As noted in a post earlier this morning, the debt ceiling Kabuki dance is likely just that; theater, a stage for a great meeting of the minds of two sides that always were going to meet. And maybe an excuse for stocks to continue the Q4-Q2 rally. Of COURSE it is.
This daily chart of SPY shows how intolerant I am of the short side, even if just to hedge. All I needed was a hint that the stock market might continue its intermediate trend (up) to unload SPXS (small loss, and maybe TZA, which is at a 4% loss that I don’t want to see compound). As for shorts on Materials, Industrials and Metals/Miners, I’ll hold them for now, as they have not compromised the bearish look of the charts (yet, anyway).
But back to the SPY chart, here is the little nudge above the upper line of what looks like a little Diamond consolidation pattern. I am just not going to risk a b/s market reaction on a b/s debt ceiling outcome that was in the bag the whole time. But that’s me, a very non-stout bear player. Nope, not at all under these circumstances.
As for gold, silver and gold stocks, what’s good for the goose may be good for the gander, in reverse. If the debt ceiling Kabuki turns out to be a temporary aid to the stock rally, might it at least be neutral at best for gold and the miners? Relative to stocks and commodities, it would probably be negative in the short-term. A nice excuse for the sector to finish up a healthy correction, as well (I took some DUST as a hedge per yesterday’s trade log).
Here is the GLD/SPY ratio today. Two things of note:
- It’s breaking down, on cue and
- The breakdown is within a major daily uptrend (SMA 200), mild though its upward slope is.
If things go as they have in the past regarding the debt ceiling noise, the parties will agree (of course they will!) and a market looking for reasons to celebrate may (not will, but may) continue its trend, which has been a very painstaking UP. Gold would likely get a pullback in relation to the stuff positively correlated to the economy, like stocks and commodities.
At such time as indicators like the Gold/SPX (GLD/SPY) ratio may bottom and hold trend, it would be time to take interest in gold stocks again, especially if nominal GDX/HUI are at logical support areas, which we have managed and will manage going forward.
Meanwhile, regarding the stock market, it’s important to realize that the rally never did end. At least that is the case in the broad SPX, the leading NDX and even the SOX index, among a few others. The noise coming out of Washington got Twitter talking about debt default and a US dollar crash. Because of COURSE it did! But it was just noise. Bigger picture, the gold/miners play is not dead by a long shot. But it was due for a pullback/correction and that’s what we have got.
Meanwhile, I’ll plan to manage the market we’ve got, not the one I want to have (and frankly, I don’t particularly mind this one in the near-term).
