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Notes From the Rabbit Hole
Notes From the Rabbit Hole, #775


US Stock Market: Indexes played the take/fail the SMA 50 game last week. Friday was Op/Ex, so of course it unraveled the good done on Thursday. Bigger picture, a resumed rally now would project to end the bull phase sooner, but a deeper correction to the SMA 200 on the indexes (generally) could sustain it indefinitely longer.

US Market Sentiment: Neutral. Not standing in the way of resumed correction or resumed rally. It’s just the way it is. We don’t always get no-brainers. Indeed, usually we don’t.

Indicators: Mix of still calm indicators like HY Spreads and Libor/T-bill continue to indicate a calm ‘just right’ macro that Goldilocks and the soft landing brigade just love. Yield curves remain inverted and posturing to steepen, which would bring changes, inflationary or deflationary, eventually, with the potential for an economic bust. The pair of Gold/Silver ratio (GSR) and USD, themselves a combined market liquidity indicator, are at decision points. Leaning against them could see us lose much capital if they rise impulsively. Leaning against them could bring significant gains if they fail. So why not wait for the signals?

The Napier View: A new entry in our summary, the interview with Russell Napier linked below actually helped me put someone’s narrative based on history and his experiences with the pictures that my indicators have been painting. Especially that of the 30 year Treasury yield Continuum. The signaling of the broken Continuum trend is inflationary and Napier affirms the notion that it’s the government that will do the heavy inflationary lifting, through fiscal policy, as government is not bound by bond market constraints to the degree that the Fed is. That’s not Napier saying that, it’s me. But we have witnessed and documented the government fiscally supporting things in microcosm this year, as recently as the spring when it decided to bail out the banking crisis [correction: government in coordination with Fed as its tool] and make it no crisis at all. The subtext is that maybe the government is outlawing shorting the markets by proxy. Or at least saying if you’re going to short you’d better be nimble about it. The broken Continuum moves forward with fiscal inflation as one of its rationale.

Global Stock Markets: On balance global seemed to hint last week that USD is going to fail. Generally, markets bounced and in some cases started repairing suspect looking charts.

Precious Metals: Fundamentals for gold stocks are not in order. Gold stocks, gold and especially silver could be in order as participants of the inflation trades, if USD and GSR fail. But for now, it’s just another would-be anti-USD trade. GDX inverted H&S bull pattern made positive strides last week. Gold stocks, gold and silver remain in technical correction but the seasonal averages, CoT and oversold BPGDM are not standing in the way. Bullish target for GDX is 40. But the pattern has to take out and hold the neckline and SMA 200, per video update linked below.

Commodities (per last week): CRB targets 305. Crude oil targets 105. Uranium sector went nuts and is overbought, but viewed as investment worthy on big picture global supply/demand fundamentals. If USD starts to pull back and silver does well and out-performs gold the other stuff would likely bounce/rally hard. Stuff across the spectrum like Lithiums, REE, Nickel, PGMs, etc.

Currencies: USD is pushing the limits even harder. But before we get too uptight about it let’s see if the Gold/Silver ratio can undo its negative divergence and also rise. If they rise together have cash and enjoy its income. If they drop together, well Garth, party on.

US Stock Market

Typical. SPX held its ground last week, but is wobbling below resistance and buzzing the 50 day average. Typical. It popped bullish on Thursday and gave that back on Friday. Ah, but it was Op/Ex and so the related shenanigans were in play.

SPX is vulnerable but not broken. If it keeps going up in the short-term we project the bull phase to end sooner rather than later. That prospect is still in play as we’ve been noting that 4300 is the key level to hold in the short-term for the less healthy situation to play out. If the SMA 200 (now 4182) is tested in the near-term that could mean more bull… much more of it, if it tests successfully.


Nasdaq 100 also looks pretty bogus. But again, Op/Ex. Real? Memorex? As with SPX above, a drop to the SMA 200 would fill a gap and could be a healthy test for an ongoing bull market or the fuel for a longer rally even if the bear lay in wait in 2024, as some macro indicators would lead us (me) to believe.

Bottom line here is that neither of these headline indexes looks inspiring on the short-term. If they do rally from around current levels I give the bull less time and if they make hard but successful tests of major support I give the bull more time and possibly, a new lease on life. Per the trade log, I shorted NDX via SQQQ on Friday. Ugh, Op/Ex.


As a side note, the Semiconductor index looks even worse than the above. It’s a leader, after all, and we should let Op/Ex clear and see what it and the two indexes above do next week. Please, no more slop. Do something!

Market Indicators

We know about the negative divergence of the 2 year yield to the 3 mo. T-bill yield. It’s a bear market predictor. We know about the 10-2yr Yield Curve in a steepening posture. A steepening usually brings an economic bust sooner or later along its slope. But what of the heretofore sleepy indicators telling us all’s well, sleep soundly little investors, Daddy* will tuck you in and keep the bad monster away.

The VIX (volatility) index is still showing that little investor babies are sleeping soundly, without a care in the world, complacent and comfy.


Hush little investor baby, don’t you cry. Daddy’s gonna tell you there is not a care in the world as speculative spirits are implied to be alive and well. Junk bonds (high yield) are fine.

high yield spread

Libor/T-bill spread: Sleep little piggies (banks), daddy will fiscally reflate you at any such time your tummy may growl or heaven forbid, start to feel queasy prior to regurgitation. Do you see how daddy government took care of the little spike of unease you felt earlier this year? Sleep….

libor/t-bill spread

Finally, the Gold/Silver ratio, which would theoretically attend a bullish USD if the macro were to take a negative liquidity event, is not actionable and still somewhat negatively diverging the USD. If these two break upward it would bring the pain. If they fail the global system is indicated to be stable. In that case commodities, precious metals and certain sectors (e.g. Materials) and markets (e.g. EM) would likely outperform.

gold/silver ratio and usd

Generally, risk indicators are flashing alarms. That includes the already postured 2yr/T-bill and Yield Curve and the still sleepy indicators above. By definition, extremes in these calm indicators imply risk. But risk will not be realized until it is realized, whether as an interim or extended phase.

Another consideration is that the view, so well put forth by Russell Napier in this interview (thanks to subscriber John C for the link), of perma-interference by governmental fiscal inflationary policy could be supporting the sleepy indicators above (we actually noted in real time the government’s bailout of the supposed banking crisis earlier in the year) and the financial markets as a whole. Given that the Continuum has radically changed its signaling, might some traditional market signals like the 2yr/T-bill and the Yield Curve not work the way they tended to during the decades of the intact Continuum? We should consider all such possibilities because we are in a new long-term macro phase by definition of the upward break in long-term yields.

The original literal interpretation of the Continuum’s break was, after all, the signal of a new age of inflation and the end of the age of monetary Inflation onDemand as enabled by the long-term disinflationary signaling of bond yields. The Fed is sidelined by this situation. We have noted for years and years that when the yield would ping the limiters it was a warning of a hawkish or potentially hawkish, not dovish Fed. So of course Trump is at it again. If Trump becomes president again, it would have to be his admin that will bring (fiscal) inflation, just as would another Biden admin. The monetarists at the Fed are implied to be sidelined.

The bottom line is that Napier’s view is completely logical to this picture. Fed sidelined, but government willing and able to overtly inflate where the relatively paranoid Fed (the Wizard, after all) would become self-conscious about being exposed by inflationary bond market signaling.

Well, the government carries a big club and quite probably does not care who sees it (least of all the supposed bond Vigilantes). Indeed, government would pretend or in the case of individual lawmakers ignorantly believe that it is doing the best things for its constituency (ref. Napier). If big government is at the ready to support the economy at every turn a deflationary bear market in equities and an end to the “everything bubble” could be forestalled or canceled. But we’ll have to live (and invest) with higher interest rates and avoid long-term bonds with great prejudice.

This would not just be a US phenomenon. It would be global. Many months ago we noted how the rebuild of Ukraine, as a striking example, could be the target of massive fiscal policy that would drive the demand (and thus, prices) of the materials of a rebuild. That’s the case for a commodity super cycle. The case for deflation is as an ‘interim’ situation. Possibly a lever to be pulled by fiscal inflators where it used to be pulled by monetary inflators. That is and has been our interpretation of the Continuum since it broke.

30 year treasury yield continuum

* “Daddy” currently played by the government (fiscal) in the absence of a dovish Fed (monetary) and “the bad monster” is actually a pissed off animal known for its ability to run down human investors and maul and eat them with great malice.

US Market Sentiment

The seasonal turns negative in September. Like, now. This is on average and thus no sure thing. But history is history and this is the history. The face value implication would be the scenario noted above and in recent reports where the market takes a significant correction to fill the gaps and test the SMA 200 prior to a big bull move or bull market resumption (if the test succeeds, or less favored, confirm a bear market if it fails). The growing prospects of governmental control would theoretically aid the continuing bull market scenario, obviously favoring some sectors and markets over others, depending on which party is in power.

market seasonal average

Meanwhile, Dumb money started to eat stocks and Smart money resumed fading them. This is currently neutral, at best.

As for the usual suspects…

  • Investors Intelligence (newsletters): Held firm at a neutral 2.25 Bull/Bear ratio on 9/12.
  • AAII (Ma & Pa): Faded to a neutral 1.2 Bull/Bear ratio on 9/13.
  • NAAIM (investment managers): Rose to 58% bullish on 9/13, from 50% bullish.

All in all, market sentiment is contrary neutral, not standing in the way of further correction or bull activity. It fits with a market currently being miserly with its actionable signals, whether technical, per indicators, or per sentiment.

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 situation is not any less complicated than in the US. The World (ex-US) ETF and many of its fellows appear to be perched and ready to bull if the US dollar resumes its daily downtrend (most recent video update here, along with GDX, gold and silver). ACWX is postured in a ‘W’ formation below the SMA 50 after once again holding the SMA 200.

Europe continues to look like a top, technically. But its leader, the UK index, wants to show how quickly a downtrend can be terminated. While not shown, the UK spike is also above its SMA 200.

Now look at Canada. Last week it and Australia were noted to have faded to neutral and suddenly TSX appears bullish, as if it thinks USD will fail and commodities and resources will bull. Fellow commodity/resource heavy economy Australia is very interested in what its amigo is doing.

global stocks

Japanese Nikkei demands that it will not give me my buy at the SMA 200. No, it says hold your NTDOY and keep an eye on the laggard known as Fanuc and don’t think about buying opportunities. Meanwhile, the Yen ticked a new low last week. Of course it did, even as a media headline was seen touting potential Yen-supportive policy forthcoming from the BoJ.

Hong Kong robo trend continues downward. China, Asia and EM are not actionable. Various EM should wake up if the US dollar takes a dirt nap.

We noted India in a potential buying opportunity (bullish consolidation) and there it popped. I did not even see it until this moment, but probably would not have done anything, regardless.

Canadian TSX-V once again attempts to bounce. With all the larger players in the commodity/resources patch in correction, why get anchored to the stuff on da ‘V’ until/unless it signals something other than an ongoing downtrend? If a widespread commodity/resource play comes about the big boys should go first as da ‘V’ often participates as a final speculative act. The chart continues to ask why junior resource investors continue to label themselves as such, or limit themselves as such.

global stocks

Brazil took back the SMA 50 and can be watched for signaling in the EM/resources areas. The trend from the spring is up. Argy bounced on cue at the SMA 50. It’s either a bear flag or a resumed bubble.

Mexico continues to roll over and look bearish. Africa continues to robo trend down. FM is making a bearish posture below its uptrending SMA 50. The SMA 200 (not shown) is at 25.72.

global stocks

Precious Metals

We are managing a potential for a rally in gold stocks and the precious metals. This would be led by silver (hence a close eye on the Gold/Silver, Silver/Gold ratios). But as belabored repeatedly, if a real rally (ref. Friday’s video update including GDX, gold and silver) does manifest from the current GDX bounce pattern, we’ll be under no illusions that gold mining fundamentals are good. They currently are not. They are stagnant, at best, and have been generally easing since the spring.

gold ratios

But the majority of the 2003-2008 bubble period came against poor fundamentals and an inflationary macro. That is why we use TA per the video post linked above. Of course, with a turn – even an interim turn – of the macro toward a market liquidity event the fundamentals would improve drastically as would be indicated by gold rising vs. stocks and commodities, including gold mining cost input commodities.

The main point here is that gold stocks often decline (to a sound buying opportunity, e.g. Q4, 2008, Q1, 2020) with other markets as their operational and macro fundamentals greatly improve, and they often rise with other markets (to a clear selling opportunity, e.g. 2008, 2011 & Aug. 2020) as their fundamentals degrade. That would be the influence of the average gold bug, who is inflation-centric and should be faded either bullishly or bearishly depending on the macro condition and state of the sector (mature rally or unsustainable decline).

In the current situation, with a potential target of a GDX gap fill above 40, the plan is for a selling opportunity if the bounce morphs to a genuine rally.

The video update went over the technicals. Let’s not belabor here. Meanwhile…

  • Gold and Silver Commitments of Traders (CoT) improved with metals prices under pressure last week. While not in stellar shape on a contrarian basis, CoT continues not to be standing in the way of a rally.
  • The average seasonal pattern for gold bottomed in July, turns up in September, down in October and bottoms for a strong rally in December.
  • The average seasonal pattern for silver bottoms in October and turns up for a strong rally in January.
  • Gold stocks were due to bottom in September when viewing recent years. They are due to bottom in September or October over the span of 18 years. See 1st graph below.
  • The Gold Miners Bullish Percent (not a sentiment indicator as some believe; it’s a measure of oversold/overbought) is contrary bullish, exploring the depths from which buying opportunities often come. See 2nd graph below.
gold miners seasonal
GDX seasonal average


Again, USD accompanied by Gold/Silver ratio up = stay away from commodities.

USD accompanied by GSR down = buy commodities. Pretty simple. As yet those two riders of the would-be liquidity Apocalypse are floundering toward a decision point.

This chart shows the vast under-performance of the TSX-V/TSX ratio to the CRB index. With CRB breaking bullish – OPEC manip or not – the message continues to be to avoid the junior cow pastures, holes in the ground and the stories told about the great riches therein. It has also been a negative divergence to the CRB index that just has not mattered. Maybe it has something to do with the inflation being manufactured by governments (OPEC is after fall, a geopolitical fiscal entity) as opposed to central banks.

At face value CRB index is bullish and our target is 305 based on the breakout. The target for WTI oil is 105. Gas continues to slither along the daily SMA 50 and above long-term support. I continue to hold AR. Industrial metals and Ag index are trending down but will gain a boost if USD and GSR fail.


As for Gas, here is the long-term support chart once again.

natural gas

And here is the seasonal, which bottoms now on average. Unless true deflation really is in the offing I don’t see how the case for Gas is not a strong one.

natural gas seasonal pattern

Uraniums pumped hard and I sold UUUU (again). I retained FUU.V (FUUFF), which actually pulled back on Friday and is the least overbought of the ones I watch. This is the best way for a true believer to trade herself right out of a bull market. But for me, it’s about profit when profit is presented in this market. The U’s have provided plenty of that. The sector is overbought but per the Tweet (or whatever they’re called now) below it looks like a launch to what could be a new high, regardless of any short-term volatility.


Meanwhile, the also-rans await the macro signals of the USD and Gold/Silver ratio. This stuff is all downtrending but boy could it ram bullish if the 2 Horsemen fail. I was so tempted to buy TLOFF based on, yup you guessed it, fiscal policy news from the US with respect to securing its TLO’s future Nickel production. I held off for now. Much as TLO is US strategic, so is MP in the REE space. With respect to the Napier article and governmental fiscal policy (inflation) of the future, items like these could provide great investment opportunity as the US disengages from its China dependency in the coming years.



Savings balanced by gold.

Trading Account: No positions

Roth IRA (non-taxable, no contributions)

Cash is about 84% as I got a little more ‘in’ last week, trying to be discrete about sectors. But with the indications in the report above as yet undecided (sentiment middling, macro indicators asleep but skewed toward risk side of the RvR equation, market technicals undecided/suspect at best… the waiting game continues. I’ll raise or deploy cash at will and at any time depending on what the market is doing. The way it has gone it tends to change from day to day but we’re going to resolve to a deeper correction or a resumed rally before too long.

My preference is to manage intermediate swings and when new ones engage, major macro phases. Not daily swings.

As for the gold miners, I’m giving them a shot despite the fundamentals. Sometimes it is just time, and if the little GDX pattern keeps up I’ll keep up. If it breaks down, I’ll break down (to paraphrase Sgt. Barnes in Platoon).


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.


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