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Notes From the Rabbit Hole
Notes From the Rabbit Hole, #764


  • US Stock Market: Pullback turned out to be a bull flag, as suspected. Indexes ticked new highs on Friday but left a FOMO/MOMO driven gap. Could fill now or later. But the SPX target of 4800 is still in play. We are currently looking for the market to blow off amid its terrible risk/reward profile. It could be a lot of bull guiding directly to some painful bear in the coming weeks or months.
  • Indicators: Indicators are reflective of the risk ‘on’, bullish atmosphere. High yield spreads, Libor/T-bill, Equity Put/Call, SPX A/D line, etc. are supportive. One ongoing bearish signal is SPX Equal Weight negative divergence. See below. Indicators show bull sentiment in effect with few immediate disturbing signs other than the Put/Call. That can turn on a dime.
  • Market Sentiment (US): Brutally over-bullish now. Generally now near the degree of its opposite over-bearish condition last October. Sentiment is condition for a market top and it is in place now. It is not a timer, however, as it is a reflection of what is going on (full bore momentum and fear of missing out).
  • Global Markets: Global generally recovered the previous week’s pullback and also generally remains bullish with some exceptions, mainly owing to the state of domestic policy (e.g. UK).
  • Precious Metals: It is possible that the precious metals complex is ending its correction now, but that is not yet technically indicated. The best feature is silver thus far successfully testing its SMA 200. The sector can rally at any time, but the best, clearest low risk downside objectives are lower and still open. See segment for more detail.
  • Commodities: CRB trends down. Oil trends down. I bought oil. Most commodities are neutral to down with few positive trends behind them. We do keep open the discussion about potential rotations into the segment.
  • Currencies: USD and Gold/Silver ratio are going sideways with USD above support. It’s as simple as USD/GSR up, party in trouble or continues thinned out to Goldilocks. USD/GSR down, inflation trades whip up for a relief rally.

US Stock Market

Q2 ended with SPX ticking a new rally high as presumably funds window dressed their holdings to show that they are with the (bull) program in their upcoming quarterly reports to shareholders. I will not be surprised if Friday’s gap gets closed next week to punish the FOMOs. Regardless, 4300 (+/-) is now the key to keeping an upside manic blow off scenario going. That level – our previous favored target – has been taken out and moderately tested.

NDX, which has been leading the festivities, has filled its upside gap objectives and is looking at clear resistance at around 15500. Perhaps a good spot for a rotation to favor other areas if not away from the Goldilocks Tech trades? Undetermined because we should never underestimate the needs of man, woman, casino patron, Ma & Pa, and of course algo-driven machine to own Apple and Microsoft, the next big things in American Tech!

My snide comment aside, the rally is fanning out to other areas as rotations may already be in process. Interestingly, both Value and Growth are bullish (although a ratio between them would show that Goldilocks is still favoring Growth over value in a trend from January).

The SPX Advance/Decline line is fully on board with the current price, so there is no negative implied breadth divergence from this perspective.

Our favorite leadership chain, SOX>NDX>SPX is still intact from Q4, 2022 (SOX/NDX & SOX/SPX) and January of this year (NDX/SPX).

While under-performing greatly, the median of 1700 stocks (XVG, long-term chart) held clear long-term support. It’s amazing to think that the first two humps on this chart, representing that support, correlate with SPX 1500. So the median stock is in a bull market from 2009 but man, that is some under-performance with SPX currently at 4450. But with XVG above support during the 2022 bear cycle, there is also the potential for internal breadth rotation to lay a little catch-up.

Okay, now one from the dark side. SPX Equal Weight is greatly under-performing SPX headline. If the chart’s past is prologue a market correction is coming. That fits perfectly with our current theme that this rally, this bull cycle is a bear market rally or at least a terminal cycle, an ill-fated small bull market book-ending 2022’s small bear market.

With reference to some areas that look to only be in moderate bull phases (several sectors and indeed the venerable Dow itself), perhaps there will be rotations that chip away at the market’s penchant for clinging to the headline names (e.g. Nvidia, Apple, Mr. Softee, etc.). But at face value, while not a timer, the divergence in Equal Weight SPX is quite a bearish signal.

Speaking of the Dow, here is what I mean by its moderate bullish look. As a man who stares at charts I want to buy it. That is just a bullish look to an index that has been going sideways. If you stare at it as I do, you might even see a pattern measuring to 37500. Yup, a tick to a new all time high (previous high: 37000). Rhyme with SPX 4800? Also yup.

That is to say nothing of the Dow’s weekly chart pattern, which measures to just over 40000. If this thing breaks out, it could all be on the table. So say the daily and weekly RSI and MACD, which are positive and looking ready. Tech/AI hype machine overbought? Rotation to Dow’s more traditional areas like Pharma, old fashioned ‘value’ Tech like Intel, Materials, etc. is possible. For now let’s manage the smaller, and frankly more well defined pattern. It measures to 37500 and is a nice companion to the SPX 4800 target.

Am I bullish? You be the judge. There is a lot of bullish stuff above. Am I aware of risk? Oh yeah. Risk is rising every step of the way and with every internal rotation. But the bottom line is that the innocent days of the previously projected Q4 (2022)/Q1 (2023) rally are long gone. We are now into H2, 2023 and momentum and by extension, sentiment are taking on lives of their own.

My positioning is mostly in items that have greatly lagged or not become overbought. The bull case rests on rotation because to be long the big Tech captains now exclusively makes you a smart, even sexy player. But the time to actually be bullish on that stuff was December-January. From until recently my focus was Tech, like Semi, Cloud, Cloud security and more recently, AI. Now I want to fan out or be mostly sidelines, but not chase sexy stories.

All of the above appears to fit the new targeting for SPX, to 4800 and a test of the all time highs. My bullishness may also be a sell signal here and now. July begins a new quarter after all, and the summer dog days often include market corrections.

With that we realize that a high risk situation can unceremoniously stop at any time, screw the measured targets. We realize that the Dow has not yet taken out the pattern resistance. We realize that SPX could simply be on a bull trap above the previous 4300 target. We realize that Equal Weight SPX is flashing a warning.

We also realize that markets are very bullish, with some laggards showing signs of joining the party.

More Market/Macro Indicators

The pressure relief in the Equity Put/Call Ratio, as its weekly EMA 10 broke down, was an early hint that our existing objective of SPX 4300 was going to give way to a test of the all-time highs. That breakdown has obviously continued and the stock market has long since shed this negative indicator as an obstacle. It took the hype and FOMO of recent headlines about AI and a developing extreme over-bullish sentiment situation to do it. But it did it. This implies another element in place that is aligned with the high risk, but bullish FOMO-driven MOMO we’ve got going now.

High Yield spreads indicate speculation is on and risk is ‘on’. Duh, but keeping tabs on it.

M2 percent change from a year ago continues to submarine. Market liquidity is coming from somewhere, but new money is not coming from this traditional money supply indicator. Notice how the percent change has tended to rise into or during recessions. That was the Fed printing new economies and bull markets.

Here is the literal view of M2, rolling over slowly. In this view M2 is still very elevated. So it is quite possible that the money still sloshing around from the Fed’s policy fire hose in 2020 is supporting liquidity and the speculation that appears to be taking on a life of its own (shear, albeit temporary momentum is a liquidity force in its own right).

Real (10yr) yields are back to the highs. This is theoretically signaling the Fed in complete control of the inflation fighting process and also bearish for gold, as well as the inflation trades. If this breaks higher all bets for gold and commodities could be off and insofar as stocks may remain bullish, the signaling would remain pro-Goldilocks. Folks, I am just trying to interpret what I see as accurately as possible.

Libor/T-bill remains quite subdued after the little banking crisis mini hysteria that was summarily papered over by monetary and fiscal authorities. Again, one wonders to what degree such papering may have contributed to liquidity and speculation in the ongoing broad market rally.

US Market Sentiment

The Equity Put/Call indicator above is actually a sentiment indicator and it implies full bull momentum in play. Happy days, baby, happy days! Smart & Dumb money? Happy days, baby! Risk? As parroted repeatedly of late, it is rising right along with happy dumb money.

Stock market vs. the Citi Economic Surprise Index? Happy days! Like, beyond reason.

Newsletters (including your letter writer)? Happy days! Even before Friday’s lurch upward.

Ma & Pa? Oh, boy, happy days! Investors Intel and AAII are more sticky than dumb money. The big surges in these readings, even before Friday, are quite frankly, scary. As in potential for an immediate July corrective hit or reversal scary. If the market fills those Friday gaps, we’d then watch to see if that’s all there is or if there is more correction to come.

The other usual suspect, the NAAIM investment manage survey was over-bullish but only moderately so on July 28. This was reflective of the corrective bull flags that were still in place then. Let’s not bother with the graphic.

Market sentiment is now officially dangerously over-bullish to the opposite degree it was over-bearish back in Q4, 2022 when we began managing the prospects for the rally. It took a lot of time and grind to get the rally off the bottom-making grind back then and it could take some time to kill it here in H2, 2023. But risk is risk and it is very very high from a contrarian sentiment perspective.

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.

Let’s stick with the weekly chart view for a brief review without me pretending to have much clue about what’s going on internally with any given global market. I have not had to touch a single chart so take a general view and realize all statuses are as they were last week, just a tick more bullish on balance. You can reference NFTRH 763 if you’d like.

Precious Metals

Last week we noted that the Commitments of Traders for gold and silver had likely improved, although we did not have the reading at the end of that week. Well, they improved but gold only twitched more contrary positive and silver made an appreciable move, but not to an implied end of trend.

Silver often being the sector leader (downside and upside), it is notable and potentially short-term bullish that the little guy (Small Specs) took a hit in sentiment. It is possible (just spitballin’ here) that the CoT is in an alignment that could see the precious metals rally with the broads and inflation trades and then take a big hit later from higher levels. But the bottom line is that no clear cut low risk CoT readings have been signaled yet. For a view of what that might look like, check out the Palladium CoT in the Commodities segment.

However, there is no technical signal that gold (daily chart) is ready to rally. Bounce? It began that last week. Rally? Not unless it takes out resistance. Frankly, it looks to me like the low-mid 1800s are still more than viable.

gold price

As with the CoT situation, Silver (daily) is the one offering a ray of hope, technically. It dropped to the support area coinciding with the SMA 200, tested it, bounced and is now testing the SMA 200 again. As usual, watch silver. It has done enough work to qualify as ‘correction over’. But any bouncing that may come about would need to clear the May high (26.43) and hold it in order to signal the next bull market leg. As such, and as with gold, I am staying well aware of the downside potential to 21 area sooner or perhaps later. That would be a hard test of a higher low and the basing pattern’s upper support.

silver price

Could GDX rally now? Sure. Is the correction over? It’s not technically indicated. As with silver, GDX has not gotten the clear no brainer angst filled lower high, sub 28. There is a little divergence in RSI that could instigate a bounce toward or to the SMA 50. It did put a hard test and reversal in at the SMA 200. That could be noticed by men and women staring at charts and advising bullish about it.

So again spit ballin’, if the broad markets continue upward and if they do so while rotating to the laggards, why not a hard rally in the gold miners? It’s possible. A fill of the upper gap on GDX around 40 equates to around 330, or 100 points, on HUI. Possible? Yes, IMO. Probable? Not yet, in my view, but on watch.

I added to a few existing holdings last week (AEM, BTG and MAIFF/MAI.V). I initiated OGNRF/OGN.V, held SILV and NEM, and have an eye on EDVMF (EDV.TO), AGI, WDOFF (WDO.TO) and a couple others. It may be too much to ask for a sub-28 gap fill before a good move begins. But then again, maybe not.

Either way, with the broad market rallying hard, if the miners are to take up the bull festivities along with commodities and inflation trades, they are nothing special. Not yet. That would only come during/after a broad deflationary market liquidation. In other words, a real post-bubble environment. Do you feel like we are post-bubble at the moment? Me neither.

Hence, I think that regardless of any near-term price action that may resolve bullish, the usual touts posing as gold stock analysts should be tuned out if they even breath the word inflation as to why you should be long-term bullish. Inflation? Stocks sure do seem to like it better than gold miners.

Gold miner fundamentals prefer the combination of uncomfortable disinflation (i.e. deflationary pressure that impairs economies and cyclical stock and commodity markets). Whether or not the miners go up amid inflation, it is that other backdrop – extended periods of which have been oh so rare during the age of bubble policy – that benefits their real fundamentals, because that is when the economy is weak, stocks are weak and the Fed is weak.


Here is the Palladium CoT mentioned above. Quite contrary bullish as commercial hedgers are quite long, large specs are speculating quite bearish and the little guy wants none of this once prized element.

Meanwhile, the long-term monthly chart indicates about 13% downside before support is encountered from the current level at 1222. So perhaps there will be sentiment bounce if the markets rotate toward commodities, but bullish CoT or not, a clear technical buy for a long-term is not yet indicated.

As a side note, Platinum ticked a lower low to the February low and is and has been of little personal interest. Pd, Pt, Li and Au producer SBSW is down over 65% from its 2022 high and would be the watch item I’d look to some day.

Moving on, we had an NFTRH+ update on Crude Oil and Natural Gas while also noting that oil technically remains in the same downtrend it and the CRB index have been in for a year now. I’ve also noted the reasons I’ve held both NOG and AR. Namely, for those positive internals in oil and gas. But also for NOG’s intact bullish chart, which is better than the average Energy stock…

…and AR’s potential to put in a base/bottom/low as NatGas attempts the same.

As for the rest of the complex, copper and industrial metals (GYX) continue to be intermediate downtrend and bearish, respectively. I have a small and unconventional (non-miner) copper producer, ARREF (ARG.TO).

Uranium sector (URNM) held its 200 day moving average with leader CCJ remaining bullish. I added UUUU to my CCJ holding and the Sprott physical Uranium fund, trading at a healthy discount to the u3o8 it actually holds.

The Ags (GKX) went up big and tanked bigger to a new low. Meanwhile, DBA, the related ETF, tanked to a higher low. Not looking too good here. I hold the loosely related ‘fert’ play NTR, which along with MOS, actually took on a bull flag look last week.

In the Lithium patch, LTHM looks best, breaking a short-term bull flag late last week. ALB is still in its flag. These items are on short-term uptrends, not long-term ones or even intermediate yet.

Filed under ‘oops, I did it again…” a moderate position in downtrending REE producer MP was added as well. This is my strategic future hold. For right now it’s a position taken, along with some others, on the prospect of a commodity/inflation trade catch-up speculation.


USD (daily) logically got pushed down on Friday as asset markets popped and inflation trades at least popped their heads up out of their respective mole holes. There was some weakening inflation data that I supposed prompted weakening Fed sentiment. Sentiment that may believe that despite Powell’s hawking words, just maybe the June pause is THE pause. Well, if that is the case nobody has informed CME Group, which as of this writing still projects a July hike with only the slightest projection of easing in March, 2024! Will they adjust? Maybe. But they are what they are right now.

USD sits on the 50 day moving average, having halted at the first resistance area. Its would-be fellow market liquidity taker, the Gold/Silver ratio eased last week, but the short-term trend from early May is still up. We need to watch these two, as a pair, closely. As yet, there is no conclusive signal for an inflation trade type rally. Goldilocks, however, lives as of this writing.

If USD and GSR go impulsive up together the broad rally would probably end. If they drop hard together an inflation trade would very likely erupt. As yet, of course they are going sideways.

Global currencies (daily) see gold-ally Swiss France trending up but in correction. Japanese Yen tanking, renewing memories of the old Yen carry trades, which would see a bearish Yen beneath bullish global stock markets. Euro is sideways and neutral. Canada dollar is constructive at worst. Aussie is neutral with a bearish bias. British pound is firmly trending up as they fight inflation over there.

Finally, the weekly chart of Bitcoin checks in and says that if world continues to go speculative ‘up’, it’s on board. As it pokes the weekly chart’s resistance area again it has triggered a formerly down triggered weekly MACD up again. BTC is poised to break resistance amid a generally speculative environment.


Savings balanced by gold.

Trading Account: No positions

Roth IRA (non-taxable, no contributions)

IRA is 76% cash. That is me rotating into some laggards for a would-be internal market rotation of an ongoing broad rally. If I am wrong, cash will of course be increased. Everything will be for sale if/when the time comes for the end of the rally. Just spitballin’, however, I sense the potential for a final drive higher to be led by the extreme laggards, generally downtrending commodities and the still uptrending but also still in correction, gold miners. But the trend of the rally’s internals in not that at this time. It is still Goldilocks. So I still have some stuff that fits with that.

The bottom line is that the whole raft of assets is sailing along on the calm waters before the increased chop and eventual waterfall. It’s not yet the time to deploy hard and long. Not in my opinion. It won’t be until the broad rally either resolves to a new bull market (establishes a breakout that holds) or tanks to real bear market lows one day. Right now, it’s party on… with really dumb money.

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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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.


This Post Has One Comment

  1. Bart

    That PA COT looks really good IMO. COT = fundamental analysis.

    Love those sentiment indicators. They tell you objectively about the subjectivity of others.

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