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Happy New Year?

Financially speaking, if we can plan well enough before 2023 unfolds and then keep the analytical ship on coarse through the adjustments that are sure to come, it can be a good one, regardless of what the broad markets do.

I am pretty excited about a year that is sure to hold surprises. I just want us to be much less surprised than the average investor, casino patron, trader, pre-programmed machine and even policymaker (remember how tardy the Fed was in coming to a hawkish view in 2022 after we’d all but demanded they turn that way).

I want to tune out the perma-poms in the gold “community”, tune out the perma-bears (and whatever perma-bulls are left) in the stock market crowd, tune out the financial media, tune down  the Fed’s policy projections and the associated conventional analysts making their own projections off of that. I want to tune out the whole damn cacophony.

It’s a Bear Market, But…

SPX has maintained the higher low to the November 3rd low (3698.15) that we demanded it do in order to keep the prospect of a more extended seasonal rally intact. Therefore the situation is this; the major daily trend (SMA 200) is down. The intermediate trend (SMA 50) is down. These indicate a bear market.

The short-term trend from October is up. That is why it is so important for SPX to hold above the 11/3 low after filling the gap (in and of itself a good thing). Now SPX will either fail and resume the bear market or it will catch many off guard and set about a resumed rally, in which case we’d watch for the upper gap at 4219.

us stock market, spx

Here is a non-exhaustive look at some pros and cons for the US stock market.


  • Positive seasonality.
  • Unfilled gap at 4219.
  • My own imagining of a bullish weekly SPX inverted H&S. TA novelty alert!
  • Previous over-bullish sentiment profile has been partially reset.
  • Economy still intact despite declining leading indicators.
  • Inflation indications weakening, implying a future weakening Fed.
  • The mid-term election cycle, the aftermath of which we noted back in October to be bullish on average.
  • The related 3rd year presidential cycle, which is obviously also bullish since it coincides with the above.
presidential cycle


  • With respect to the chart above, Tom McClellan speculates that the December break from the usual bullish pattern is brought on by rate hikes and  Quantitative Tightening. They are still in play obviously, but due to become non-factors in 2023 if/when the Fed pivots dovish.
  • However, our thesis is that while it has been a nice, orderly bear market in 2022, if indications like deeply inverted yield curves (nowhere to go but up?), out of whack (to history) upward ramped M2 Money Supply and the 30yr Yield ‘Continuum’ having taken out its decades old trend with authority mean something, historical comps may go dysfunctional and the Fed may not act in its usual manner. In other words, while they may pause the hawking, I am suspect of a pivot to actively dovish any time soon, with the memory of the damaging inflation they created in 2020 fresh in their (egg) heads.
  • Despite the depressed state of stocks, the VIX has not responded to the upside. This belies a calm amid the recent price erosion. It could be perceived as a positive divergence to a coming rally, but on balance if I’m a bull I’d rather see it having spiked rather than indicating relative complacency. Daily chart…

vix, volatility index

Weekly chart. Indeed, this is pretty darn scary if I’m a bull. The 2022 bear market played out against a sideways VIX, which recently tapped the top of an important support zone. The implication is complacency in relation to a stock market that declined around 20% in 2022. The problem would be in what happens if we really ain’t seen nuthin’ yet from the bearish side (with ref. to the indications of the blown out M2, the blown out 30yr yield Continuum, etc.).

vix, volatility index, weekly chart

My wife had CNN on and I happened by and just watched a conventional economist from the Washington Post talk about how inflation is still going to be a big problem in 2023. There’s some conventional thinking. She espoused more conventional thinking in advising that the stock market always comes back and people should stay invested.

We have talked a lot about how orderly the 2022 bear market was. It also never even dinged our first significant downside target at SPX 3200 +/-. Seasonal rally or no seasonal rally, the bear does not end until upside milestones are reached and most indexes and sectors are far from those. VIX above indicates relative calm. The WaPo economist advises calm.

But folks, I hate to dredge them up so often, but these are not calming indications…

Indicators Run Amok

The Continuum did what it did not do for decades in busting the limiters to the upside, flipping its entire modus operandi upside down from a deflationary backbone to a broken backbone. Despite the potential for a deflationary episode in 2023 this may also indicate that inflated chickens have finally gotten out of the barn and come home to roost in the bigger picture.

Recall that our view for many years has been that this deflationary indication (downward trend in yields) gave the Fed license to inflate every time yields tanked. Well? Different this time. Different from anything since the 1980s. It’s our job to correctly interpret what that difference will mean in 2023 and beyond. Two possibilities…

  1. A new age of inflation with the Fed’s hands tied about how to control it.
  2. A coming deflationary episode, if that’s what’s in the cards, has more room to run (by this chart) than previous episodes that were routinely halted at the former EMA limiters.

My guess? Deflation first, then a new inflationary age. If the Continuum breaks back down through 2.5% we’d have to reevaluate that and consider an extended deflation.

30 year treasury bond yield

M2 did what it has never done. That ramp job in 2020 was way out of character from any before. While policymakers have routinely taken actions that increase money supply, the trend is blown due to the policy extremes of 2020. Frankly, this is very concerning and also begs non-conventional thinking in 2023 as opposed to robotic thinking like ‘stocks always come back’. Yes Ms. conventional economist, these indicator had always been within normal long-term trends too. Now? Not so much.

m2 money supply

10yr-2yr Yield Curve is becoming epic inverted. Curve flatteners run with economic positivity or neutrality. Steepeners run with economic busts or an inflationary economy. Sure, the YC indicates we’re still on a flattener. It also indicates that the steepener has yet to come and the risk of such is high in 2023.

yield curve

Meanwhile, in December the bond market has been kicking up a bearish bit of dust as the Continuum above held support and rammed upward and the ‘real’ 10 year yield is also on a ramp up again. This shows that the bond market is still attending to inflation, to tightening and to a hawkish orientation. If gold bugs are being honest, they’ll see this and realize that it is, at face value, not positive for assets, including gold. But given the silly seasonal and so many other indicators out of whack, I am keeping an open mind here.

real yields

Dialing in to the 2yr Treasury bond yield (daily chart) we find another indication of the recent bond market tightening as the topping structure we’ve speculated on is being tested now from the underside. Again, silly season. But at some point this gets serious, silly season or not. The view remains deflationary, but this is an indication of still hawkish bond market signaling.

2 year treasury bond yield

Yet with all of the market signals above that may compel the Fed to stay the hawkish course, inflation expectations continue to look to have topped.

inflation expectations, 10 year breakeven rate

Bottom Line

It’s a concerning situation because of the extremes in the indicators. Worse, indicators like M2 have no historical precedence and the Continuum has busted a trend that had been intact from the 1980s!

The yield curve is at an extreme inversion last seen in the 1980s, with nowhere to go but up on its next major trend. Up means steepening and steepening usually means an economic bust. The 2020-2021 steepener was inflationary. Inflation created that economy. The next steepener is more likely to be deflationary (yes, I know the economist on CNN said inflation in 2023, hold your stocks and other conventional utterances) and it feels like the Fed is being forced to bring it on by the market’s signals.

Meanwhile, actual fears of inflation are rolling over and as we’ve seen in various manufacturing reports so too are prices.

I would be bullshitting you if I tried to tie this all into a cohesive narrative, complete with assured conclusions. That is what I am supposed to do as a ‘newsletter’ writer. I am supposed to present myself as the guy to come to for the answers you need. Well, that is a clown show and I want no part of it.

I am presenting what I think are important market views that a majority either do not want to present or more likely, are not capable of presenting because their mantra is to sell a point of view, not an analytical view that is still taking shape. Whatever is taking shape, it is not good if you like orderly and linear. 2023 looks to be anything but linear. But we shall manage it!

Market Sentiment (briefly)

Smart & Dumb indicators are neutral. With the recent upturn in yields the Bond market is once again contrary positive (which would be anti-inflationary of the contrary bullish view if bonds wins out). Gold and Commodities are okay but not compelling, sentiment wise, as well.

smart money and dumb money

Investment Managers (NAAIM) have been a good guide to market turns with their over-bullish FOMO and over-bearish FEAR-MO in 2022. While they finally backed off last week with the stock market’s price they too are in neutral territory at this time.

naaim sentiment

For reference, AAII are still in hiding (contrary bullish) and Newsletters (Investors Intelligence) are neutral.

Global Markets

Much like the US, most global markets have taken a pullback in December. Here is a brief rundown of some markets.

  • Europe/DAX: both rallied above their 200 day average and are pulling back in December. Same status as the US in that the seasonal rally is intact, but these markets are relatively better than the balance of the US market.
  • UK: UK 100 is not only intact, but technically constructive. It’s technically in a bull market on all time frames. That could end in January or it could be a harbinger of a more pervasive global bull to come. Whatever it is, it’s not (yet) bearish at all.
  • Canada: Unlike Europe and much like the US, TSX is below its 200 day moving average but still a hair above the early November low. That must hold to keep the seasonal alive in the great white North. Eh? TSX-V is broken and has been broken for well over a year now. It can bounce if the seasonal bounce party resumes, but speculative resources/commodity trades are no good based on trends.
  • Asia (incl. Japan & Australia): The Emerging Markets aspects of Asia are benefiting from the weakening USD, which has been trending down since October. China large caps rallied about 40% from the bombed out lows and now are dealing with the downtrending SMA 200. A break through calls attention to this area (I already hold EEM and EM income fund TEI) and a failure maintains the bear market. The same can be said for Asia (ex-Japan) and EM in general. Japan has been relatively stable throughout the bear market but recently the Nikkei took a pullback toward some of the bear market lows. My would-be buy target is well lower in the 23000 to 24000 zone (current: 26094).  Australia’s AORD is relatively firm but still has the appearance of having entered a bear market later than some others. It’s near but below both the SMA 50 and 200.
  • India: Still dog gone constructive compared to many. It’s a bull market but most recently BSE dropped through the daily SMA 50 and is rising to test that breakdown. The rise looks like a bear flag, at least as long as it’s below the SMA 50.
  • Lat/Am: Brazil’s Bovespa is about as neutral as you can get. But that won’t last. It’s either going to confirm bullish and lead others or breakdown with others. It’s in a weekly chart pattern somewhat similar to the one I’ve speculated about on the US S&P 500, but it’s better because if it’s real it measures to new highs as opposed to a test of the highs. Argentina’s Merval is on a hysterical moonshot spike upward. Why? You tell me. Currency manip? Monetary policy? Is its form of government better than that of the balance of the rest of the world? Why am I not invested there? All questions that pop up. The spike, by the way, will blow out and precede a tank job if history of other such events holds true. Meanwhile, the Lat/Am 40 ETF is in a bear market like much of the rest of the world.

Precious Metals

With all due respect for the still gold-bearish indicators above (e.g. ‘real’ 10yr yield, yield curve flattening trend) others have continued to turn in gold’s favor. The fact that the yield curve’s next big move will be to steepen reflects a good risk/reward currently and will be a bull indicator when it happens. Meanwhile, our cavalcade of inter-market indicators is still on track.

Gold/SPX and Gold/Global stocks remain constructive as supportive macro/psych indicators.

Gold/RINF made a good break upward that is being corrected a bit here in December. But it’s still a potential breakout in Gold vs. the Inflation Expectations gauge.

Gold/Commodities (CRB, industrial metals, oil, etc.) is still constructive to have bottomed and turned up.

All in all, this is an intact picture of the ratios that need to continue upward for a bullish 2023 view of gold and more than that, of the gold miners, which leverage these indicators either psychologically (vs. stocks) or operationally (vs. commodities and inflation).

gold market indicators

Gold daily is as we left it last time this chart was viewed. It took out resistance, which is now support coinciding with the SMA 200 (1790).

gold price, daily chart

Gold monthly (log scale) continues to show the long-term trend line intact. Not bad, eh?

gold price monthly chart, log scale

Silver daily is also as we last viewed it, having taken out resistance, which is now support with the SMA 50 (21.82) rising to meet it. 24.50 was our upside target and silver got there. Now it’s decision time. Ultimately, if this thing corrects silver is not broken even if it pulls back to the 21s to test the moving averages.

silver price, daily chart

Silver monthly (log scale) shows the TA novelty AKA Andrews Fork having contained the post-2020 pullback and new upturn. Of more importance, the long-term log scale trend from 2001 has been held.

silver price, monthly log scale chart

HUI daily is doing what it should do after reaching our target at the SMA 200, which included clear lateral resistance. While this could be interpreted as a halt and reversal point, that is just conjecture because it was always going to take a breather here. Want to be bullish? Well, then the argument for that is that Huey is working off a previous moderately overbought situation.

If it breaks up and out we begin seriously thinking about the major upside target of 500. If it reverses from resistance look for support from 202 to 208.

hui gold bugs index, daily chart

HUI monthly shows the shelf of resistance that the current rally leg has brought the index to. Our bigger picture projection is for an eventual run to 500. As implied by the daily chart’s SMA 200 above, a break through this resistance would seriously engage the discussion of the next big leg up, which would eventually turn the black arrow green.

hui monthly chart

HUI monthly (log scale) looks sweet with its implication that the bottom is in.

hui gold bugs index monthly chart, log scale

As for the individual miners, we’ll save the charts of the favored ones for early 2023 as the sector generally has stalled here and everybody’s just waiting in the year-end waiting place.

Favored items currently held are MAI.V/MAIFF, OGN.V/OGNRF, AGI, AEM, GOLD, NEM, WPM, ORLA and KGC with BTG, NGD, SSRM, RGLD on watch. But GDX and/or GDXJ are a more reliable way to play it if you’re thinking the HUI target of 500 is a real goal. Set, forget or take profits/buy back as needed along the way.

Separately, while I have a long-term holding in real gold, I am trying to peck away at bullion fund PHYS with the 3000+ upside gold price target in mind. That will continue as long as bearish indicators like the ‘real’ yield do not trump those currently aligning bullish.


CRB Index: Sneaky CRB continues to trend down on the intermediate-term (SMA 50) and roll its major daily trend (SMA 200). But the sneaky part is the look of it, which to my eye feels bullish with a long flag and RSI creeping above 50. Of course, it’s been Santa season and could be a fake out. But I would not be surprised if there is another pump into commodities and inflation trades in the offing, near-term.

crb commodity index

Oil/Gas: Crude Oil is driving CRB to this consolidation although it looks less bullish than CRB potentially is. Gas is in a terrible looking chart pattern and is broken. The seasonal pattern for oil is neutral and that of NatGas is very bearish.

Copper/Industrial Metals (GYX): The copper price looks a lot like the HUI Gold Bugs index and I don’t like that as a gold stock bull in waiting. I don’t want to see the counter-cyclical sector running in tandem with a very cyclical metal. It’s silly season and perhaps everything can continue to rally. But at some point copper is going to have to decline in gold terms for the favored macro view to engage.

PGMs: Platinum continues to look good, having held the SMA 50 on a recent drop and turning back up to tick a new cycle high last week. Interesting, but w/ a silly season caveat. Palladium is no good technically, as has been the case for some time now. Downtrend intact, but recall how long Pt spent in a downtrend/bottoming posture before finally breaking it.

Agricultural (GKX): It’s a mixed bag but GKX has recovered from its roll-over and taken back the SMA 50. I continue to hold Soybean fund SOYB as my only Ag holding because I have liked the chart and the seasonal is positive into summer, as previously noted.

Lithium/Nickel (battery materials): While the Li price has eased about 11% from its highs the picture is unbroken (see chart below). Lithium stocks ALB and LTHM (which I added on the bombed out, oversold situation) got croaked for it. Nickel (holding Ni prospector TLO.TO/TLOFF) has maintained a rising trend from September after an upside blow off and crash earlier in 2022.

lithium price

Rare Earth: REMX and MP have both been flattened. REE are critical materials, but also subject to cyclical activity. Right now they are flashing counter-cyclical.

Uranium: the sector (URNM, URA) is gently trending down. Not technically actionable, IMO. Watch items URNM, NXE, UUUU and CCJ are still just that, watch items for a future bullish view.


Bitcoin remains bearish with a target of 10000 to 12500. Next…

USD continues to follow the Gold/Silver ratio downward. The implication is abundant market liquidity and/or continuing inflation fears, which may be behind the recent tightening in the bond market. USD is technically bearish and recall that on December 6 we noted in an NFTRH+ update that commercial hedgers’ status implied that the buck had further to drop.

us dollar index and gold/silver ratio

The bigger picture (monthly) shows the Gold/Silver ratio guiding USD southward after it dinged long-term resistance from the 2000-2002 topping pattern that we noted well in advance. USD is in danger of cracking the first support area and if that goes we’d watch for a tick below 100 per the daily chart above.

us dollar index and gold/silver ratio

Global currencies generally continue to trend up vs. USD since October. CHF/USD is a positive indicator for gold, as the two usually correlate well. Commodity currency CAD continues to be relatively weak. That may not last if the inflation trades kick up again or it may in hindsight be looked back at as a negative divergence to the inflation/resources stuff.

global currency pairs


‘Savings’ Account (balanced by gold) continues to hold cash and equivalents along with two senior gold miners, NEM and GOLD.

Trading Account thinks it can be short solar play FSLR and Energy play XOP and succeed. We shall see.

Roth IRA (non-taxable, no contributions)

One thing that jumps out at me is how cash is paying increasingly meaningful income on a monthly basis. I was pleasantly surprised to see the December interest income from the money market fund held. Meet the new Fed, not the same as the old (ZIRPing) Fed. They really do seem to want us in cash instead of assets.

Frankly, cash & equiv. are too low (78% after adjustment) given the above note on the income it is providing. I am half hoping for the market to tank so I can raise it again. But for now, with SPX clinging above the November 3 low, I actually added it in the form of SPY.

Everything below can be sold in favor of the comfort of cash (I have held gold for 20 years, after all). However, it would take a lot of negative reinforcement for me to abandon the precious metals trades as I still view the macro as shifting counter-cyclical and in favor of the sector.

My best wishes to you for a happy and healthy new year!




This Post Has 2 Comments

  1. Armen

    Current situation in 5/10 real yields looks to me conspicuously similar to Jun-Aug 2022 episode that resolved unpleasantly for gold bugs. Or am I imagining the similarity?

    1. Gary

      It looks very similar and could be damaging if this, and other indicators of bond market tightening continue. But with other macro indicators creeping positive for gold I am keeping open the poss. that the bond market is doing things during a season that cannot be trusted fully for its signals.

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