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Notes From the Rabbit Hole
Notes From the Rabbit Hole, #773


US Stock Market: Slightly favored view became a reality as SPX and most indexes took back the 50 day moving averages. Thus, the bulls have the ball. The bears could take it back, but the old story of bulls chasing bears around the playground giving painful wedgies could also come about.

US Market Sentiment: Contrary sentiment continues to be permissive of the bounce, and even a next leg of the larger rally. In other words, the current sentiment structure is not standing in the way should the rallies continue.

Indicators: M2 is rolling over, a liquidity negative. On the other side is the fiscally stimulating government. No wonder we have markets that seem confused. 10-2 yield curve has pulled back but is still in a short-term steepening structure. This represents a change in character on the short-term and if it continues, an economic bust of some kind (stagflationary or deflationary) longer-term. Libor/T-bill yields are still very calm and benevolent as are High Yield Spreads. When combined with the contrary sentiment above this favors a short-term bullish outcome. But by definition the combo of these sedate indicators and indications from the yield curve and 2yr/T-bill divergence, market risk is high.

Global Stock Markets (per last week): Markets are bending under the pressure of the USD rally, which is at a clear decision point. On balance and with few exceptions, global is technically neutral at best. If USD cracks, that is likely to flip positive. If not, it likely won’t.

Precious Metals: Sector (gold stocks) has bounced from the original sub-28 target (GDX) to the moving average (SMA 50 & 200) cross area. Favoring a continued rally but we have set caution limits for the pullback that began last week. See segment. Gold and silver are okay and even better, respectively, from a daily technical standpoint. Silver’s weekly chart sports a potential target (35) that I would loudly announce if I wanted to hype you up. As it is, I want to note it for you and let you moderate or hype yourself as you see fit. :-) On the whole though, I continue to see this rally as a ‘sell’ when it tops out because the precious metals are running with the cyclical inflated macro. The best long-term backdrop will be after the age of inflationary bubble making ends.

Commodities: CRB back above the breakout point and targeting 305. WTI Oil is too and targeting 105. Energy sector is very interesting. Uraniums still look good. Industrial metals also trying to join. Outliers like Li, REE, PD & Pt are varying forms of underperforming to bear trending. Want to stick with what is working for the same reason I’m doing so with the precious metals. IMO, it’s a trade, not an investment at this time.

Currencies: USD bounced to end the week, but this is normal even if it is going to resume its downtrend. A world full of human and electronic robots always were going to bounce Uncle Buck from the parameter that everyone sees (daily SMA 200). An important decision point is at hand. Gold/Silver ratio, the companion indicator to USD if it were going to inflict damage upon the macro, bounced but remains weak relative to USD and thus, something of a negative divergence to it.

Think With Your Head, Leave Emotion Aside

The emotion part of the equation is difficult. For example, a thought bubble above my head muttered “you POS” as I sold Minera Alamos last week. I simply got tired of seeing it go its own way while I managed the gold stock sector well, in other cases. I realize that there are delays, weather issues, permits needed, blah blah blah. I also realize that is part of being a junior mining investor. Well, that is not me. With Minera Alamos, I went against who I am because I admire the company’s president, and as such was susceptible to my own emotions. In essence the internal voice was saying…

“Gary, you don’t even follow the company closely enough to be a true believer. What you do is ‘top-down’ macro, and you do it pretty damn well. That takes up 90% of your time. You’ll get the sector right so why are you sitting in a ditch at the side of the road with a mine developer in a foreign country going through its risky processes? Don’t you remember Rio Alto, which you blessedly sold before it got tanked on political hang ups?”

Something like that. Anyhow, since I continue to believe that due to their current correlation with cyclical markets (generally anti-USD) the gold mining sector will be a ‘sell’ at whatever high it makes on this cycle. I don’t want to marry a story that is not going with the sector. If this is just a trade, I want it working as such. My other gold stock holdings are, on balance, much more suited for that.

But what actually prompted this segment is a comment to last week’s public article, Gold: The Anti-Bubble. As you may know, I have my own beliefs about what an honest monetary system and honest money should be. I am sure most of us do. But if you are going to ply your trade in the den of evil, you have to realize that you are in evil’s den, not your own living room. I found this comment disturbing, comical and also tawdry in its lack of originality.

“Gold and Silver are MONEY and should never have been deemed a Commodity as the criminal banksters trade PAPER and tons of it as if it were GOLD/Silver which it is NOT. Until G/S are removed from the commodities label , this country and ALL of its citizens will perish. imo”

Aside from the dead give away, the word “banksters”, the writer’s message hearkens back to my early days over 2 decades ago, when I fell for similar dogma. The case for gold made so much sense and I was just naive enough to swallow it in a sincere way. Well, on the first hard correction (2002, I think) that saw me lose paper gains I began the process of realizing that these people are true believers, spouting slogans and fighting an ideological war.

Screw you. I have since come to believe that there is an entire industry, a sub-industry to the great evil of the broad modern investment machinery, that exists to inspire heartfelt rebels to fight a war, rather than invest in, or avoid what they actually see (or should see) happening. If I come off as if I have contempt for a large portion of the gold bug community, well, so be it. I believe that a majority are tending herd, towing the company (the industry’s) line. I believe a lot of individual investors are like the Gary of 20 years ago.

I also believe that certain business plans not only include one-way gung-ho dogma, but depend on it as a profitable tool to keep marks, that is, customers/clients/buyers of stock they want them buying in line and in the game on heart felt emotion, rather than gritty reality. It’s not to say the dogma is not materially right in many of its assertions. But it is to say that it is wrong and can be wrong for decades, until it is finally right. Meanwhile, how many have been absolutely blown to pieces in this ideological war?

Again, I have my beliefs, bias and gold. But I also had to develop patience and perspective (P&P). While I, as well as the average gold bug, do expect the system as it currently stands, to either end or be radically altered at some point, P&P are now being employed personally into my 3rd decade! The system is intact, the evil is intact, the gold bugs have not changed even one single bit and best of all, certain macro indications imply that maybe, just maybe, a big system altering change could be at hand in the coming months or very few years. I’ll maintain a regimen of P&P until said changes come about.

<insert here the obligatory and most radical picture of macro change>

30 year treasury bond yield

US Stock Market

From NFTRH 772‘s Summary segment:

SPX took out the SMA 50, as did DJIA, NDX, SOX, Small & Mid Caps. SPX has also tentatively taken back former support.


To review, the two main options were…

  • SPX bounces at or above support in the 4300 area amid over-bearish sentiment, possibly (not necessarily) to resume its larger rally, or…
  • SPX continues to decline for a test of significant support and the SMA 200 (4150 and rising).

The second option would, in my opinion, be the most bullish. The first option would feel good to casino patrons in the shorter-term but in my opinion, top out, potentially into the next bear market. Another thing to consider is that option 2 could still be in play if the current bounce fails and does not make a new cycle high.

Bottom Line

Last week the market made a move toward option 1, short-term bullish. If it continues, play it as you will (or will not), but also realize that the upside target of 4800 (up to a tick of a new all-time high) is viewed as the last stage of the post-2008 bull market. The supposed bear market of 2022 was not a bear market at all. It was a reaction to the hawking Fed that came without proper signals from the bond market.

Like a divergence of the 2 year yield to the Fed proxy T-Bill for example. That condition is now in place.

t-bill and 2 year treasury yield

Like a steepening 10yr-2yr Yield Curve for another example. The curve has made a secondary deep inversion and if it now steepens, changes they’re a gonna come. Count on it. In the 2022 fake out, the curve was flattening into inversion. That is usually a bullish backdrop. If a new steepener is being birthed, that would evolve into an inflationary backdrop, a deflationary backdrop or both at different phases. But change will come and it likely will not be friendly to the stock market.

yield curve

US Market Sentiment

We began managing the bull phase in Q4, 2022. Markets did not easily resolve bullish back then, but we had to have a positive risk/reward view due to the following:

  • Sentiment was strenuously over-bearish.
  • Inflation fears were projected to slowly diminish, tamping down Fed (hawk) fears.
  • The mid-term election cycle was in play and its positive effects – on average – extend a year out. Interestingly, we are only 2 months short of that anniversary.
  • You can throw in a lack of the T-bill/2yr divergence and still-flattening yield curve shown above as part of the beneficial 2022 backdrop as well.

As for the current situation, Sentimentrader’s Smart & Dumb money data has been as reliable as any sentiment indicator in forecasting the ups and downs of the rally, after the big contrary buy signal in Q4, 2022. They have lots of other studies and measures* but I am a ‘keep it simple stupid’ kind of guy.

What we currently see here is Dumb money sentiment having dropped far enough to instigate a new and perhaps final leg of the market rally. It has not changed much. As originally noted a couple weeks ago, at the very least I do not want to be shorting this sentiment setup. Cash is so much easier, is a ‘no lose’ proposition and it’s paying out to boot.

smart money, dumb money

* You might consider a subscription to Sentimentrader if you’d like access to the micro details, but to include them in a routine or comprehensive way in NFTRH would be a time consuming exercise.

Last week we noted an exceptionally drastic move down in NAAIM (investment managers) sentiment. This week they were getting back with the bull program as the market failed to do what their fears thought it would. The dramatic down spike is capable of foreshadowing more than the market bounce we’ve had so far.


Investors Intelligence (newsletters) had recoiled sharply on the 29th.

investors intelligence

AAII (Ma & Pa) did so as well as of August 30.

Bottom Line

The market had the anticipated bullish reaction off of the over-bearish sentiment noted in NFTRH 772. With the subsequent rally, including a couple days after some of the data above were harvested, the market continued to rally. All in all, market sentiment continues not to be standing in the way of further short-term price upside.

Global Stock Markets (daily 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) is bouncing from the SMA 200, which keeps it viable to continue rallying. It will depend on the US dollar if/as the inverse correlation continues to hold. Europe is also above its SMA 200 (not shown) but both of these charts remain suspect below the SMA 50. As an example, check out the UK for what happens when you remain below that intermediate trend marker for long enough. It’s a downtrend.

Commodity/resources countries Canada and Australia are in relatively decent shape.

global markets

Japanese Nikkei has tentatively taken back the SMA 50. Hence, no buy for me as I will wait for the SMA 200 or nothing. Ref. the long-term chart showing a clear buy area that correlates with this chart’s SMA 200, with plenty of room to upside target of 35000.

India appears to be in a bullish ‘handle’ consolidation/correction. Interesting. EM is still vulnerable below the SMA 50 as is Hong Kong. Lots of China negativity in the news cycle lately.

Canada’s TSX-V is bouncing, which we’ve noted it needs to do for this still bearish picture to remain intact. The 600 area is resistance.

global markets

Brazil lurks below the SMA 50, which it needs to take back in order to re-bull. Argentina’s bubble finally takes a little pullback. Mexico attempts to recovery from its roll-over.

Africa is bear trending. Vietnam and its heavy weighting are trying to keep FM aloft.

global markets

Precious Metals

No fundamental discussion needed. Gold and gold stocks are following silver, which is leading an anti-USD bounce and which is not representative of what the best long-term fundamentals will be after the great ‘everything’ bubble bursts and/or the next economic bust ensues.

Gold’s daily chart did nice work last week, taking out the resistance associated with the SMA 50. Clear the 1980s and it starts to get serious, as in a near-term target to all-time highs above 2090 (our long-term big picture target is 3000+).

gold price

Silver busted through resistance, turned it to tentative support and is now testing that move. Meanwhile, the leader has turned daily RSI and MACD positive. Not bad considering that the daily chart uptrend never was lost on the correction from the spring highs.

silver price

Now prepare for…

…to titillate you with the mysterious things they see. Some men who stare at charts may advise you of a “complex” inverted Head & Shoulders pattern on the weekly chart, or will if/when they identify it. That is because the word “complex” sounds more professional and than a freak with too many shoulders. But this man who stares at charts does not worry about professionalism. This freak may resolve bullish. To do so it needs to take out 26.50 and then 27.50. If it does these things the chart advises the target of 35, which would be a new high for the post-2011 era.

Should it resolve that way, consider that both weekly RSI and MACD are positive and yet have been consolidating/coiling. In other words, there is plenty of future momentum fuel stored up if the thing does break out.

silver price

Hence, one wonders what the Silver Miners ETF – wretched though it is – could do if silver goes on a heater.

silver miners

Gold and silver Commitments of Trades (CoT) are still in decent shape. Gold’s CoT is certainly not standing the way of a continued price rally as it never became terribly over-bullish before the correction and thus all we expected was the routine correction that gold may have already completed.

Silver CoT has started to perk up but like gold, does not have a stop sign here if the rally resumes.

silver cot

The Gold Miners ETF found logical resistance at the daily SMA 50 and its “Death” convergence with the SMA 200. Men who stare at charts often advise doom in such cases, but the more likely outcome is bullish. That said, the gold stock sector has proven nothing yet aside from a minor bounce. I added a 15 min. chart to the trade log on Friday to show the support area that GDX should hold to keep things in order after the reversal to fill Friday’s gap open. That area was 29 (+/-) and here you can see it being tested at the daily EMAs 10 & 20.

gdx gold miners etf

I am pretty much set with the quality positions (see Portfolio segment) I’ll hold (or increase) to ride a continued rally (favored) or sell/hedge if the rally fails (not expected, but depending on USD and the macro). One day when the proper investment environment comes about (de/dis-inflationary or possibly stagflationary post-bubble) I’ll go further afield into investment and speculation in the sector.

My current road map, of course subject to likely revisions, minor or major, looks like this:

  • Gold stocks are part of a wider rally in the broad cyclical markets with an anti-US dollar flavor. If the USD rolls over (it’s at a key decision point right now) I expect a potentially exciting rally (ref. silver’s leadership and the weekly chart above).
  • Assuming a rally, I plan to sell whatever high is made (GDX targets as high as 40 to fill the upper gap) if/as the miners rally with stock markets and commodities, AKA cyclical items benefiting from the inflationary operations of the post-2019 cycle.
  • Then cash would be held, speculation on broad shorting opportunities would be taken and patience would be employed in order to be a strong buyer of quality gold mining situations at the next low.
  • Is it a stretch to think that if the broad macro takes a real bear market GDX might not at least fill the gap below 23, from whatever high it makes on the current cycle? Not to me.


Oil/Energy had a nice week with Oil firm. That drove a strong week for the CRB index as well.

First, let’s get a look at commodities vs. gold for a clear picture as to why the precious metals complex is nothing special in the current macro. The rise in these ratios does no favors for the gold mining industry. Yet gold mining stocks often rise (if silver leads gold) under such ‘inflation trade’ circumstances.

crb, oil and gold

Nominal CRB re-took the breakout after a temporary bull trap. The target of 305 is loaded again.

Crude oil’s breakout measures to 105 if the breakout holds; and on a second try the odds are greater that it will hold than on a first try. NatGas is still slithering constructively in a base at/above very long-term support as it is due for a seasonal low in September if it has not already made one. I added CVX to current holdings NOG and AR last week and may add more in the Energy patch. Possibly oil fund USO as well.

Industrial metals continue to trend down but made a notable break above the SMA 50 on Friday. It’s something, at least. The Ag index is in a firm downtrend, although individual Ags are all over the place, bullish and bearish. I do not distinguish myself with the Ags, and am inclined to mostly leave it alone.


The Uraniums continue to ride the intermediate uptrends and I am just holding UUUU, NXE and FUU.V after selling URNM.


Now the outliers, REE and its China complications, Lithium and its short-term over-supply (and previously over-hyped) complications are not technically actionable. Which does not mean they won’t bull with the wider macro. But it’s not in the charts yet. The trends are down.

I keep an eye on SBSW for Palladium and Platinum, and TLO.TO for Nickel. But if I’m not going to hold an MAI.V (for example) because it is going the wrong way during a ‘trade’, I don’t want to hold these either, until they start showing signs of going the right way.

Bottom Line

CRB target of 305 is back in play. Could WTI oil actually make it to 105? The chart thinks so, based on the renewed breakout. Let’s take it week to week in this prime anti-USD trade.


USD is all I am interested in this week (and is the primary interest most weeks). The chart tells us all we need to know. Let’s not beat a dead horse after Friday’s video update.

us dollar index


Savings balanced by gold.

Trading Account: No positions.

Roth IRA (non-taxable, no contributions)

Cash is about 80% and will be decreased if the rally continues or increased if it runs into trouble. Pretty simple, actually. It’s hard not to have a lot of it given the income it is spitting out while asset market risk rises.

But for now, I like the Tech stocks I hold. Especially ANET. Love that one for how it has treated me. Originally re-bought it after checking its growth at more than double MSFT and its valuation metrics about half of Softee’s, as I recall. TENB & CRWD are also growth stocks that I trust if I trust the market’s ability to continue boosting richly valued stocks, which includes ANET as well. These along with a couple Semi stocks are part of a somewhat diversified set of holdings.

I’d been rotating into Energy and last week added CVX. Also copper miner FCX. These are tucked into the same mental file as the Uranium stocks. If this market is going to put on a final act in an anti-USD manner, I think I’ll add more commodity related stuff or add to existing positions, which is what I’d also plan to do with gold stocks. A silver stock or two could play some mighty catch-up (ref. the SIL/Silver chart above) but to me that stuff is a side show. As I recall WPM is about 50% silver, so there’s that. For silver miners I’d consider HL and SILV. But little urgency quite yet.

All in all, I am ready to speculate on a final play for the stock market as we approach Q4. But I am even more ready to manage risk and get ready for the bear market that I think will follow in the coming months. I think it is possible we may end up with an equal and opposite sentiment backdrop to Q4, 2022 that sprung our bullish orientation to begin with.

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 4 Comments

  1. Armen

    I’m late with compliment, but format – summary, etc. is so much better now.

    1. Gary

      Thank you for the feedback, Armen! It’s important for me to work the ship’s rudder properly based on subscriber feedback.

  2. David

    Gary really like the new summary format. easier to read and if I need more details can read down in the letter. Like the video podcast also . We just got to
    work on your NE accent! Lol. Thanks again for all your work. Awesome.

  3. Gary

    Thanks, David. I just watched re-run of Ray Donovan last night. There’s not a decent Boston accent in the whole cast. Bunchie comes closest I guess. :-)

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