these distortions do keep the Fed in restraints (relative to previous episodes) at the next deflation scare, any coming deflationary phase could be made far worse due to the breakage of the these indicators.

The Fed is a Vampire, remember. At least in my macro view. You have to invite the Vampire (agent of inflation) into your house (a deflation stricken macro). But next time it is questionable whether the Fed still would have the tools necessary to fight deflation (or the will to fight it) with charts above implying a saturation of inflation by policy into the system.

Precious Metals

On that note of tinfoil hat goldbuggery, let’s proceed to a sector that would actually be enriched over time if the decades of the Fed’s Inflation onDemand were to end or be severely disrupted. See how this all ties in? I am not bullish on gold stocks because I am always bullish on gold stocks. I’m not. I am bullish on gold stocks now because the macro is delivering a potential path to such a view.


Always has value. Always, until some form of monetary stability comes along to displace it. Bitcoin? Ha ha ha. Sea shells? Maybe. A box of donuts? Maybe. But not probably. So I never sweat the price of gold but do get a little irked watching chartists and trading coaches out there micromanaging its price with little concept of value.

Gold is an immovable object acting as a barometer of the global monetary situation, which is filled with assets and speculations that are indeed on the move. When they move up, gold under-performs. When they move down, gold out-performs.

As yet – and in line with Q4’s ‘Goldilocks’ relief – gold is not indicating much of anything even as it maintains a potential constructiveness toward becoming technically bullish. It’s ratios to assets have started to move but even the ratios are still in transition. What’s more, an initial deflationary impulse could impair the price of gold (but not its value proposition), depending on how many inflation bugs remain to be flushed.

We’ve done a lot of daily chart management in recent reports and updates, most recently on December 15th for gold, silver and GDX. Let’s instead grab a look at the big picture monthlies this week.

Gold’s linear chart (my normal scale) made a thus far false move to a lower low and trapped bearish breakdown players before a significant rally of over 200 points.

It’s pretty simple, technically. Hold the lows of September-November or a drop to the low 1500s becomes likely because the price will probably not flash another ‘bear trap’ false breakdown. If we get something along the lines of a pervasive asset market Armageddon ’23, there awaits major support at the former bull gateway. Call that support 1378 (+/-).

gold price

However, the log scale monthly chimes in and says ‘whoa, easy on the fear mongering, bear boy!’ with an intact major trend line and channel (of sorts). It’s positive in that sense. But it could be negative in the sense that the gold price broke above a reasonable trend in 2005, got way overdone into 2011 and could be due for a downside rip below the channel if a law of ‘equals and opposites’ comes about and wants to put a downside distortion in place to mirror the upside one. 1378 viable after all? Sure. Viable, but personally not expected until given more reason to expect it (like a failure of the September-November lows).

gold price, monthly log chart

Okay, maybe this report format is good for some and not so good for others. It’s good for people who like to read a lunatic chart guy free associating interpretations of what he sees. :-) It’s not so good for the people who want a stable analytical source making a lot of clearly defined sense. Personally, I believe some indicators went over the edge of the relatively flat, linear world of market analysis that existed into 2020 and new frames of reference will need to be developed. And that’s not just…

…saying that. It’s sublimely distorted indicators like M2, the Continuum and oh by the way, the epic inverted yield curve saying that.

10 year - 2 year yield curve

Could gold take a hit from the implications of the still ongoing inversion before a 2023 steepener aids perception toward the monetary metal to the eventual tune of our 3000+ target? Oh yeah. But the flip side of that coin is that risk in gold is low because so many indicators have started to improve off of extreme readings like this. What happens when this one flips?

At some point, whether after an interim decline or not, I believe gold is going to rip higher in part because in a macro full of extreme and/or broken indicators, it will have less competition in the coming years (like from bonds for example, as the broken Continuum implies broken bonds, which in turn implies a broken safe/liquidity haven).

Gold Stocks

But here is the key as far as any precious metals trading/investing other than physical gold is concerned. Despite the risk of another sell down if a deflationary episode bites hard enough and abruptly enough, keep in mind that gold mining fundamentals benefit during a counter-cyclical economic backdrop and deflationary monetary backdrop. But also keep in mind that fundamentals rocketing higher in Q4, 2008 were met by crashing gold stock prices, all of which equaled major opportunity after the damage was done. It’s a lot to factor, but factor it all we will moving forward.

We have reviewed the HUI linear monthly chart often, and from it established a longer-term upside target of 500 (+/-) off the correction from the previous upside target of 375. As long as HUI maintains a higher low to the 2020 and 2018 lows the new target is loaded for 2023 or perhaps H1, 2024.

Here is the log scale version of HUI monthly, also showing an intact trend line. It argues that the bottom could well be in already. It’s indicative of why I am going to think long and hard before releasing too many gold stock positions in fear of a coming deflationary episode.

Technically: HUI is in a terribly volatile series of higher highs/lows from 2016.

Fundamentally: If/as a deflationary macro episode drives gold’s ‘real’ asset adjusted prices higher (regardless of whether gold bulls or bears, nominally in any short-term phase) the benefits will eventually flow through to gold mining operations.

hui gold bugs index monthly chart, log scale

Look no further than the Gold/Oil ratio and oh by the way, a whole macro host of other gold relationships! Yes, I installed an ‘!’. I am a chart nerd and the one below nerds me the hell out.

We don’t need many words, given all the words digested to this point not only in NFTRH 736, but all along the way. Suffice it to say, gold has again flipped bullish relative to stocks, had already made moves vs. commodities and check out panel #3… finally a substantive move in gold vs. the inflation expectations gauge. That’s extremely notable and needs to continue in order to engage our 2023 plans.

This is a macro transitioning toward the gold stock sector, both operationally and psychologically. It will be important to keep beneath the surface views like this in mind in 2023, because there is likely to be a lot of ‘deflationist’ noise out there trying to refute a pro-gold mining view, and that could include inflationist gold bugs as well (cue memories of mass selling in Q4, 2008 while the newborn NFTRH was getting extremely bullish (and suffering temporary wounds from falling knife buying).

So speaking as just another market participant, I am two things… 1) patient, even cautious and 2) revving up a bullishness that could go beyond anything since Q4, ’08.

Look at this progress…

gold price ratios


Silver has been our projected and actual leader for a Q4-Q1 relief party. But it is unlikely to be my personal favorite in 2023, if a deflationary phase ensues.

Again using a log scale big picture monthly chart, there is not much to complain about with silver, technically. Specifically, it’s got intact major trend lines similar to gold and HUI. I put an Andrews Fork in there as a TA novelty not to be taken seriously, but still…

silver price, monthly chart, log scale

In my opinion silver remains the wild card that it often is. If gold and silver bugs one day start to take preeminence (and center stage blowing their bull horns) silver could take a major rally into a future blow off. But in the here and now we have noted that silver finally took out the key daily chart resistance at 22 (+/-) and while that level can and probably will be tested near-term, as long as it or a lower support level (again, ref. the Dec. 15th update) holds, it is possible that an initial and significant rally has already begun.

Recall here that the seasonal averages for silver and gold bottom in December and on average bull until topping in February. Silver then drops before making a slightly higher top in April, while gold makes a temporary top in February before dropping and grinding out a tough and sometimes volatile uptrend for the rest of the year. So why don’t we distill the seasonal averages to a simple projection…

If the silver rally has begun in earnest, we’ll target the February-April time frame for its end. Maybe not an end to a bull market that may have begun in 2020, but prior to a correction that maybe you don’t want to be standing in defiance of.

silver price, seasonal averages

While we’re on the seasonal view, let’s check out that of gold. The recent rally activity sure is in line with the average of the previous 30 years. Not bad. By February let’s be on alert if gold/silver/miners are still bulling by then.

gold price seasonal average

Gold Stocks Bottom Line

The seasonal rally off of the Q3-Q4 base in the precious metals complex is intact. While the daily chart is not included this week, HUI (current: 221.96) needs to hold right here at a higher short-term low, or it is probably going to test the SMA 50 (211.14) and/or lateral/base support at 200 to 205. This is much like the stock market situation.

And that is the issue. The best gold stock phase is going to be when the sector is held as unique due to its unique and counter-cyclical fundamentals. The process, volatility and all, continues.


As usual lately, I don’t want to give too much import to a sector that is squarely in the firing line of a hawking Fed and the failing inflation signals in its wake. So a bullet pointed rundown should suffice.

  • CRB Index: Another week, another ill fated bounce to test the underside of the downtrending daily SMA 50. No thank you, I have not been any sort of committed inflation trader for over a year now (some signals, including the bullish USD, had been negatively diverging the inflation trades for well over a year).

crb commodity index

  • Crude Oil: Even worse than CRB as its recent bounces have petered out well below its downtrending SMA 50.
  • NatGas: Still trying to maintain a perch at its SMA 50, having held that level (6.30) after several tests last week. It’s a very volatile but neutral daily technical situation.
  • Copper/Industrial Metals (GYX): Doc Copper did not quite meet its previous high on the last bounce/rally. It tested and thus far held below its SMA 200. This for the second time. GYX is similar except that its test of the SMA 200 ticked a slight higher high before turning down. No interest here, China reopening hype, seasonal Santa hype or not. It is still counter-trend stuff, technically.
  • Agricultural (GKX): GKX looks like it’s in a little bear flag, rising from a highly suspect position. The tracking ETF, DBA, bounced for a perfect and thus far failed test of its SMA 50. While we have noted that some Ags like Soybeans and Corn are seasonally positive into July I have little current personal interest. It’s an inflation trade, after all.
  • PGM, Uranium, Lithium, REE and other outliers: Some of these items have varying degrees of ‘inflation trade’ stink on them. PGM is important to cyclical economies, Uranium is important to future cleaner energy requirements, ditto Lithium and Rare Earth Elements are used in a multitude of industries and technologies.
  • Palladium made a harsh and ugly breakdown last week. Bearish. Platinum weakened for a test of its break above the SMA 50 and 200. That test is still in progress. No personal interest in either of these metals. The Uranium price dropped from 52+ to the current 47.80. It needs to hold around here or it would break down on a short-term perspective (longer-term it’s in a cyclical bull market that began in 2016). Personal watch list items URNM, CCJ, NXE and UUUU are all some form of ugly on daily charts. The Lithium price remains very elevated at the high of 85, but premier Li stocks like ALB and LTHM are still ‘hard down’ to the point where I still have my eye on them. A very casual eye, that is.


Let’s not waste time with sideshows like Bitcoin this week. No 10k to 12.5k no personal interest (current: 16.7k).

Let’s do spend some time on the US dollar and Gold/Silver ratio. The GSR had guided USD down and sure enough, Uncle Buck cracked. As long as silver leads gold it appears that USD will remain pressured with macro markets are intact. But if the Gold/Silver ratio turns back up there could be a lot of pain in H1, 2023. That could eventually lead a future US dollar bottom.

But an important consideration is that while they have started to trend in a USD-positive direction, both commercial hedging and public optimism data are not near a bullish contrarian setup for USD. So the party – in some assets at least – could labor on as projected, into Q1, 2023.

us dollar index and gold silver ratio

The daily chart of global currency pairs shows a small pullback as USD twitched upward as the great and powerful Fed rendered its USD supportive decision. These global currencies remain in labored intermediate uptrends with the notable exception of ‘Commodity currency’ CAD. ‘Commodity currency’ AUD is not so hot either. Makes sense, given our current disinflationary macro view.



Market Sentiment

Dumb money has turned down with the market. That was needed if the Q4-Q1 relief rally was going to have some longevity into Q1. Hence, the important question near the opening of this report regarding gaps. Will SPX stop dropping and hold the November low after filling its downside gap? If so, we’ll look to the upper gap after the markets unload enough sellers.

smart and dumb money market sentiment

Investors Intelligence and AAII have not altered their positioning much. Still restrained relative to what dumb money (above) had been and relative to what NAAIM (investment mangers) had been… and still is!

As of FOMC day NAAIM were perking up to a new level of bullishness. The reason is that the market put on a euphoric spike above and reversal below the SMA 200 (SPX) on the ‘Goldilocks’ CPI report before finding other things to worry about as stocks then declined due to renewed fears of a slowing economy (according to the mainstream financial media always needing a rationale with which to harvest your eyeballs). That decline came right after this reading printed. Yikes. NAAIM… on cue, baby.

naaim market sentiment

Sentiment Bottom Line

It is not now and has not since October been beneficial to a contrary bullish case. Last week’s hard hit to dumb money confidence is either the gateway to the next leg of the bear market or more likely (in my opinion), a reset in sentiment taking place in order to potentially drag the market relief rally into Q1. But it’s a bear market rally.



‘Savings’ Account (balanced by gold): holds NEM, GOLD and cash equivalents.

Trading Account: no positions.

Roth IRA (non-taxable, no contributions):

At -3.97% over the last year and something a little worse than that YTD, I continue not to inspire others about how to make great riches and make coin in da stonk market. With the other accounts doing nothing other than collecting income and the IRA with its eyes on the future and what it will take to gain return in that future, I am keenly aware that catching the long forsaken gold stock sector at the right time and in the right macro phase could provide head spinning profits. That potential is something worth waiting for. It happened in 2002-2008 and again in 2008-2011.

As yet I am still unsure whether I’ll be profit taking (the likes of NGD is already manufacturing a paper loss) or holding/adding for said head spinning phase. That will depend on what market signals I see as we emerge from silly season.

Meanwhile, interest bearing cash and if inflation continues to fade, Treasury bonds should be just fine for now. It makes waiting not only bearable, but comfortable. It gives me the mental head space to try to clearly interpret the macro.

Cash & equivalents are 87%.

roth ira