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Summary

US Stock Market: Bullish and at high risk. However, the SOX > NDX > SPX leadership chain remains firmly in place. <unchanged>

US Market Sentiment: Firmly over-bullish has graduated to extremely over-bullish in several indicators.

Market Indicators: If the VIX divergence is going to play out in a market pullback/correction it could happen any time, as VIX dropped to fill the gap (ref. update). Other indicators continue to express a fully risk ‘on’ backdrop with complacency and comfort among investors. That by definition means that risk is high because the pendulum is so far in the bullish direction. The Gold/Silver ratio is still gently trending upward and that favors the macro we have had to this point, Goldilocks who herself favors Growth and Tech. <unchanged>

Global Markets: Still bullish on balance. But EM and Asia continue to make hints toward breaking bullish and the Canadian TSX-V made a new high for the cycle (right to the underside of resistance, which is a key point). Much like TSX-V, China (large caps & A-shares) is trending down but bouncing hard to test the 200 day averages. European stocks are making new highs but are trending down vs. the US S&P 500. Japan is trending up vs. the US, which is quite a feat as even India is not doing so. <unchanged>

Precious Metals: Gold is in blue sky. A monthly close would go a long way in keeping it there. Always a chance that the monthly candle could pull back as they have so often. But gold is bullish short through long-term. Silver is still lurking neutral and would likely direct the sector’s fortunes, near-term. Gold miners are at resistance, but 3.5 years in this corrective leg of the bull market that began in 2016 could mean enough corrective work has been done.

Commodities: With the firm Gold/Silver ratio and USD still on its intermediate uptrend, commodities do not yet have a macro tailwind. The Canadian TSX-V rallied hard on Friday and if it gets follow-through, it would bode well for commodities as well. A potential problem is that the broad market is at high risk even as da ‘V’ probes resistance (and our long standing target area). Watch silver’s performance relative to gold. If silver wrestles leadership from its stuffy old dad, commodities would get that tailwind. <unchanged>

Currencies: USD got clubbed on dovish sentiment. But it did hit a short-term support level and held there. While USD is bullish on the big picture, it is suspect on the smaller picture, pending perhaps a bounce to test the breakdown. USD remains the primary global market counter-party/foil. Bitcoin has spiked hard and much like the action in the thin stock market led by Nvidia, implies speculative froth aplenty still inherent in this market.

800

That sure is a lot of writing. 800 weeks of detailed reports and in-week updates. But it stays fresh for me because the markets, economy, policy and hence investment implications are always shifting, rotating, if not outright changing. It is a challenge because it is constantly in motion of some sort. I love challenges.

So my job is also my primary* hobby because with the social/psychological elements to the markets and market management, I am just very much into it. Seriously, if you asked me whether I’d rather do this on a Saturday (for no compensation) or go for a round of golf (for free), I’d choose this. That is because it is a labor of love and it helps keep me in tune with the things I am most interested in.

Of course, this creates some pretty big voids elsewhere. I am not overly social and don’t find a need to be. I am a worker. I was trained that way by my father, who used to work me to death as a kid. Problem being, he was working even harder! In short, I prefer being productive over being relaxed or recreational. The work-a-holic speaks, and he’s going to keep speaking for another 800 NFTRH editions!

* My other hobby came about after my band was no more and I plugged into my computer instead of an amp. Over time I’ve learned more about the recording process and love it to the point where I don’t know if I’ll ever stand around in a room with live people again and play. I can be a control freak this way, doing everything my own way. I have discovered about myself that I am something of an autocrat. An autocrat of one

USD & Bond Market

USD (DXY, daily) broke its strict intermediate uptrend if you were to draw a trend channel of it. It also ticked a lower low to the previous low. Now it is testing clear support at the top of the bounce pattern from December to January. It’s already getting oversold. But that oversold could just be in prep for a bounce to test the breakdown below the SMA 50 (blue). MACD looks like another rollover may be in progress, but first let’s see what kind of short-term bouncing USD may do.

The Payrolls report was great in its headline (+275k vs. 198k expected) but it did show an easing in wages and a tick up in unemployment. So that moderation (and dovish implication) likely factored into still-firm markets and a still-weak USD.

As well as USD, rising long-term Treasury yields – and their Fed-hawkish implications – have generally been antagonistic to most asset markets more often than not. The 10yr and 30yr are in similar structures but I’d like to use the 30yr (daily) since it is the basis for the long-term Continuum chart with which we had previously managed the ongoing macro of disinflationary signaling and then, with the big break upward in 2022, the new macro and its inflationary signaling.

It will be important to understand whether the yield has begun a new uptrend (channel) or perhaps simply made an A-B-C upward correction of the hard bear phase (bull phase for bonds) in Q4, 2023. Arguing against the A-B-C theory is that I’d have thought ‘C’ should have made more significant move above ‘A’. As long as the yield is above the ‘B’ low, an intermediate uptrend is still in place.

If yields head up again it would also likely act as a tailwind for USD, or more to the point, renewed Fed-hawk views would act as a tailwind. If yields drop and USD does too, then we can expect ongoing rally activity in a broader section of the markets (including commodities and resources, as we’ve been speculating upon) as long as the drop in inflation does not get uncomfortably intense (i.e. deflationary). As a side note, if yields rise but yield curves get impulsive to the steepening side that inflationary signaling may no longer favor USD because confidence in policymakers would be indicated under stress.

Here again is the chart of the Gold/Silver ratio (GSR) with USD and long-term yields. The US dollar continues to ape the situation in yields, which is not always the case but in this time of obsession with the hawkish Fed, it is the case. Rising interest rates mean rising Fed Funds rate, which means hawkish Fed. At least so the story goes for much of the last year. As for the GSR, it is gently trending up, indicating no strong upward pressure on USD as a liquidity receiver in a would-be liquidity crisis. It is still pleasant signaling for Goldilocks and if it breaks down along with USD, would-be pleasant signaling for commodities and inflation trades.

Market/Economic Indications, Stock Market & Sentiment

Let’s borrow a graph from Hazel’s Payrolls post and again note that even as ‘they’ manage to prop the jobs market with massive services and government hiring, the unemployment rate is posturing to base and bottom in a similar way to 2007. Again, the question ‘can they hold things together into the election?’ is a pertinent one as many indicators, including this one, are at extremes as we’ve been noting for months now.

A divergence between the VIX and SPX is still in play. On a closer candlestick view VIX did drop to fill the February up gap, as I thought it would. Then it bounced and left another gap in early March. So, is the market going to rally so VIX can fill that one too? It’s just too much guesswork for a non-committed bear player when all she has to do is regulate cash levels to manage risk. But the signal remains in place for an eventual market correction. If it plays out, and given the length of the divergence already, one would think it would play out as an interim correction prior to more bull into the election. I just doubt that they can gun this mess unabated into the election.

If SPX were to crack even its tightest uptrend marker, the daily EMA 20 (5061), a subsequent pullback could be significant, even if it does not end the larger bull phase. After a would-be gap fill at the SMA 50, next two visual supports are 4750-4800 and 4600. Oh but all those gaps to one day be filled. First things first. This pig has not even dented its EMA 10.

Meanwhile, the US market’s leadership chain is intact with Semiconductor getting pumpy on the front end but Tech just maintaining lately. Is it really the AI fueled mania in NVDA and SMCI driving all of this?

Well, if it is Nvidia what might we make of the big bearish engulfing candle on Friday. Frankly, it looks like something silver did in spring, 2011 prior to the big bear market.

I am sure some brave shorts shorted this reversal. For my part I was at a car dealership all afternoon on Friday and would not have touched it had I been watching. I will surely use it as a guide, however. As a side note, I am watching both NVDA and SMCI as momentum indicators for the US market, but also as future buys if they drop far enough because I think that if the market gets an interim correction, it could be a fuel stop for a final run into Q4. Just a plan, anyway.

Regardless of NVDA and its undisputed leadership, even as former captains like AAPL and GOOGL drop out of leadership the lesser hyped, lesser played stuff is still thinning the market’s breadth in a dangerous divergence. Sooner or later this should matter. It’s another indicator asking whether ‘they’ (and you know who I mean based on the last several weeks’ analysis) can hold it together into November.

Sentiment

Dumb money is eating stocks and Smart has generally faded them. It appears that Friday’s in-day downward reversal (esp. in hero stock Nvidia) wigged out casino patrons a bit as they micro-twitched back to short-term lower risk, while longer-term risk is quite high.

Other indications include the Investors Intelligence Bull/Bear ratio reaching extreme levels as of March 5. Newsletter sentiment is now squarely opposite to its state back in Q4, 2022 when the rally began.

AAII (individual investors) is still wallowing around at an over-bullish reading that is not quite as extreme.

NAAIM (investment managers) crept higher still last week, up to an extreme 94% bullish from the previous week’s 89%.

US Stock Market Bottom Line

As it has been for months, bullish and at high risk (sentiment risk and technical divergence/bad breadth) of a pullback, perhaps to renew the bull for a final run into November.

But the “bullish” side of that statement is still what is in play amid that risk. The market has not even taken out its 10 day average. Until it does that and takes out the EMA 20, it’s purely bull trending.

Sentiment-wise, it’s a very contrary bearish situation but these little sentiment squalls, like the one that drove the short-term risk reading above back down, can happen repeatedly along an ongoing rally (absent meaningful correction).

Global Stock Markets

Everybody is as they were in the global rally, generally bullish, with the notable exception of China. You know, the same China and Mandarin language that a famous commodity promoter was “teaching my baby girl” 20 years ago or so. Well now, baby girl’s all grown up and wondering why daddy was so zealous. Like, what’s the big deal, dad?

• Europe 600 has now joined its developed world counterpart, the US, in blue sky. I assume similar risks are in play although I do not study European risk indicators.
• UK 100 is different. It continues to amble sideways in a neutral/positive bias situation. It, like the others is in a long-term bull market. But it is not a dynamic one at this time.
• China large caps, A-Shares and Hong Kong are similar. Trending down but rallying of late. If the world is not ending (it is not) I think that alert contrarians would be keeping a firm eye on this.
• As it is, Asia (ex-Japan), AAXJ, which I hold, is still rallying within a neutral/positive bias along with EEM and the Frontier ETF (FM) is also still on its bull phase. I decided not to add it as there are too many individual fish to fry should the play really get going.
• One important market for getting the temperature of EM and resource/commodity rich regions is the Canadian TSX-V, and it has bulled up to target at 580 and resistance. I must stress that a target is not a stop sign, but much will have to do with the macro and especially indications from USD, GSR, etc. As it stands now, the rally in da ‘V’ is still on.
• Canada Senior (TSX) is just another bullish market. It is on the verge of but just below, blue sky.
• Fellow developed commodity country Australia (AORD) is in a long-term bull market and has ticked blue sky.
• Brazil BVSP (currently 128365) took a hit on Friday, taking it from an already non-stellar looking technical situation to a flat out bad one. There is a gap at 121000 that could fill and keep a higher low (and thus the rally that began a year ago) in place. The LatAm 40 ETF (ILF) took a hit as well. We had noted two things about it previously: 1) it had made a long-term chart breakout and 2) it appeared vulnerable to Brazil, which was not looking good. Now neither look good.
• Japanese Nikkei is just flat out bullish and has registered upside targeting we established years ago. This closes out all those deflationary lost decades. I have FANUY and SONY on watch. What the heck? Fanuc, a quality Machine Tool/Robotics manufacturer of whom I was a satisfied customer when I worked in the real world, especially, would benefit if global industrial activity, including China especially, were to rebound. But a lot of Japanese equities look extended. NIKK impulsively rammed to target in a relatively short amount of time, after all.
• India’s BSE Sensex is flat out bullish. I am not going to buy such a market. But bullish is what it is as long as it is. You can just feel the global hedge machines having rotated hard into this market.

Global Markets Bottom Line

Bullish with most extended/mature and others like Asian/EM buyable IF the bull rotates. A weak USD would be helpful there. No changes to this view. China is a wild card as it tries to stimulate its way out of its economic slowdown.

Precious Metals

This chart of the gold price is once again provided for its simplicity. As noted last week, gold has been bullish on all time frames and importantly, that includes longer-term time frames like this. Gold, while a macro laggard amid the still-intact policy (fiscal/monetary combo) bubble, has sneakily broken out to all-time highs. It is not just you and I viewing this now. It’s going to be everybody.

For review, the measurements are a longer-term 3000+ from the large Cup and 2450 from the lesser pattern just broken to the upside. While still a laggard, this breakout could also be signaling macro changes to come in which gold could play some serious ‘catch up’ to the bubble stuff. Patience, lots of it.

One word of moderation, however. Gold (2185) needs to close March above 2153 to confirm a new phase. This line chart does not show the highs of previous spikes that failed when “Mr. Slammy” made the scene.

From NFTRH 799:

GDX (daily) over the last couple of weeks popped from above the October low, dropped to fill the gap and shake ’em out, popped again on Friday and oh well, left another gap. The short-term double bottom and subsequent upside volume feels like something real, at least in the context of a tradable rally. Personally, I am constructive on the short-term but will not pull out my golden pom poms because other areas bounced or remained bullish.

Finally the miners got it going after that re-test of the short-term low. The over-bearish situation had become unsustainable. The launch off of that low has left 3 gaps below while eyeballing a fill of one above (30.50). That, along with the already filled gap below it were noted as “reasonable” targets for a rally. But considering the volume that came in after the low, if the macro does start to shift (see below) this could be looked back at one day as the launch to the next real bull phase. Hey, could happen.

As yet the gold miners are simply rallying with most everything else. Some notes on the gold miners and the precious metals in general from a macro perspective:

Gold Ratios to risk ‘on’, inflation sensitive and/or cyclical markets continue to show a developing counter-cyclical environment (Gold/Commodities firm to rising) amid Goldilocks. But until gold does the same vs. stock markets we are only ‘in progress’, not there yet. Gold/SPX bounced within its downtrend and Gold/Global (ETF, ex-US) is actually at a point where it could start to make some noise.

Gold/RINF (inflation expectations) is indicating counter-cyclical pressure amid waning inflation. In other words, Goldilocks in preparation for a counter-cycle. The miners took the cue immediately after we noted it. I like it when that happens.

Gold/SPX is still a negative divergence to the HUI Gold Bugs Index. We have noted that the gap can be closed primarily by gold out-performing stocks or by HUI dropping. While HUI remains firmly within the correction that began 3.5 years ago, I want to allow for positive change here. It’s probably time.

BPGDM has only started to lift off a low, if that was the low that I think it was. The implication is that the rally could have more upside, pending any volatility at current resistance (ref. GDX above).

Other Notes

• HUI/Gold ratio is ‘V’ bouncing, but still a negative divergence. It could well spring higher, however, to close the divergence. We had noted this as an ‘oversold’ sign for the sector after it tanked.
• Gold & Silver Commitments of Traders, which had been constructive, sentiment-wise, popped toward contrary negative (as of March 5th), which is what they do during a rally. They have not necessarily hit what looks like a limit area. But the reading is taken before three more days of rally activity. So CoT is indicated to no longer be friendly, contrary sentiment-wise. It is not a timer, however.
• On the big picture, sentiment is not an issue for the precious metals complex. Why, look at the Gold and Silver bullion fund still trading at a discount (to NAV) of 4.7% despite a bullish looking technical situation by monthly chart. In my opinion, gold bugs have been banished from the consciousness of regular market participants who are too busy chasing Nvidia, Super Micro and Bitcoin.

Fun With Log Scale Charts

Golden pom poms aside, this log scale monthly chart of gold can only state one thing as it currently stands: bullish, and though a monthly close at new highs is needed to avoid another false breakout, a chart that absent an “attack” * from Mr. Slammy, will gain a lot of attention if it holds new highs.

* I recommend avoiding words like “attack”, “cabal”, “banksters”, etc. because Mr. Slammy is a reality, whoever he is. One day those that drive him are going to decide it is time to make some coin on this play. If we take seriously this conspiracy stuff pretending to be analysis, we will not be ready when the time is right. We’d be too hung up on ghost stories.

Finally, HUI monthly log scale also holds trend from the beginning of the terribly volatile bull market that began at the 2016 low. After 3.5 years in the wilderness, it is coming time for this massive consolidation leg to end. Next target is and for years (since our first target of 375 was hit in 2020) has been 500 (+/-), which would conveniently coincide with the upper channel line on this chart. This chart does allow for another touch of the lower trend line, but I think that is a lower probability potential.

Commodities

One guide for commodities is the TSX-V index, which as noted above is still in rally mode (though at targeted resistance). The best case we have had for commodities has been for what’s left of the positive economic cycle to fan out and include the inflation trades as inflation eases and the Fed de-hawks.

With confidence so fully intact (despite what the average market participant may say) in policymakers, inflation has penalized the inflation trades by firming the US dollar. If more economic signals roll in that weaken the hawk we could expect commodities to bull for a while if/as the USD weakens. A pre-election, fiscally stimulating US government would only help the play. Meanwhile, technically…

• CRB index is neutral on a daily chart, but a weekly appears as a long (since H1, 2022) bull flag downward consolidation that is trying to turn up NOW. As it appears, it is quite constructive looking.
• Crude Oil & NatGas show oil, CRB’s driver, in a similar state to the index; poised to go bullish. Gas has just entered what on average is a very bullish seasonal. I am still constructive on the Energy sector.
• Metals & Mining (XME, which I hold) broke out from a flag before getting pressured on Friday. Copper is poised in a somewhat bullish looking pattern while the broad GYX is trending down but on an attempt to change that. Much follow through needed.
• Uranium stocks popped hard on Thursday and got whacked harder on Friday. Holding URNM and UUUU. The bottom technical line is that the correction that began on Feb. 2nd is still intact.
• The Ag index (GKX) continues to trend down while the Ag ETF (DBA) trends up. Since I have had no interest in the sector I have not looked for updated info about what components/weightings are creating the disconnect. I did, however, put Fertilizer stocks NTR and MOS on watch last week.
• Outliers like REE saw the ETF (REMX) bounce in its downtrend and my watch list item, MP, do some kind of debt financing I did not fully understand. MP remains the long-term pick for REE, from my perspective. PGMs Pd & PT are each trending down but each with the potential to have bottomed. SBSW is the related equity, but I’d just as soon add PALL and/or PPLT. I did add downtrending Nickel (w/ Cu) prospector TLOFF (TLO.TO) on a hunch that maybe it’s just time. That’s a big “maybe”.

Portfolio

Funds are balanced by gold (long-term risk management & monetary stability).

‘Savings’ account now holds only early stage Cu/Au explorer AE.V after profit was taken on a position in GOLD (Barrick). AE.V was increased on downside. I tried to add on another pullback last week, but was unable to get filled. It was originally brought to my/our attention by MC, a geologist and NFTRH subscriber and his very positive views have been echoed elsewhere by reputable sources that I have seen since. So again, the intention is to hold, much like Great Bear was a few years ago. This stuff requires patience.

Roth IRA (non-taxable, no contributions)

Cash and equivalents are at 78%, which feels about right for now. The portfolio holds gold stocks, which are the go-to for the next macro phase (IMO) and a combination of Goldilocks and more cyclical items like Energy, Commodities and Materials.

If the macro shifts to further include commodities, resources and materials, I’ll reduce cash and add. Or if Goldilocks abruptly ends, I’ll reduce that and reallocate/re-balance. Perhaps after the election or whenever the broad bubble pops I’ll be ready for the new macro, and as of now that is what I have gold and the miners tabbed for.

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 nftrh.com 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.