NFTRH+; GDX on plan, parameters & discussion ensue

In this update on the HUI, HUI/Gold ratio we also noted that GDX had not yet filled its gap below 29. Well, now it has. Filled it yesterday and is probing down to support and the SMA 200 today, which is so logically the product of the Golden Cross having made it into the Goldbug-o-Sphere as a bull signal to get excited about.

GDX, gold miners ETF

Note also that the HUI/Gold ratio is still probing downward and now just a teeny above the December (reversal) low. That needs to hold. Period. Or we have a bad sector internal signal that may or may not imply a loss of the SMA 200 above, but it sure would increase the odds of it.

In general, the gold stock sector is now where we wanted it in order to have a buying opportunity. With the weakening fundamental backdrop lately and amid the recent resurgence of inflationary signaling (many bugs still don’t get that they should never include cyclical inflation as reason to be fundamentally bullish gold stocks) I am having patience before adding positions [AEM subsequently added on drop to its SMA 200] because even if the sector rallies as planned (but as part of the inflation trades) it would be for the wrong reasons.

The reason I am having patience is strictly a “man stares at chart” thing and when he does, he cannot ignore that gap around 22. Gold stocks never were special (copper stocks did even better) on the broad rally that itself is churning this week and if gold stocks resume upward after a “healthy” technical correction, we’ll keep that in mind until it either results in a (hopefully profitable) sell, or the proper funda reengage after Goldilocks and the little inflation surge happening today get kicked out of the house. That would be fundamentally better scenario to buy (on downside opportunities) and hold as an investment as Bob Hoye is calling gold miners now. Me? I’ll tap the breaks on that kind of talk until a lot of macro work is done. Q4-Q1 has only been a initial hint, and copper did better than gold at that!

A little lecturing there even as I had just wanted to update the daily chart.


This Post Has 10 Comments

  1. Michael

    Sounds like you are calling a Buy and then saying you are not yet buying? Please let us know when you are making a significant (how do I underline significant?) reduction in your portfolio’s cash position.

  2. Gary

    I am not calling anything. I am discussing that GDX has dropped to the expected support area. I do not call ‘buy’ and I do not call ‘sell’. I lay out what I believe is happening so that people can make their decisions according to what is best for them. Into the correction I had raised the risk alerts appropriately and also planned the downside targets, which the sector is dropping into now.

    For ref. I added AEM per the trade log. But this is not some guy making calls and a bunch of sheeple doing what he says. It’s a collection of people who have gravitated to this type of analysis and hopefully appreciate it rather than being told what to do. I explained the reasons why I am not significantly reducing cash. Gold stocks are nothing special yet, and I am not obsessed on them. Hence all the macro talk that goes with this stuff. A “buy/sell” caller usually doesn’t care about the macro stuff.

  3. Michael

    Sorry, I reread my post and realize it didn’t say what I wanted.
    I subscribed just a couple years ago after reading your public posts for a long time because I like the way you think, I believe in the importance of macro indicators, and have used them very successfully in the past. After subscribing I saw, oh my gosh, he is over 90% cash! Even when cash didn’t give you much. (Cue my innate risk adverse paranoia). I am not a trader, and doubt I can have any significant portfolio growth working with less than 10% of my accounts. I know that I call the buys/sells for myself, but what I now struggle with as a subscriber is my agreement with how you see the macros versus the huge cash position you have maintained for years. I have friends who always remain mostly cash, but they are options traders. I’m in healthcare so that isn’t going to happen with me. I look forward to seeing when/if you move to cash below 50%.

  4. Armen

    Bond market (nominal, tips, hy spreads) buying into “higher for longer” + “soft landing” narrative. Sometimes I think why bother with all the signals, the simplistic idea “fed will go on until something breaks” may be good enough in the current situation.

    1. Gary

      Agree. Problem being, when something breaks it usually comes out of left field.

  5. Gary

    It is just the kind of investor I am. For me, low cash is 50% and that is rare. I am always managing risk. Last time I was below 50% cash was Q4 2008, and then I just had to go near all in. I remember making 40% a year total gains on average while only being 40% to 60% invested in 2002 to 2008. My training was to make 40% a year on less than 50% invested. That is my ideal. That was in the last gold stock bull that ended in 2008, but all sorts of other stuff was bulling too. I think the cash focus comes from my internal lack of belief that the markets are real. I am no financial adviser and certainly no mutual fund manager. I see loved ones put all-in right now (and riding the bear market down) even though cash is paying interest and it disgusts me. If I were presenting a model portfolio instead of my real portfolio I could be mostly in and show performance. But within my very investing soul I don’t trust markets micro managed by a central authority and will not expose myself to them beyond my admittedly conservative nature. By holding gold for 20+ years the pressure to play the casino to the hilt is mitigated to a degree. I stepped foot into an actual casino once and never again would I do that. It was gross. I am no gambler and a remotely managed market (the Fed and its interest rate manip) is gambling. A final note is that we are all different and my situation is one that has seen major outflows of funds due to personal life situations and commitments. As a person, a human, my family and I have had some major challenges. This argues that I should probably use a traditional model portfolio as newsletters do rather than managing an actual portfolio as I do, which is conservatively. It could lead investors who are different than me astray. I get that. Gold stocks have been garbage more often than not and I have a problem being one with the types of people that are ardent gold stock bulls (IMO promoters, idealists, dogmatists, political extremists, sometimes influenced by religion and other things that have no place in markets) even though I hold gold for the very long-term. It all argues for me to go the Hoye method of just talking about the markets and not discussing an actual portfolio. I know of other NL writers who display a model port and then more casually talk about personal moves without showing them. It’s a tough question. But with cash paying out now and my view that this is a bear rally I sure am not going to change now. But I do have a voice inside asking me to take on more risk when I feel strong conviction with the HUI 500 target as an example. But even there I need the damn macro funda lined up as they were in Q4, 2008. I have to thank you for prompting this lengthy response. It’s good to review our modes of operation once in a while.

  6. Armen

    Why is it a problem if you’re in cash? Problem is if there is no landing, or as you say von Mises crack-up. For me the problem is also waiting, as I periodically have an urge “to do something” (aka fomo).

    1. Gary

      It’s certainly not a problem for me with the structure of the current market. I think Michael was probably referring to my historically high cash levels, which were harder to argue for. As for waiting, I dream of another Q4, 2008. One came in Q1, 2020 and we nailed it. But with the Fed printing a bull market I did not go in as heavy as I – in hindsight – should have or would have if I were a conventional financial adviser or fund manager operating with OPM. The problem being, what if the Hoye squirrel does find his post-bubble nut ‘this time’?

  7. Michael

    It is exactly my success in going to large cash position early 2008 that made 2009 the best investing year of my life when I basically went all in, and felt fairly safe doing so. Maybe a person only gets one of those moments a lifetime? I went heavy into cash in early 2022 and am now pacing the floor wondering whether I should return to DCA/value-investing in the 5-6 companies I feel I understand, or wait for another babies thrown out with the bathwater moment. I cannot pretend to do what you do, but find it interesting to watch.

    1. Gary

      That is what I wait for too. Q4, 2008. A guy can dream, I guess.

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