• Post author:
  • Post category:NFTRH
Notes From the Rabbit Hole
Notes From the Rabbit Hole, #760


  • US Stock Market: Most everything bounced on ‘jobs!’ Friday. Happy days are here again. For a day at least. The prevailing backdrop continues to be Goldilocks and favoring Tech areas like AI, Cloud, Cloud Security and Semiconductors. The view continues to ‘bear market rally’ with SPX now into our target zone of 4219 (gap fill) to 4300. If it were to take out 4325.28 and hold it, we then shift to managing a test of the highs targeting 4800 (+/-), which the leaders, NDX and SOX are trying to point toward now. On the other hand, the primary target has been 4219 to 4300. So why not manage that before we get too hysterical on the upside?
  • US Market Sentiment: Over bullish, but not yet definitively at a bull killer reading. But market is at risk here and now. That risk would only increase if we get a killer upside reading by Dumb money indicators.
  • Market Indicators: Currently benevolent and supportive for the ‘risk on’ markets and the ongoing US/Global rally. Of note, the Libor/T-bill indicator is at ZERO after spiking with the bank crisis hype a few months ago. High Yield spreads are positive for risk on, negative for gold. Real, inflation indexed 10yr yields are bullish for Goldilocks, bearish for gold (and not positive for commodities) as they have spiked to near previous highs. 10yr-2yr yield curve is back on an inverted flattener, positive for Goldilocks, negative for gold.
  • Global Stock Markets: Europe is near its highs, Asia/EM bounced to in some cases undo previous breakdowns. China is still technically questionable, at best. Commodity countries Canada and Australia are very volatile with undesirable charts and Canada Junior, TSX-V, is clinging to important support. Special interests have been Japan and India, and the Brazil ETF has taken on a bullish flavor lately.
  • Precious Metals: It’s a correction and it is in line with the pullback in macro fundamentals. The PMs are setting up contrary to the cyclical world and that is positive, although the average gold bug will not think so. He is going to rail against the dark forces of manipulation. Well, if they have managed to manipulate all the indicators noted above (and more), then they sure are all-powerful. However, when the party ends there will be gold… and its miners leveraging the situation. As for the correction, see the segment below for some technicals. Key higher low points are noted.
  • Commodities: Trending bearish, bouncing in some special interests within the general commodity complex. Goldilocks is not helping. Again, see segment for more.
  • Currencies: USD is questionable, but now being supported by a renewed impulse of short-term hawkish sentiment. Its bounce did not halt at a notable resistance area, so there could be more upside. A breakdown, however, would signal more rally participation by commodities, EM and inflation trades and possibly even an end the precious metals correction as the ‘death of the dollar’ cult would then take over. Bitcoin has turned down from the target zone at 30000+. Logical. Daily chart used to project a buy for BTC bulls if applicable.

US Stock Market: “I Have Always Been Here Before”

Extra credit if you know the source of title’s quote. :-)

Last week the US stock market, as represented by its headline index, SPX, and as led by NDX and SOX, hit the lower end of the rally target of SPX 4219 to 4300. Woo hoo! Time to short the pig!

I have seen this movie before. It is a movie, aired in 2013, when a former extended family member and financial adviser was talking at Thanksgiving (2012) about how the “Fiscal Cliff” (remember that bearish media nugget from the past?) was going to crash the markets and all the best fund managers were raising cash.

I responded: “Bullish” (incredulous financial adviser: “really???”) and then he proceeded to keep clients all-in as always, through booms and busts, while I proceeded to greatly under-perform the S&P 500 due to my chronic risk management. By January of 2013 NFTRH began tracking the improving book-to-bill ratio of the Semiconductor Equipment industry, what I called a “canary in a coal mine” for not only Semi manufacturers, but also a string of Tech > Broad > Manufacturing > Employment > Economy. And damned if it did not play out.

So “I have always been here before”, with “here” being a place where I have turned bullish well before the herd (Q4, 2022), but then moderated my bullishness due to risk management (and a fundamental non-belief in the soundness of the structure of the modern financial system), while the come-lately herds (FOMOs, MOMOs and the touts that tend them) go on to bullish glory. SPX was around 1500 in January, 2013 and went on to head spinning bubble highs in 2022 before topping out into the current bear market.

Today I am practicing the dreaded thing known as risk management by taking profits that are afforded me, trying to remain aligned with the markets’ inner workings (e.g. Tech/Semi leadership, Goldilocks backdrop, potentials for interim shifts to or away from the inflationary/cyclical stuff and of course, risk indicators like those you will see in the precious metals segment) and realizing that cash is paying out a no-lose income of around 5%. One thing the 2013-2016 period had going for it that today’s bull phase does not: ZIRP (zero% interest rate policy). That’s an important difference.

The Fed is raising the ‘value’ of money (funny munny) by assigning income to it, whereas from 2008 to 2016 and again in 2020 to 2022 it assigned ZERO value to it. During those phases the Fed wished to pump asset markets. ‘The Fed wanted me to take on more risk and I did not listen. The Fed was backstopping those financial advisers who had ’em all-in. So logically, today is not the time to be thinking ‘all-in’, as it is a fundamentally different Fed than the Fed that willfully pumped the Everything Bubble back then.

So the daily “management” chart would show SPX having taken out the gap at 4219 (current index price: 4282) and now eyeballing the 4300 round number, which would be a lower high to the August, 2022 high of 4325. But what if…? What if this hog has its sights set on the alternate target of 4800 per the weekly chart pattern originally imagined back in December, 2022? Beauty, eh?

Even if the above were to play out against draining money supply (i.e. draining the thing that printed the bull from 2020 to begin with), an easing economy and disinflation in the air, can you imagine the FOMO ‘happy days are here again!’ suck-in a test of the all-time highs would instigate? My larger view for 2023 is bearish, but until this seasonal rally and the imaginary right side shoulder fail…

Man… eyeballs… chart… chart pattern = post to disturb the completely in control bears this morning. Don’t fumble, boyz ‘n girlz.

The original test of the highs was projected at 4800 per the post linked above. It was since modified to 4700 as the situation evolved. But the way the bottoming pattern has developed the measured target is back to the original 4800. Beauty, eh? If SPX takes out 4300 and ticks a higher high to the August high of 4325.28, then it will be time to begin managing the prospect of these higher targets and the likely FOMO fueled sentiment blow off that would accompany it.

So what if? I’ve kept that question in mind since originally imagining that scenario and now that SPX is in the target zone (at a time when market lore, if not reliably, seasonals, state “go away” after you “sell in May”). The December post mentioned FOMO and that appears to be developing as Tech and Semi “happy days” are here again!

The weekly charts show NDX and SOX having entered momentum mode and SPX thinking about cracking 4300. Even the Dow got off its ass and grabbed headlines in the MSfM with its biggest day of the year on Friday. The US market is now two things: 1) Bullish and 2) Dangerous.

SPX, NDX, SOX & DJIA US stock market

For my part, I am going to proceed as I have been, which is to trade, take profits, re-seed if/as the market rally remains intact, but keep an eye on the exit (and a host of shorting opportunities). This is not 2013, but there is a reason we have had the secondary upside target scenario in play and now the market’s leadership, Tech and Semi, indicate it could well be in play.

Frankly, I’d prefer an epic suck-in where we can make some munny to the upside and then for speculators who would take the risk of shorting, maybe even on the subsequent downside from higher levels. Can you imagine shorting a mini-mania within a bear market that began in January, 2022?

Of course, it could all end Monday. But they were not selling in May. They were buying the AI hype, buying the fabulous jobs report (it wasn’t; it was ‘services’ laden and as such, lagging), and they’ll probably buy the debt ceiling relief hype.

It could also keep going and prove my ‘bear rally’ view wrong. I don’t see it with a non-dovish Fed, declining money supply, and developing MOMO/FOMO (usually ending stage stuff) in the markets. But I will always keep an open mind. With the Fed sidelined, I don’t know how Washington could cook up fiscal inflationary policy, but I would not put it past them.

So the plan is to stay nimble, realize that the market is offering up profits from the long side and as I’ve been saying for so many weeks (months) now, it’s a week-to-week analytical situation. Bullish within a longer-term bearish situation. But last week we also hit the primary target zone. That’s not nothing.

US Market Sentiment

Dumb Money is eating the bullish headlines and smart money is fading them. That is just excellent if we are trying to marry the potential for a market top with over-bullish sentiment. Check out the short and medium-term risk summaries. It makes me feel as though 4300 (+/-) may cap this pig, after all. However, one interim bearish phase could reset the whole process as well, by dialing sentiment back in the short-term.

Best for a neat market top for the sentiment backdrop to tick further into extreme territory before marrying sentiment to technicals. But dumb money is in da house and it’s lookin’ to make itself some coin in dat AI thing and where ever else it can pick up those nickels. There is room for Dumb to climb and Smart to fade in the short-term.

As for the seasonal pattern, May typically ends strong (check)…

…and June typically begins strong (check) and weakens. Then the situation slowly degrades over the summer, with July a mixed bag, August favoring a bearish bias and September on a flat out bearish bias.

NAAIM (investment managers): Quite subdued on May 31, but so too was the S&P 500. NAAIM are likely to have rediscovered their vigor by week’s end, along with SPX.

AAII (Ma & Pa): Still subdued on May 31, but ticking up a bit. Likely further ticked up by week’s end.

Investors Intelligence (newsletters): Elevated bullishness as of May 30, and likely more so by week’s end.

Of course, with upside milestones now being registered, the herds are going to hear about things like bearish to bullish trend changes. We’ve been on a confirmed intermediate uptrend in SPX since March and with the subsequent grind upward more technicians are going to fall in line to the bull story.

Yet, per the opening segment, an open mind is begged. Per Sentimentrader’s data, the 12 months after such a signal is overwhelmingly bullish. So again, speaking personally I must guard against a 2013 scenario where I was lonely bullish (as per Q4, 2022) and then fail to take full advantage. Of course, I will not take full advantage because I will be nowhere near all-in, as I never am that. But I sure as shootin’ will capitalize if it goes the way the data imply.

The caveat, and it is a substantial one, is that if we are truly ending a major bubble (unlike the blips in 2000, 2008 or 2020) the historical instances of the past won’t matter. If this is truly a FOMO inducing bear market rally, it won’t matter. But this data does lend some backing to the idea that maybe a test of the highs (e.g. SPX to 4800) may be in play.

Global Stock Markets

Please take due note that local currencies play a role in market performance for global citizens. NFTRH being American, cannot get too far afield managing all those moving parts with my simple charts. So global market comments and charts are for reference.

Still, I continued to cast a line outside of the US last week, adding general India (INDY) to my RDY holding. Here is what I saw on the weekly chart. While I do not place a whole lot of importance on trend line breaks, weekly INDY held support and ticked out of the trend line while turning RSI green and turning an up-triggered MACD constructive to go green. Further, a daily chart would show a hold the SMA 200 and a break upward from its convergence with the SMA 50.

Brazil (EWZ) was also added, for some EM exposure. The daily chart shows a neutral situation (w/ a bullish bias), but a hold of the moving averages and pop upward. As with US holdings, it’s all week to week and I will not tolerate even minor failures. But as the chart sits now, it’s got a constructive look to its pattern with a decent volume profile.

Europe/Germany: Broad Europe is still elevated, clinging to its upturned 50 day average and DAX is a leader, near its all-time highs. I think Europe may be in a staggered cycle behind the US, where the ECB is earlier in its monetary hawk cycle than the Fed. No personal current interest, as I am more interested in EM for the future, assuming the next inflation trade comes about.

China/Asia/EM: As we have been noting, China large caps (FXI) had broken down and despite a hard bounce last week, remain in technical breakdown mode or at least, in a downtrend. However, Asia ex-Japan (AAXJ) avoided a breakdown and popped back above its 50 and 200 day moving averages. So did EEM, which in essence mimics AAXJ as they share some common components. This pop in EM also factored into why I took a shot with Brazil.

Canada Senior & Junior: TSX is in a volatile attempt to change its trend to up after bottoming in October. It’s been a global laggard. Being a relative commodity/resources economy, it’s likely pressured by the ongoing bear trends in commodities. Speaking of which, the TSX-V, much more geared toward commodities and resources, managed to avoid a breakdown below clear long-term support with a drop and small upward reversal last week. This speculative inflation trade indicator is still bombed out, but it is also possible that it might have made one of those small downside head fake breakdowns and reversals prior to a real rally (as often happens in markets). As has been the case all along, TSX-V bears watching as a bullish or bearish indication on the more speculative inflation trades.

Australia: AORD is not surprisingly similar to the market of fellow commodity/resources economy, Canada’s TSX. It too is in a volatile series of ups and downs, trying to grind out an uptrend. However, AORD is in a bearish pattern that men who stare at charts would label a Head & Shoulders top.

Japan: We watched its constructive pattern all along the way and I personally did not take action, other than with NTDOY, which is doing okay by its neutral daily chart. It was added for its longer-term bullish Cup & Handle, which is under no obligation to play out bullish any time soon. I looked at TM while on the road and thought about buying, but sat on hands, deciding to wait until I could get settled. It popped hard on Friday. With the accelerated state of the Nikkei, I am not going to chase Japan, but there are several stocks in various industries that have not moved much and could be considered. For example, Machine Tool/Robot maker FANUY is looking constructive by its daily chart. But a look into what industries are working, and why, would be recommended. For example, Fanuc is tied to China’s manufacturing economy and those of the west as well.

Global will of course be affected by the fate of the US dollar, to varying degrees. Last week, ACWX bounced while USD remained elevated (inverse USD, depressed). Either a disconnect is occurring or somebody is wrong. Global stocks appear to think USD has topped for its rally that began in early May. USD on the other hand may be thinking that global is being unrealistic.

Precious Metals

The correction drags on. Unless nominal gold is ready to rally the stock market should break down per the preferred SPX target of 4219 to 4300 in order to avoid a breakdown in the important gold/stock market ratios. Gold/Commodities is more normal. As noted in an update, the Copper/Gold ratio is making a hint to bounce further as the Gold/Copper ratio below hints at the opposite.

Gold’s ratios to US and global currencies are intact and other fundamentals (also relevant to the wider macro) are in the following status:

Indicators for Gold (and its opposition, the risk ‘on’ cyclical world)

  • Real Yields are still gold-bearish (and Goldilocks constructive), as the still-intact potential topping area has seen a recent spike upward in inflation indexed 10yr yields. This implies that central planning authorities (the Fed) are still in control.
  • 10yr-2yr yield curve is once again flattening deeper into its inversion. This also implies the Wizard is in control, is not positive for gold and continues to indicate Goldilocks.
  • High Yield spreads are muted, implying that the broad market’s ‘risk on’ backdrop is intact, which is not bullish for gold. High yield bond fund (HYG) is trending up and so are its ratios to Treasury and Investment Grade bonds. It’s ‘risk on’, baby.
  • Libor/T-bill yield has crashed from the banking crisis canard earlier in the year to ZERO. As in no systemic risk whatsoever currently indicated. It’s as we’d been noting during the supposed crisis; it would not prove material. Indeed, the bank ETF (KBE) took a big pop on Friday and could be watched for a buy. Meanwhile, in its benefit for the pigs and for the broad market, this indicator is not bullish for counter-cyclical gold.

Still, Gold/Commodities ratios are still in line for gold mining sector fundamentals. Gold (stock) bugs obviously want to see it remain that way.

GDX daily chart shows an upturn from a higher level than expected. Usually, the miners put in dramatic, support threatening bottoms, not gentle ones above any clear support. Frankly, I thought the SMA 200 (28.69) was a shoe-in and a gap fill below 28, likely. And folks, they may still be.

After seeing the strong upside volume on GDX I took a reduced profit on the DUST hedge with the idea of considering re-hedging on a bounce to resistance at the SMA 50. Then Friday’s down day (logically, on the positive payrolls hype) happened. If it pops to the SMA 50 I’ll consider re-hedging. If not, I released ORLA, which spiked hard to its SMA 50, to lighten exposure for now and may still re-hedge, depending on the speculative party atmosphere going on in broad equities.

But if the gold sector acts like it usually does, it would eventually bang the SMA 200 and fill the gap. Having time to get myself settled this weekend after traveling last week, I was probably hasty in releasing the hedge. The sector correction, when also considering gold and silver below, has odds favoring a continued correction even if there is more bouncing to the 50 day averages to come in the short-term.

Of positive note is that the precious metals complex did not do what the inflation trades (commodities, materials, EM, etc.) did on Friday. It dropped while that stuff popped. If that microcosm becomes a trend it sets the sector up to be more unique in a post inflationary, post bubble environment later on. It’s important to tune out the impatient perma-bull bug/victims who squirm and insist that we should give up on gold when it and the miners take normal corrections during bouts of speculative and bullish broad market activity.

Gold (daily) bounced to test the SMA 50 and failed on Jobs Friday. Logical. Our preferred correction targets are lower, and they include a tap of the SMA 200 (1840) and/or a higher low at or above 1820. Even if that were to occur, gold’s intermediate trend from November would still be up.

Silver did not make it to its SMA 50 before getting halted on Jobs Friday. A ‘C’ leg could take it to the preferred corrective target at the SMA 200 (22.07), if not the top of the bottoming pattern at around 21. Silver’s intermediate trend would still be up as well if those targets are hit.

Gold and silver’s Commitments of Traders situations remained virtually the same as the previous week as of May 30th. Those situations indicated that there was more corrective work to do in the metals before the trend toward a positive risk/reward would be complete. They still do.

This weekend’s work favors a continued correction before a firm sector buy comes about. If something material changes in the interim to next week’s report we’ll note it in an update.


Not that commodities are doing much at this point either in the Goldilocks-driven speculative frenzy going on in stocks. Not at all. They will bounce here and there, but Goldilocks and disinflation are not friendly to commodity prices. Nor are a global manufacturing recession or economic deceleration.

CRB daily is trending down and bearish.

CRB weekly (current price: 259) indicates further downside before the next widespread commodity play. The clear support areas are 240 and the 38% Fib retrace, 220 and the 50% Fib and handily enough, 190 and 62% Fib.

Meanwhile, the bounces come along, especially in the outliers and special interests like Uranium, Lithium, etc. Last week I took on LTHM (Li) and MP (REE) for that reason, and even FOMO’d CCJ (u3o8) because these are special areas for the future. As is copper, which also bounced. But copper is only bouncing to test its break back into a downtrend and its industrial metals bros are worse, on balance. Nothing has changed except that last week’s news backdrop gave some oversold stuff an excuse to rally.

Crude Oil is trending down and bearish. NatGas is crashed and bearish as it tries to form an extended base/bottom (FWIW, Natty’s seasonal typically declines from here into September when it turns up hard).

But the bottom line plan for commodities continues to be for resumed/continued bearish trends before the next inflation trade comes about. A mitigating factor to that would be the state of the US dollar and the state of the “dedollarization” hype going around the globe lately.


USD did not quite reach the resistance area at the daily SMA 200 before taking a little down dip to a minor support area. I don’t put much weight on the Gold/Silver ratio right now although it is tracking Uncle Buck rather reliably. If they continue to ease, it’s probably “party on, Garth” short-term for the broad markets, maybe including commodities. At such time as they may rise – and especially if USD were to get through the SMA 200 – it would be an indication of a liquidity stressed macro. But judging by the sedate High Yield Spread and especially the flat as a pancake Libor/T-bill indicator, that is not in play at the moment.

The daily chart of global currencies reflects the USD bounce/rally. Last I heard the ECB was talking hawk, so we can keep an eye on the Euro to see if it takes another leg up. CHF is in an uptrend pullback similar to gold. JPY has gone bearish as Japan has gone bullish. Makes sense. The Japan bull is, well, bull.

Commodity currency CAD is constructive while commodity currency AUD is not. GBP is okay and trending up.

We have not reviewed BTCUSD in a while, so here is that review. We used a weekly chart to project the rally to the 30000 area and here is a daily chart showing that area dinged and pulled back from. Was that all there was to the rally? Undetermined, but BTC has done all it needed to do by banging clear resistance (not shown on daily chart).

If you want to buy Bitcoin (I, as usual, don’t particularly) the area to give it a shot is the rising SMA 200. It has after all turned that major daily trend marker up. So it may well have bottomed. But such a test would confirm. As with other markets – like gold stocks for example (ref. GDX chart above) – a higher low would need to be made above the March low (19597).


Savings balanced by gold.

Trading Account: No positions.

Roth IRA (non-taxable, no contributions)

IRA is at 81% cash with only one short position. I expect that to increase sooner or later, and if Goldilocks remains in play I’d expect it to center on the cyclical/inflation sensitive stuff again (as is the Materials short). Gold miners may also be hedged.

Meanwhile, some solid profits were booked last week in AI hysteria (ANET) and Semiconductor hype (AEHR, and secondarily, INTC). As has been the case since Q4, 2022 I am week-to-week and willing to increase bullish exposure (in line with the prevailing macro, which has been Goldilocks to this point) or flip bearish at any point. Gold miners will be a special interest until such time as their macro fundamentals would fall apart. And folks, if that happens (not currently expected), NFTRH will decisively remove itself from that herd.

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.

NFTRH is not to be distributed to third parties without prior written consent

Notes From the Rabbit Hole (NFTRH) is a weekly market report in which we provide analysis on financial markets.  We make every effort to provide accurate and high quality content, but this analysis ultimately represents our opinions and these opinions are provided without warranty or guarantee of any kind.  See full terms & conditions of service under the ‘About’ heading in the main menu.