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Notes From the Rabbit Hole
Notes From the Rabbit Hole, #769


US Stock Market (as per last week): While late stage rotations appear to be in play Semi & big Tech leadership held and remained intact. Bullish is bullish until it no longer is.

New: But markets got dinged, including Semi and Tech. No technical damage yet, but this could easily progress to a solid pullback/correction, given the sentiment and overbought situations going into last week.

US Market Sentiment (as per last 2 weeks): Now on the doorstep of epic over-bullish as the we hear more and more “soft landing” crap in the media. This can persist indefinitely, but it is now a firm condition of a market top and possible gateway to a real bear market (unlike the 2022 false start).

New: the market got dinged off that sentiment. A little pullback in over bullish sentiment could result in a brief rally, but this has further downside corrective potential, sentiment-wise.

Indicators (as per last several weeks): Stability/Instability indicators are still calm, while risk/reward indicators are sounding alarms. When risk is realized the story will change with great force. Like flipping a switch.

Global Stock Markets: Global rallies intact but several areas pressured last week. Importantly, the German DAX has again been knocked from blue sky into bull trap status. It bears watching as a global leader.

Precious Metals (as per last week): Nothing special, no matter how many times the gold bugs click the heels of their ruby slippers. Sector and macro fundamentals for gold stocks have been compromised and are looking for a bottom and reversal to positive, which I do expect. But not until the cyclical, risk-on, inflated macro rolls over. Meanwhile, if USD rolls over in the interim we’d be looking for a potential of a GDX gap fill at 40 (HUI around 335). But let’s also respect the downside potential (GDX sub-28 gap and in an extreme a gap fill and H&S target of 21). Gold is technically bullish and silver is technically intact. Watch the latter for leadership if an anti-USD play is in order.

Commodities (as per last few weeks): Watch USD’s bounce to test its technical breakdown. If USD fails we’re targeting as high as CRB 305. If it’s a USD head fake and resumed bull the play ends.

Currencies (as per last few weeks): All about Uncle Buck, my friends. Short-term still bearish. Long-term it’s a firm bull market.

USD Holds at Point #1 Under Pains of Decelerating Employment

During the inflation-fueled post-2020 period the US dollar got bid up in anticipation of the tardy Fed finally getting off its “transitory inflation” stance and getting serious about fighting the inflation problem they were primary in creating. After we began projecting a fade in inflation signals in Q4, 2022 that is exactly what has happened and the Fed appears tardy once again, this time about backing off the inflation fight. But the US dollar is leading the economic eggheads once again. This time in the southerly (dovish) direction.

This update on Thursday took a guess that July payrolls would show some deceleration and sure enough payrolls came in light and continued the streak of gently declining employment activity we reviewed last week in NFTRH 768. USD (DXY) did the expected on the mild counter-cyclical indication from the payrolls data. USD held at point #1, finding resistance at the 50 day moving average and the daily chart held its bearish orientation. Hence, a positive for the anti-USD trades in commodities, precious metals, emerging markets, etc.

us dollar index

But with the July breakdown below and recovery back above important support the prospect of a bear trap is still in play. But what could come about to turn the daily chart bullish again? Well, technically that begins with taking out the downsloping SMA 200 (orange) and point #2. It’s a bearish trend from Q4, 2022 until the SMA 200 says otherwise.

What could happen fundamentally to drive the USD up to resume its intact larger bull market? It’s as we’ve been saying, a market liquidity crisis – mini or maxi – would do the trick. Despite the de-dollarization touts out there you just watch how fast they knee jerk into USD if the macro markets start to unwind. The key to that scenario would be if the Gold/Silver ratio, currently calm and nonthreatening, starts to move upward.

A market liquidity crisis would be signaled by the 2 Horsemen of the (macro liquidity) Apocalypse riding together. To review, a rise in the ratio of gold, with its more monetary, less inflation sensitive and stronger counter-cyclical utility vs. silver and its less monetary, more inflation sensitive and stronger industrial (cyclical) utility would be a market liquidity warning.

On Friday the Gold/Silver ratio (GSR) actually ticked upward as USD got pushed down. This was a tiny positive divergence, but something to keep an eye on. But as yet the GSR is just another calm signal for markets. If it were to take out the converged and downtrending daily moving averages the emojis show the points where market players will (or should) start grimacing, pooping their… err, well, showing increased concern, and finally praying to their market godz if they are still fully accepting risk.

But as yet the GSR is just another sleepy and beneficial market signal for the ongoing stock market bubble.

Gold/Silver ratio

Finally, a reminder from the weekly chart that it is still fully a technical bull market for the US dollar. A turn down from points 1 or 2 further green lights the interim anti-USD trades. That is the speculative operating plan. But the warning is that if the broad stock market – strenuously over bullish and at great sentiment risk – takes a real correction USD could easily regather itself sooner rather than later. Let’s keep a watchful eye on the GSR/USD combo.

us dollar index

US Stock Market

Risk/reward became very bad into last week’s market pullback. For newer subscribers I note that NFTRH was talking opposite to that in Q4, 2022 when sentiment was grossly over-bearish (contrary bullish). It is important to know that analysis is coming from a place rooted in reality rather than perma-dogma. Back then it seemed to take forever for positive risk/reward to manifest into a bullish market, but manifest the bull finally did.

The rally/bull has gone on longer than originally anticipated but the original goal was to turn the sentiment profile upside down, and that we have done. As noted in NFTRH 768, the sentiment profile had become grossly over-bullish.

If a real correction is taking place, dumb has a lot further to decline before giving a buy signal. On the other side of the coin, sentiment twitches like this can serve to regenerate bullish activity in the short-term. Considering the extremes that over-bullish sentiment registered into last week’s pullback I decided to hold and increase my S&P 500 short (SPXS) and continue to hold my short on big Tech (QQQ). These against a still overwhelmingly long portfolio, aside from a very strong cash position.

smart money & dumb money

Other sentiment indicators:

Investors Intelligence (newsletters): bumped upward to even higher extreme over-bullish as of August 1st, right before SPX gapped down. Perfect.

AAII (Ma & Pa): Extremely over-bullish with 49% bulls on August 2nd. For AAII 49% is extreme. Last week’s reading was an also extreme 44.9%.

NAAIM (investment managers): Dropped to 78.5% on August 2nd from a leveraged bullish 101.8% extreme the previous week. NAAIM are more skittish than the contrary indicators above. They had rabbit ears as the market began to drop on the 2nd. The data are obviously taken end of day.

Using the DJIA as an example, the market could simply be taking a typical mid-summer correction. If this were to drop to around the SMA 50 I’d consider buying it (DIA) back, depending on the macro signals at such time – for a potential drive to the upside target of DJIA 37770.


The SPX daily chart, which we’ve used to manage the rally since Q4, 2022, shows what may have been a bull trap reversal, but more probably is a summer correction to clear the excessive sentiment prior to a perhaps final drive upward (operating target is 4800). Meanwhile, SPX has a gap that is likely to fill with the uptrending SMA 50 nearby (4407). That is the minimum pullback objective. Then comes support at 4300 and critical support in the 4150 area, toward which the 200 day moving average is rising.

As noted, I am holding the short (SPXS), but am not yet in any sort of bear market commitment mode.

S&P 500

NDX looks destined to fill the upper gap and test the SMA 50. Down volume has consistently outdone up volume and if the machines stop thinking they can hide in big Tech there is a nice yawning gap at 13655, just below a support level around 13700.

nasdaq 100

US Stock Market Bottom Line

With sentiment having become grossly over-done we are looking for at least tests of the 50 day averages in the major indexes. However, while not noted above some still bullish factors to consider:

  • The Semiconductor > Tech > S&P 500 leadership chain remains intact.
  • Internal risk indicators like the Gold/Silver ratio noted earlier, along with High Yield bond spreads and Libor/T-bill yields are still calm. Could change this week, could drag on indefinitely.
  • Defensive sectors like Healthcare and Consumer Staples have been drubbed in relation to SPX/SPY, but would indicate gathering market correction risk if they were to resolve upward from the shaded chart patterns.
healthcare and staples vs. SPY

Global Stock Markets (weekly charts)

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.

The World (ex-US) has found resistance where it should find resistance with all those clear resistance touch points from 2021. Europe is the same deal. Great Britain was repelled from resistance and Canada (TSX) and especially Australia (AORD) can be watched for positive indications on the commodity/resources trades (anti-USD).

global stock markets

German DAX has whipsawed above and back below the potential blue sky breakout/bull trap line. When considering the rolling state of weekly MACD we should keep an eye on this leading market for potential US/Europe/global bear market leadership. The blue shaded area shows some really mean spirited whipsaws of bulls and bears.

german dax

Japanese Nikkei continues to bull flag consolidate its bullish situation. A reminder that the objective of the long-term base we plotted years ago is 35000 (+/-), not far from the the 1990 high of 38900. Perhaps one final up surge here in the coming months?

Hong Kong/Asia/EM continue to ponder an anti-USD move while India flies around in blue sky and Canada’s TSX-V creeps important long-term support. Da ‘V’ will vote yay or nay on the anti-USD stuff and related trades.

japanese nikkei

Brazil’s BVSP maintains its composure while the Argentine bubble took a little pullback within its robo-trend. Mexico is bullish, Africa bearish and FM, driven by Vietnam, is still in rally mode.

global markets

Precious Metals

With the understanding that gold stock fundamentals are still under pressure as their metal has been drubbed in relation to stocks and commodities lately, the prospect of a low in those fundamentals prior to an upturn is also in play. While Gold vs. stock markets appears prep’d to bounce, there is no sign of a low in Gold/CRB and importantly to mining sector fundamentals, Gold/Oil.

Still, the view is that the precious metals complex can rally as a non-unique aspect of wider anti-USD rallies in commodities and commodity/resources based markets.

gold ratios to cyclical markets

The current view is that if the gold stock rally resumes it will be a ‘sell’ before a real investment/hold situation develops, likely amid a counter-cyclical deflationary macro out ahead. But IF the USD is rolling over again and IF the gold stocks will participate in that trade, then GDX can hold here at a higher low to June. Mind those ‘ifs’, folks.

gdx gold stock etf

So if an upturn comes about our upside target is a gap fill around 40. If not, the downside target is sub-28 gap fill and a higher low to the March low. However, if market liquidations come sooner rather than later let’s keep an eye on the 22.72 gap, if not the Devil’s advocate H&S pattern imagined in this update. Best to be forearmed with as much info as possible while trying to remain cold and free of emotion.

For perspective, HUI has a bit better daily chart look. At least in that it has already hit a support area at 225, the equivalent of which GDX has not registered. It’s not much, but worth noting.

hui gold bugs index

Gold’s Commitments of Traders shows heavily net short Commercials (Swap) and a tamp down in speculative net longs (Managed Money). While not contrary positive by any means, CoT continues not to indicate a hard stop for an ongoing rally.

gold cot

Silver would be expected to continue leading if the anti-USD thing regenerates. Last week’s silver price pullback not surprisingly resulted in a fairly sharp pullback in speculative enthusiasm. Meanwhile, Commercials and especially silver producers continue to lurk net short. Similar to gold, it’s not in a contrary positive state by any means, but it is also not necessarily a show stopper.

silver cot

Gold (daily chart) has a bullish look above both uptrending moving averages. Last week it flagged down to test the SMA 50. The rally from Q4, 2022 is completely intact. In the event of a further pullback below the SMA 50 the first level to watch is the previous week’s low of 1941.70. Then the uptrending SMA 200 (1894) and finally the shaded area that speaks for itself and for a higher low to March. But first things first; gold is bullish on the daily (and weekly, and monthly) time frame.

gold price

Silver (daily) is also well on its uptrend, logically weaker than gold last week as USD continued to rally into Friday’s knock down. The uptrending SMA 200 is important here as it has already been tested once and should hold again or else a test of the March low may be indicated.

silver price

As for the miners and insofar as I am hanging in for a rally I will try not to drift too far afield with too many positions. Those I favor are those I currently hold (see portfolio below), with exceptions of WPM, RGLD and BTG, which I’ll consider adding back after its big – and frankly to me, over done – pullback.


CRB index ticked a higher high to the April high that we’d want to see in order to load the 305 target. But it is still considered to be dealing with that resistance. It’s as we’ve been saying since USD made its first (false) breakdown and bear trap; USD’s near-term direction will decide. It’s daily chart trend is down. If that resumes commodities are probably ‘on’ for a trade, not investment.

WTI oil is at resistance and trying for a base breakout. NatGas is still basing after getting bombed after the acute sentiment phase of the war had passed. Of note, Gas is approaching its seasonal bottom in September.

Industrial metals (GYX) are in a potential bear market bounce pattern. I added RIO and BHP for that reason, along with their own individual charts. Metals headliner copper is above its SMA 50 and creeping the SMA 200, and will take cues from the USD. If Cu does rally, a test of the January high of 4.35 would be the target.

In the Ags (GKX) I added wheat (WEAT) as a bottom feed for multiple reasons noted in this update. As a whole the index appears to be dragged down by the likes of wheat and corn, while the ETF (DBA) has been on a solid uptrend all year, likely owing to weightings in soybeans and sugar.

agricultural commodities

The Uranium patch held together technically last week after Cameco missed on earnings but had revenue above expectations. That drove CCJ to test its 50 day average. I had already taken the profit on CCJ and want to look elsewhere, currently holding the ETFs URNM and SRUUF and FUUFF (FUU.V), which has had a pleasant chart as originally noted, all along. It also has a positive speculative view by geologist Michael in the NFTRH subscriber base (can’t hurt, I say!). Watch items are NXE and UUUU, which are intermediate trending up and neutral, respectively. Regardless of what happens in the near-term I continue to keep U well on watch personally, for long-term fundamental potential.


As for the specialty areas in Rare Earth and battery materials, we find REE trending down as China’s heavy hand is all over the pricing in this market. MP and its US production is the main watch item, but MP is hindered in the near-term by its need to ship to China for processing of its materials. It had a nice pop on earnings but is trending down.

I watch LTHM and ALB and considered buying the pullbacks. But then I hesitate with questions about the Lithium market, the economy and EV hype in general. They have gaps lower that might compel me to buy if they fill.

Finally, there is TLO.TO (TLOFF) still on watch in the Nickel patch. These lows are scraping long-term support but I am holding off for now as Ni looks for a bottom.

And that leaves us with Palladium and Platinum. I am waiting for long-term support in Pd (current: 1264), which is lower at 1000 (+/-). The daily chart of Pt (current: 928) does not look good, but longer-term charts show it at clear support. Fundamental Pt bulls would be considering buying on weekly down moves to the 900 (+/-) area.


Savings balanced by gold.

Trading Account: Short QQQ, currently sporting a small profit. Tech is still in technical leadership mode, but I have a feeling about rotation. We’ll see.

Roth IRA (non-taxable, no contributions)

Cash is about 79% with a broad short position (SPXS) tucked in there for risk management. My goal is to be in tune with the market’s internal rotations and beyond the anti-dollar stuff (commodities/precious metals/Asia/EM) I am watching the defensive Healthcare and Staples areas as well. Both for market signals and possible positions.

I’ve retreated to a couple old standbys in Energy from the previous NOG, AR & XLE. Uranium can be a wild card and is not necessarily anti-USD. I keep it on watch, but have some exposure meanwhile.

You may have noticed that the nicely performing DVAX has been here for many months. It’s ideally a long-term hold for me. A future home run. But the market could say otherwise at any point and in its high risk, anything can and will be sold in the name of cash for future opportunities. I am a bottom feeder at heart. A buyer of destruction and other peoples’ pain. It’s just that these market bust pain points come few and far between.

Anyway, insofar as we move forward with intact markets I’d like to keep DVAX and possibly ANET, which has really grown on me. Consistent profits will do that.

As for the gold stocks, they are at this time nothing special. There are human robots out there programmed by the perma-promoters to think the sector is special, but as I see it now I will be buying from those robots on the next heartbreak. That assumes the current trade remains intact to a future high.

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. Kevin J Dueck

    Good work as usual. Insofar as inflation goes, I would not be surprised to see an uptick in the next CPI report. Considering last June was the peaked out at 9.1, the YOY were compared to the highest number. Those base effects make a difference. This July’s number compared to last July’s number will probably show an uptick and the fact that although the rate of change of inflation has slowed it has not stopped increasing. If that causes people’s expectations of inflation to stay embedded then that sentiment will lead to shift in psychology that could motivate a market correction. my 2 cents FWIW

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