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Notes From the Rabbit Hole, #757

Summary of NFTRH 757 and the macro situation leading up to it

  • US stock market is at risk by its internal indicators. Sentiment is in a mushy middle ground with a tilt toward complacency. Technically, several sectors are fading toward bearish while the headline SPX clings to its ‘rally intact’ status. Tech is leading, as expected during a Goldilocks phase. Former leader, Semi, continues to flash suspect.
  • Global markets would gain the upper hand on balance, if the USD were to tank support and drop toward point ‘C’ of an A-B-C correction of its ongoing bull market. However, led by the Gold/Silver ratio, USD held firm and popped last week. Japan (Nikkei) and India (BSE Sensex) are among the bullish markets on the global picture.
  • Precious Metals are on track. Silver led the rally to this point, but it got hammered as the Gold/Silver ratio erupted last week. That is on plan to our favored disinflation to interim deflation theme. But it could take patience as many bugs will sell because of inflation’s failure. Silly bugs. Though there will be price hazards ahead, gold mining operations would leverage a deflationary macro to bottom line improvement.
  • Commodities are trending down. Uranium is my special interest, but in the future I’d look at copper and the battery metals and probably the whole shootin’ match if ‘they’ have the guts to try to create another inflation problem out ahead. For now, no interest.
  • Currencies see USD taking the nod from the Gold/Silver ratio and bouncing from support. This is as it should be for our favored views. Now let’s see if there is follow through, as last week was just an impulse, not a trend.


We are approaching the summer slack season with da boyz plannin’ ta sip da Long Island Ice Teas in da Hampins, regular people planning to smog up the highways and bi-ways in search of the perfect spots to grill burgers and dogs, find lake side entertainment and enjoy summer in typical fashion.

It all seems normal out there and there are theoretically (I don’t assume them to be actually) bullish inputs supporting that normalcy, as we have anticipated and managed since last November.

  • When we began the Q4-Q1 rally theme one of the inputs was the bullish post (mid-term) election period, which runs for a year, typically. That would take it to November, 2023.
  • On a similar theme, the democrats are due to start propping the markets by whatever means possible in the run up to 2024. “Possible” is debatable.
  • The Fed is about to roll over, stop hiking now and start cutting the funds rate by September according to the people who make these projections for a living (CME Group). This has bolstered the current…
  • Goldilocks phase, which we projected back in Q4, 2022 and which endures to today with the inflation stuff trending down (as inflation indicators roll over) and the economy still going fine. What a wonderful backdrop for the machines to rotate back to the downtrodden Tech sector.

But the chart below…

America is not paying attention to what is going on beneath the surface of the financial markets. The same financial markets that a majority of the middle and upper classes (and their financial advisers) depend on to always be there as they have been. 2022 was a modest little bear market. Life goes on. Burgers and dogs to consume. Golf to play. Boats to sail. Beaches to lay around doing nothing at.

We will continue to work. Or let me rephrase that. I will continue to work so you will have a touch point to refer to at those times you may wish to de-summerize and re-marketize. The way the indicators are going, we are in the danger zone now, in my opinion.

Sure, this chart can take months to deliver its message (of an impending market top), but I don’t necessarily think that just because summer is coming we’ll have to wait until the typically expected rough season, beginning in September. Here and now the T-bill yield (Fed funds proxy) is as far stretched as it gets above the freer market’s yield, the 2yr.

3 month t-bill yield and 2 year treasury yield

The implication is that the Fed has over-tightened once again as they tend to do while following backward looking indicators like CPI. To boot, when I affix my tin foil hat I tend to think the Fed would not mind a significant asset market liquidation as it would solve problem #1 for them, the nasty inflation problem (and its lingering effects) that they were primary in creating. In other words, the bust side of the boom/bust continuum that Keynesian monetary policy has got us on.

To review, the stock market took a small bear in 2022, but if this chart carries a worthwhile message, per its history of the last two normal bear markets (excluding the abnormal crash and inflation-fueled reversal in 2020) that bear cycle jumped the gun. In my opinion, as the economy slowly decelerates and inflated prices slowly ease the market is, while thinning out its participation, still rallying on the post-election and ‘Fed relief’ inputs. In other words, Goldilocks.

In my opinion this is a rotation into the stuff that got hammered during inflationary 2021 and 2022, as if big Tech is a safe haven. It’s algos, machines, your financial adviser and the herds she tends rotating with the change in the macro backdrop. It’s like a top spinning on a table; rotate, rotate, rotate… until finally it runs out of steam and falls on its side or worse, flies right off the table and crashes to the floor.

Barring an event like I Galaxy Brained last week (a significant drop in the USD within its ongoing bull market), I’ll continue to favor the idea that the 2022 bear market got ahead of itself and today we are seeing that remedied to reload a bear case that would this time include the T-bill/2yr divergence (above) that did not exist last year.

Meanwhile, this pig lamely rides along the uptrending daily SMA 50. As a side note, when you see me call the stock market a “pig” more than usual, it is indicative that I am short said pig. That is also my psych vulnerability at work, because I am half prepared to cover shorts and mutter “go to hell you bloated hog”. I am not a stout market bear. I know that, and try to manage it.

With due consideration for the fact that several sectors are bearish or fading that way, the status of SPX is unchanged as it lurks below resistance but above the upturning moving averages. This is two things at once, a platform for failure as a short-term double top and a platform for success should it hold the moving averages and decide to fill the 4219 gap at least, or perhaps test 4300 resistance or worse still (for my direct short position), target 4700 as per our outlier and least favored upside objective.

But this is the stock market; a price mechanism and I have seen this movie before. Given that there can be more months before the bearish implication of the chart above plays out (assuming it will play out, as I do), there is another aspect of the market in play and that aspect is comprised of the hope-filled stuff of disinflationary Goldilocks and conventional mass mindset that will only be punished when the market decides it is time.

s&p 500

US Market Sentiment

The sentiment profile is not much changed from last week. It is in a middle ground and with Dumb money subdued despite a market that has not broken below its SMA 50 and 200. The setup would not stand in the way should SPX hold and rally.

smart and dumb money sentiment

NAAIM: Moderately bullish as of 5/10.

Investors Intelligence: Moderately bullish as of 5/9.

AAII: Still pessimistic as of 5/10, although bullishness bumped up a bit.

aaii sentiment

VIX: Continues to show complacency aplenty as America prepares to take to the highways and bi-ways. Don’t want to worry about too much while drinking a Bud and chowing down burgers. Summer, baby!



Equity Put/Call Ratio: weekly EMA 10 has pulled back with the rally but is still in an uptrend, implying coming bear pressure on the markets. If the uptrend that began when the 2022 bear began breaks down we’ll have to reevaluate.

Citi Economic Surprise Index: not mentioned in quite a while as the 2022 bear market put the S&P 500 back in line with the index. So by this metric, all is fine currently. It makes sense because as yet the economy is still fine. If economic data start tanking then… not fine.

‘Real’ 10yr (inflation adjusted) Yield: Still going sideways within a potential topping cluster. It is a view of a Fed that can pat itself on the back for its sound policy on the macro. If this is the top I expect it is, they will weaken and a positive indicator for gold will kick in.

Breakeven Inflation Rates: (inflation expectations) continue to look as if they’ve topped and are moderately trending down. This is Goldilocks. If she morphs to deflation scare, remove the word “moderately”.

High Yield Spreads: Still moderate, but still with the look that it could rise. As yet, no alarm, but on watch.

M2 Money Supply: Rolling over. Have patience. This remains a forward hazard for markets that depended on the Fed bloating it in 2020. The 2020 money printing was extreme and that extreme must be worked out of the system somehow.

Fed Balance Sheet: Similar bloat job to the above. These were epic and historic alterations to the inflation making machinery and they are nowhere near normalized (even per the levels of previous gross distortions). Where do they hide the cheese? That is the question I ask. Do they hide it in a mother of all inflationary ops out ahead or do they get it yanked from them in a deflationary episode?

Treasury Bonds

  • We noted an important view in the chart at the top of the segment. The 3 month T-bill yield is way out ahead of the 2yr, and that has preceded bear markets, historically.
  • Last week in NFTRH 756 I came up with an alternate view that would see an inflation problem manifest sooner than currently expected. Then the 30yr yield actually made a move in that direction per Monday’s update. Then of course the “grind” market ground the yield back down. Today it sits constructively at the moving averages. Of note, however, the 10yr yield is below its moving averages. Bottom line is no change, our main plan is inflation (done) > disinflation/Goldilocks (in process) > deflationary liquidation out ahead, before any plans for the next inflationary macro. But we are also still secondarily on watch for the inflation scenario noted last week as long as long-term yields have not broken down and the US dollar and Gold/Silver ratio have not yet affirmed strong new up moves (although the GSR looked impulsive).

US Markets Bottom Line

  • High risk, with the deflationary view out front, and timing at issue as Goldilocks plays out.
  • Many US market components are already going bearish, but big Tech and the headline SPX are what gain the headlines and they are still bullish and intact, respectively.
  • Short-term sentiment is mushy, not bullish or bearish, and is an element in our “grind” view. But longer-term views like the VIX and Equity Put/Call ratio indicate complacency while the trend in pressure against the market increases.
  • Pick up nickels in front of the steamroller if you will (I have been all year) and short if you will (I have recently) but the market could easily wipe those out as price will always be price and risk does not need to be realized in any convenient time frame (like before I am compelled to cover).
  • We continue to look for a bearish second half of 2023, and we also have some parameters to watch that could negate that. Personally, a simple sign I’d watch for is SPX losing its daily SMA 50 & 200, dragged along with other already suspect (at best) segments like small caps, materials, metals & miners (items I am short) and commodities. But it’s the Goldilocks rotation that is keeping things afloat for now. So those are the kinds of nickels I am picking up in front of the steamroller.

Global Stock Markets

Watch the USD. Its inverse dropped as it and the Gold/Silver ratio each popped notably on Thursday and Friday.

If that is a real move global stocks will get hammered, on balance. So too will commodities continue to be bearish and cyclical/reflation-sensitive US sectors like Materials, Industrials and Energy will feel the pressure.

Japan seems like an exception, likely owing at least in part to the weak Yen. EM and Asia (ex-Japan) are looking weak neutral at best and China large caps are a bit worse.

Canada’s senior market is still functional in a similar way to SPX, while its junior market continues to flounder around at support. Fellow commodity country Australia is a volatile sideways.

Lat/Am sees Argentina making a new bubble high on Friday and Brazil bouncing sharply within a gentle downtrend.

Europe continues to sport bullish and has been tracking the bullish Euro. Interestingly, however, the STOXX 600 started to grind as the Euro topped out with the hard bounce USD. Hmm… we can consider Europe currently anti-USD, along with many other markets.

India is a different sort of bullish than Japan. Nikkei is breaking upward from a sweet looking base/consolidation as we’ve noted last week on the weekly chart (with a pure technical interpretation being new highs to come on the bull cycle from 2012). BSE is more volatile but also bullish in that its trends are up.

Back to Nikkei, longer-term subscribers may recall that we had a technical target for Nikkei around 34000 based on the long-term base breakout back in 2017, and darned if the chart may actually have been right. If the current break upward from the consolidation (which looks even better on the weekly chart) holds true, there’s the target awaiting.

Generally, I have little interest in global stocks to go along with only mild interest in certain US stock segments. But if USD breaks down – again, something it hinted at NOT doing to end last week – then I’d have strategic interest in global stocks for reasons laid out in NFTRH 756.

Precious Metals

I talked my head off about gold, silver and the miners (as well as stocks, bubbles, the Fed, etc.) in the interview linked here. You might want to check it out if you haven’t already, because I want to just cover the basics here this week.

Gold stock fundamentals are a-okay at this time. Gold is trending up vs. most stock markets and commodities, major currencies and best of all, inflation continues to fade. We await a morph from Goldilocks to a more pronounced deflationary pressure that would wake up the sleeping masses. We’ve covered it all consistently and if the situation changes, it will be noted. But it has not changed, even as the sector got dinged last week.

Gold and silver commitments of traders are and have been at the point that could trigger a pullback/correction and that came last week. We’ve also noted that when viewing longer-term CoT data, this level was “not a show stopper”. That’s my story and I’ll stick with it.

Gold sees briskly long large Specs, well short Commercial entities and an enthusiastic little guy. Gold barely pulled back last week, but if it continues to do so the CoT are not standing in the way.

Gold’s daily chart is is fully intact as it has not even tested the uptrending SMA 50. A serious – and healthy – pullback could bring it to the ‘higher low’ area at the SMA 200 (1827 and rising). But first things first. The gold price is intact, technically. MACD is not nice, however.

gold price

The monthly chart is a picture I like looking at for its bullish potential beyond the noise of today. It’s on the third knock at blue sky, thus far failing to break. But monthly MACD, unlike the daily, is an ally for whenever the time comes for gold to take its next shot at the upside. RSI is also quite nice.

Then there is the monthly log scale chart showing that the false breakdown noted above also dinged a long-term trend line, which it recovered in due time.

Silver’s CoT also recently popped to a risk area but like gold did not hit “show stopper” levels, historically. But the pullback here certainly is normal, especially considering the interested little guy.

Silver’s daily chart cracked support #1, which we have noted would be no big deal if it happened. That’s how silver tends to roll. Nice, normal neat support level? Smash it, baby! However, silver is also testing the SMA 50, which is within that fat short-term support area.

Of more importance has been the 22 +/- area cluster and now it is even more important as the SMA 200 rises toward it. Let’s view that as our most important junction of support for silver going forward.

silver price

The monthly big picture view sees a normal pullback from very clear long-term resistance (note red arrow touch points from 2010-2012). RSI and MACD are positive and to keep a bullish view we’d really like to see any testing of the SMA 200 above be quick and be met with a firm reversal to keep this big picture view looking good.

The log scale monthly shows an intact situation to the long-term trend line and Andrews Fork, aka a TA novelty I like to include once in a while.

HUI’s weekly chart halted where it was supposed to halt, if a pullback were to manifest. It is still a candidate to zoom up to the upper channel line, but it is also a candidate to test the ‘higher low’ area around 225.

hui gold bugs index

The monthly log chart is two things: 1) in a volatile but bullish series of higher highs and lows and 2) still within the downtrend channel (not drawn here, but shown above). In other words, a grand new bull leg is not yet indicated to be in play on the big picture.

hui gold bugs index

Here is the linear monthly for more perspective. Our target is 500, but first Huey needs to break the handle by taking out the 325 area.

hui gold bugs index

On to the GDX daily “management” chart, we find a short-term double top potential shaping up. However, key short-term support at 33 (with the SMA 50 rising toward it) has not been breached. So it’s intact, technically but with said double top potential and frankly, an unpleasant looking MACD structure.

As long as GDX has been above 33 we’ve been open to the gap filling above 40. But if MACD and RSI are guiding it to lose support, we’re back on the sub-28 Express and watching for that gap to fill (and frankly, I wouldn’t mind getting it out of there). Then the key is to hold a higher low. But again, first things first. 33 area support and the SMA 50 (32.46 and rising).

gdx gold miners etf


I’ll spend even less time on this segment than I have been in recent months because with even inflation’s backward looking signals now fading I am no commodity bull. Copper sucks. The other sexy super-cycle global build-out stuff sucks (or is not particularly actionable). Commodities will get played, pop here and drop there as the hedge hogs rove through the landscape, Whack-a-Mole style. No thank you for now (with the possible exception of uranium).

However, assuming the disinflation>deflation scare view is correct, there should come another inflation problem, perhaps in 2024. If the current view is not correct, we’d have the likes of the situation discussed at length last week, a global anti-USD trade. That would bring commodities front and center again, sooner. So by no means am I abandoning interest in commodities, especially uranium, copper, battery metals and energy. For now…

  • CRB index (256) continues to trend down with initial support in the 230s and better support in the 190 to 200 area.
  • Oil & Gas are trending down and crashed toward long-term support, respectively. WTI oil (70) has successfully tested support below 64, but is an an ugly chart pattern. Considering that oil held support at the time of the OPEC+ price manip, and until gas gets up off off the mat, I for one will be cautious about flipping positive on Energy.
  • Copper & Industrial Metals (GYX): Reality comes knocking to the ‘China story’, fundamental supply/demand bulls in copper. The copper price broke below its 200 day moving average and it appears that the downward consolidation may be flipping to downward trend. GYX is worse. Flat out bearish, now well below the converged daily moving averages.
  • Uranium: I took my modest profits on CCJ and SRUUF not because I wanted to, but because of the wider macro situation for the inflation stuff. U is a bit of a wild card and CCJ, URNM, NXE, UUUU, etc. have not lost their bounce patterns. This remains primary on watch for the future.
  • Palladium, Platinum, Nickel, Lithium, REE: Pd is above its daily SMA 50 but still in a hard downtrend. Pt continues to be similar to silver in that it has established a new uptrend but got knocked down last week as well. Ni took another hard down and broke its potential base/bottom. Li is still trying to bounce from a support level, the watch list items ALB and especially LTHM bounced hard, but thus far that is all it is. REMX and watch item MP are trending down.
  • Agricultural (GKX): The index remains bearish while the ETF (DBA) continues to look constructive to break out of a base. Little current interest, regardless.


Now it gets interesting. The Gold/Silver ratio (GSR) made an impulsive jump and now we’ll see if the old rule still applies. That rule is that the USD gains a liquidity bid if the GSR continues upward. Might it have been a knee-jerk in the GSR soon to fail? Sure. Might it have been the start of something bigger? Sure might have been.

As for USD, it is obviously still bearish as it tests the downtrending daily SMA 50 with resistance above, including at the SMA 200, which appears to be rolling over.

usd and gold/silver ratio

The weekly chart lends more perspective. USD is thus far holding support from the 2020 high and reversal, and a monthly chart (not shown this week) would display even more solid support and an ongoing longer-term bull market. As for the near-term, if it ain’t broke, it ain’t the foil for a widespread global inflation trade. In other words, Uncle Buck holds the pattern’s neckline. Should that be lost, we’d think hard about a global asset party lasting approximately to point ‘C’. But as yet, the Gold/Silver ratio begs to differ if its breakout leads to more upside.

Daily currencies for your review, with the blue SMA 50 the key to existing intermediate trends.


Finally, weekly Bitcoin halted right at target (30000+) and is turning down. If USD fails, expect this digital speculation to bust through resistance. If not, BTC could be back on the Sub-12000 Express.



Savings balanced by gold.

Trading Account: Short Industrials (XLI) & Metals/Miners (XME)

Roth IRA (non-taxable, no contributions)

Cash is at 87% and yet there are three short positions. So the IRA is nowhere near the same time zone as invested in this market. The focus is gold mining, for reasons that only seem to get more solid as the inflation phase fades away. As I get a clearer view on this correction in the sector I’ll plan to add positions if all stays on plan in the macro. But #patience all around. I want to try to get this right. But it could takes weeks/months to play out. So, still taking it week-to-week and fine tuning the view.

Cash & income-paying Equivalents are at levels that are right for me and my real-world situation. Your situation is different. Cash will be adjusted as needed.

Refer to the Trade Log under the NFTRH Premium menu at for trade info, if interested (not that you necessarily should be). Also, you can follow at Twitter @NFTRHgt for notice of updates.

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