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Summary

US Stock Market: Bullish and at high risk. But SOX is in pullback mode and NDX looks vulnerable short-term. In other words, the leadership chain is wobbling. If markets correct the favored view for now is that it would only be that, a correction. Projecting the next bear market is probably getting ahead of ourselves right now.

US Market Sentiment: Sentiment has progressed to the point where it is now dangerously over-bullish on balance. Again, not a timer but a condition for a correction is in place here and now.

Market Indicators: An ongoing mix of indications stating two things: 1) a sedate backdrop with seemingly not a care in the world and by extension, 2) high risk to broad stock markets, but especially in the US.

Global Markets: Still bullish on balance. See segment for detailed view.

Precious Metals: Sector could probably use a little cool down. Let’s watch silver’s pattern trend line breakout, however, because when this sector actually bulls it bulls hard, overbought or not. The recent rally off a double bottom in the miners felt like a launch rather than a bear market spike. CoT is not contrarian positive for gold or silver in its Commercials/Large Specs alignment, but small traders have fled and that is positive. The macro has not fully turned in favor of the PM complex (and especially gold/gold stocks) but it is well in progress. Until stock markets crack or at least start under-performing gold, it’s a long, arduous process. I am big picture bullish and anticipating the next leg of the bull market that began in 2016.

Commodities: Commodities may be ending a long downward consolidation. Items to watch closely are the Silver/Gold ratio (want to see it rise), USD (want to see it drop) and TSX-V (want to see it hold its rally parameters). See segment for more.

Currencies: USD is in a daily chart bear flag, rising to test a breakdown below support and the 50 and 200 day moving averages. As long as it remains below those, it’s a bear flag. Take them out and it’s a renewed bull phase. See segment for more on USD, Gold/Global Currencies and Bitcoin.

US Stock Market, Internals & Indicators

This article on Friday took a look at the S&P 500’s internal sector rotations and considering the potential roll over in leadership (over the broad SPX) by Tech as noted in this article, I took a short on Tech using SQQQ. It has been over a year of more often Goldilocks than not. If the market stays bullish/intact (pending interim corrections) it may shift to include, if not favor the more cyclical stuff like Materials, Energy, Industrials and possibly, Financials for a while.

With defensive sectors like Healthcare (XLV) still trending firmly down vs. the broad market (SPY) and the Semiconductor sector (if not Tech) still in leadership mode, the internal signaling to an ongoing bullish (at best) or stable (at worst) environment for stocks, high risk and all. But with internal rotations.

Here is a look at a daily chart of four such cyclicals in relation to SPY. As you can see, Energy and Materials are still trending down but have rallied in relation to SPY of late. I took the profit in Energy (XLE) and still hold XLB, as it has a measured target well higher, nominally. XLF/SPY has been trying to establish a gentle uptrend and XLI/SPY may have bottomed already.

I am not recommending these items as a ‘buy’ in a risky market, but simply noting the market’s internal indications. If you are going to be long, it will pay to be long what is being rotated into rather than out of.

On that last note, I tried a short against NDX/QQQ using SQQQ. It is an intact uptrend, obviously. Much like SPX it’s also a gappy chart. I am going to assume that NDX (daily chart) will fill the upper gap and test the SMA 50 (1754) but a real correction, if one comes about, would first target short-term support at 16860. A real and healthy correction would target the firmly uptrending SMA 200. Now that would be some good work to do if a pause to refresh is in order.

Note also that RSI has ticked negative below 50 after an extended negative divergence, and MACD is down-triggered and rolling over. We have seen plenty of such setups not resolve bearish, but bearish is what the TA is hinting, for a perhaps healthy correction. Until a real breakdown of the uptrends in this and other indexes comes about, it’s risky to short, by definition of the bullish trends. But as noted several times previously, I am going to poke this pig periodically when it looks viable.

The VIX divergence to SPX is still intact and a potentially bearish indicator. Also note that since early February VIX has popped, dropped to fill a gap, popped again, dropped again to fill another gap (gaps not visible on this line chart) and now with no gaps left, maybe it could actually play out to a market correction. I am positioned not to much care either way, but in my heart of hearts I’d like to see it play out. Markets are more fun (and gainful) when the herds are in motion.

Meanwhile, USD is sometimes correlated with the market liquidity gauge (Gold/Silver ratio) and sometimes with long-term yields. Frankly, with USD still bear flagging (ref. Thursday’s update) and the GSR pointing downward (but still moderate trending up) it appears that Uncle Buck is a bit confused, not quite following bond yields (as it had been) and not quite following GSR. Typical of a market that seems to make sport of withholding actionable signals until the last second.

It’s important to remember that the above are not always correlated. Especially yields and USD. But in a time of near total submission by market participants to every utterance emanating from the Fed’s multi-voiced orifice, Treasury yields (long and short-term) have directed the US dollar. However, if the GSR breaks down a headwind would be implied to the dollar and we’d likely see a continued fanning out of the market’s internals into the anti-USD stuff, the cyclical stuff, etc.

If, on the other hand, GSR finds support within its uptrend and gets impulsive to the upside most markets – likely but not necessarily including the precious metals – would come under much pressure. Another option is more of the same, which is a gently uptrending GSR, a firm USD and that porridge glutton, Goldilocks. I am leaning weak USD, pro ‘anti-USD’, pro-cyclical. But as always we’ll let the market decide and just keep track of the implications of that coming decision.

More Indications

• Gold has weakened of late vs. Copper and Commodities in general. If this weakening continues, it would favor the pro-cyclical rotation theme above. However, gold has been trending up vs. copper since spring of 2022 (in line with that year’s broad market correction) and broader commodities since Q4 of that year. This is counter-cyclical, anti-inflationary signaling. Hence, caution across the macro despite the bullish view on the surface.
• The big spike in copper came within the context of a still intact downtrend in its ratio to gold. If that downtrend is broken to the upside a big indication for the cyclical theme will come about. We’d also expect silver to outperform gold in that case. Let’s keep an eye on this. If copper goes wild, the inflation trades could get pretty frisky.
• The problem being, copper prices spiked at the hands of coordinated price manipulation in the form of top Chinese smelters agree to cut output. We have seen this movie in crude oil and various other metals and materials. Fine, copper is bullish due to the manip. But as a cyclical economic indicator it sure is not positive in the least, needing coordinated output controls to ram the price upward.
• Gold/SPX has bounced but still trends down and Gold/Global is neutral. So from the all-important perspective of equities, the macro has not yet fully aligned. So why again, as a gold bug, would I like to see the broad market crack? I may or may not pound a table or two, but I sure will gladly note it when the macro flips anti the bubble stuff and pro the anti-bubble.
• M2 money supply continues to flag downward, but is still very much aloft. It is that loftiness – plus the Fed’s ongoing monetization operations in the shadows that has kept the markets liquidity this election year, in my tin foil hat wearing opinion.
• High Yield spreads and Libor/T-bill yield spreads indicate a completely sedate, calm backdrop. This is a prime indication of both bullishness and high risk. They often go together. This needs to be understood.
• Market breadth as illustrated by the downtrend in Equal Weight SPX (RSP) vs. Headline SPX (SPY) is poor and a bearish omen.
• We have not discussed it in a while, but the Equity Put/Call ratio’s 10 week EMA is trending down and also indicative of risk ‘on’, much like junk bonds, Libor, etc.
• The 10-2 yield curve (daily chart) is again consolidating its steepening structure, but the trend has turned up and as long as it does not fall below the December low the steepener is indicated to de-invert (0+) in the coming months. That will likely happen under inflationary pressure, deflationary pressure or likely in my opinion, both at varying times heading into and through 2025.
• Finally, the divergence in the 2yr Treasury yield to the Fed proxy 3 mo. T-bill yield remains in place and glacial in its progress toward signaling the next bear market. But it is a negative indicator. Just a very slow and lumbering one.

Bottom Line

The sum of the above tells me that risk is ‘on’ and risk is also high. While the dominant macro theme is inflationary, almost by definition of governments and central banks that literally exist because of inflation (debt choked government will not soundly resolve its obligations) or to promote inflation (central banks). Monetary and fiscal inflation are policy, and as long as confidence (“confidence” defined in this case as a lack of revolution) in the system remains in place, inflate they most likely will.

But I continue to moderately lean toward an interim deflationary event (Q4, 2024 – Q1, 2025?) prior to the next big inflation phase which, due to the implications of the Continuum’s multi-decade trend break, will be more pronounced and painful than previous inflation phases that actually benefited markets at varying points along the disinflationary decades.

Market Sentiment

• Dumb money over bullish, smart money fading. Over-bullish, but not particularly extreme.
• Investors Intelligence (newsletters) has spiked even more extreme over-bullish to a 4.2 Bull/Bear ratio. Dangerous reading.
• AAII (Ma & Pa) is spiking to an extremely over-bullish reading of 2.1 Bull/Bear.
• Doink! NAAIM (investment managers) has spiked to a high of 105%. In my experience, they never get more bullish than this leveraged level. Dangerous.

Global Stock Markets

Here is the view of global stock markets as a whole (ex-US) in relation to the S&P 500. The trend is purely down. Hence, speaking personally I’ll continue to focus more on US stocks insofar as I participate in the high risk bull, although some areas, like Asia/EM could play catch up if the US dollar declines.

Meanwhile, a quick review of some global areas:

• Europe 600 is in blue sky and trending firmly up.
• UK 100 continues to lag, but is more moderately trending up. Frankly, UK looks like a buy assuming the global bull market continues. The chart appears to be awaiting a catalyst.
• Canadian TSX is on the verge of blue sky, testing the April 2022 high.
• TSX-V (chart below) got hammered back to support after registering the target zone. The rally is intact.
• Aussie AORD dinged blue sky and then summarily got hammered to test its daily SMA 50. Rally intact.
• Japanese Nikkei has pulled back after exceeding the 1990 high. It became quite overbought on the drive to long-term blue sky after taking out our long held upside targets.
• China large caps and A-Shares are rallying well, but remain in daily downtrends. So technically at least, it’s a bear market bounce/rally. I’d still keep an eye on this area – as well as greater Asia – for a macro market rotation in 2024, again assuming the broad global bull continues.
• Indian BSE Sensex pulled back to test its daily SMA 50 last week. It is trending up, not overbought and bullish. As long as that remains the case, a test of the SMA 50 is a buying opportunity for India bulls.
• LatAm 40 is consolidating within an uptrend but is being dragged by Brazil as Bovespa takes on a heavy look to its daily chart.
• The collective Frontiers (FM) are still bulling along after we’d identified a pleasant chart pattern. The play is getting overbought.

As to the Canadian TSX-V, it bears close watch for those of us participating in some of its components or similarly smaller, speculative resource and commodity stocks. Rallies in the precious metals and commodity complexes would definitely perceive an ongoing rally in da ‘V’ as a tailwind and a failure as quite the opposite.

After hitting the upside target zone TSX-V got hammered. Recall that we noted that bulls do not want to see the two previous lows (544.91 on Feb. 23 & especially 536.31 on Feb. 13) violated. Take out that 2.13.24 low and the play would be broken, technically. Meanwhile, if the play is to continue, the heavy pullback to the current higher low is a technical buying opportunity (mental stop loss per the lows noted above).

Precious Metals

Gold has made good progress vs. commodities over the last 1-2 years. That has logically been in accordance with disinflationary Goldilocks market signaling, and is expected to transition to counter-cyclical signaling. Gold has been drubbed vs. stocks and that is ‘bubble on’ signaling. Again, the macro is glacial, while our brains fire off sparks in hyper time. Patience and perspective always required.

I almost got rid of my partial hedge (DUST) on Friday afternoon, but decide to keep it over the weekend. GDX came within a penny of filling the 30.50 gap before easing to fill the 29.62 gap by another penny on Friday. I continue to view the initial surge as a potential launch to an even better rally, if not a resumption of the volatile bull market that began in January, 2016.

With gold keeping pace with stocks (headline SPX, it has more than kept pace with lesser indexes and market measures) over the last 2 years I’ll continue to view it as prepping to take over leadership after 12 years of massive under-performance and the more recent sideways action relative to SPX. The negative divergence of Gold/SPX to HUI continues to be a minor concern, but at such time that gold would start to rise in SPX terms the difference could be made up that way, as opposed to a drop in gold stocks. Indeed, I’ll favor that outcome vs. a significant drop in the miners. But until the macro turns folks… it has not turned. Eh?

Meanwhile, copper price manip or not, the Gold/RINF ratio continues to project disinflation that could one day impulse to a deflationary cycle, even if it is interim to the next big inflation phase. Buying quality miners on weakness during this process should work out well as the inflationist bugs scatter. It is no coincidence that HUI popped after we noted the positive divergence by Gold/RINF. A divergence is obviously still in play.

This X post shows the situation in silver tracker, SLV, which I used to replace CEF (Au & Ag). It’s overbought on the daily and could fail at any time, although the larger weekly chart pattern could come ready at any time. Our target for silver (not SLV) is 35 in the case of a successful breakout and likely, retest.

Gold, meanwhile, targets 2450 first and the later 3000+. These are based on two different patterns and the break to blue sky. However, gold (daily chart) got overbought on the initial launch to blue sky and may continue to roll over here. We can watch the EMA 20 area at 2121 and breakout support in the 2086 area. But make no mistake, this was a bullish breakout, regardless of any correction activity to test it. That vertical move was impulsive and came on volume.

Other Odds & Ends

• HUI/Gold ratio is still in a ‘V’ bounce off of the oversold low. In the PMs lows are often made in dramatic fashion on breakdowns. While the trend in the HGR is down, it is possible that the miners have made a low in relation to gold. If so, that would obviously be positive.
• Gold Miners Bullish Percent (BPGDM) is on an upward spike, as projected. But it is not extreme and so it is not standing in the way of further upside (i.e. the sector is not overbought other than on a moderately overbought short-term reading).
• Gold and silver Commitments of Traders are certainly not bullish, contrary sentiment wise with Commercials increasing net shorts and large Specs increasing net longs. One positive, however, is that the little guy has faded both metals and that is meaningful and taken in a vacuum, contrary positive.

Speaking personally, I am going to continue with my tack of not adding too many miners. I hold WDOFF (WDO.TO), OGNRF (OGN.V), AEM, KGC, CXBMF (CXB.TO), NGD, RIOFF (RIO.V) and AMXEF (AMX.V), along with a projected long-term hold of AE.V, which pulled back enough for me to increase the position but then went up again. I’d still like to add more on opportunity. That one could be special, but is very early stage. I may add a NEM here or a RGLD there. But I’d just as soon increase positions already held. They are the ones I’ve selected, in the cases of AE, WDO, OGN and CXB with the able assistance of some astute fundamental associates. Their expertise ranges from geology to finance and I trust their funda due diligence. The rest are mine, FWIW.

As for silver miners, as the X post above implies, I’ll take the Silver Bullet rather than guessing which miners will perform. Silver moves well enough with zero execution or country risk. That’s my story and I’m sticking with it. Although it was a little difficult not to buy SILV as it lurked at support in late February. Discipline, Gary. Discipline. Stick with it.

Commodities

Copper was discussed above. Chinese companies are regulating output and that boosted prices. That is fine for copper bulls (for now), but it is not indicative of an inflationary or cyclical macro. Frankly, it is indicative of the opposite as China fights its battle against economic slowing and an overall disinflationary macro persists.

Meanwhile, crude oil continues firm and with the big copper price manipulation – I mean rally – the CRB index is more than firm. I want to change our view to the GSCI index as its chart is cleaner than CRB. It took out the SMA 200 last week and that is notable as the index makes the initial attempt to revert to an uptrend after what might have been a double bottom.

The weekly chart view shows the long correction and consolidation from the 2022 highs that we had noted as potentially bullish on CRB. The fan lines are more novelty than anything, but traders will see that pop up and out of the 3rd trend line. This has come from a clear support zone. Two signals to watch for to green light the situation?

1. A weak US dollar.
2. A strong Silver/Gold ratio.

Copper & Industrial Metals: Copper got the coordinated price manipulation and other metals are lagging. But some, like Nickel, have gotten off the floor and bounced. As have Palladium and Platinum. If the commodity complex is making a double bottom and rally I’d expect the metals to be a featured item in the play. As yet I hold only Nickel prospect TLO.TO, but would seek to expand. Copper miners were missed (for now) with the China smelter hype spike.

Energy: Oil (Brent & WTI) remain constructive for bull continuation. I sold XLE because the profit was too good and the ETF was getting overbought. But I hold Gas stock AR, although Gas just cannot seem to get up off the mat despite its positive seasonal. I also would consider individual Energy stocks or even buying the oil fund USO back moving forward.

Uranium: u3o8 has rallied hard, leading the commodity complex by a country mile, and has begun to pull back. I want to watch my final Uranium holding, UUUU, very closely because while bullish, u3o8 could easily slide further to the 75 area for a test of the large basing pattern and the breakout from it.

Meanwhile, sticking with the alternative Energy theme, it sure does appear that the Solar index predicted a Biden win in 2020 and then it’s been 3+ years of ignominious decline ever since. Why again do gold bugs find the need to cry manipulation as if they have a corner on the market of such things? If this were gold the excuses its promoters would be making would be deafening. That’s what that stuff is, excuse making rather than owning reality. Okay, moving on…

Lithium: Li has risen off the floor. The two main watch items (ALB, ALTM & SQM) are still right there on watch. EV has taken quite a hammering and that obviously includes Tesla, which has a chart that looks somewhat similar to the one just above. The best aid for EV, in my opinion, would be some Biden admin pre-election political noise, much like what has come about for the Cannabis sector (see below). ALB, ALTM, SQM, etc. have been hammered although SQM is on a bounce. I’ll keep the segment on watch.

Rare Earth Elements: REE prices are still weak (you can review them here), but per analysis a few months ago the stock price of US REE play MP is much weaker than materials prices since 2020. Hence, I keep MP on priority watch for that reason as well as its strategic ‘US based’ situation.

Agricultural: The Ag fund (DBA) is rallying hard and the Ag index (GKX) is firmly trending down. On a quick look I am still unable to understand why the stark difference. But nor do I much care. If I go into the Ags I’ll probably do it with ‘ferts’ MOS and/or NTR, each of which are trending down and looking for a bottom.

Cannabis Sector

There is noise emanating from Washington’s orifice about Federal de-scheduling, which would be a game changer. Much like with copper’s price pump on Chinese smelter coordination, I don’t like chasing media noise. But after the hype eases a would-be de-scheduling of marijuana would take it out of the classification with Heroin (which is ridiculous) and into the classification of alcohol, which in my opinion is more harmful than pot.

BTW, Colbert cracks me up as he has since I first saw him on the Daily Show many years ago when I was sent into uncontrollable laughter at one of his sketches.

Here is a daily chart of a few of the preferred items. As you can see, the sector was grinding out a change to a potential uptrend even before the hype. Consider this sector back on watch after years on the outs. Legislation will not promptly follow the hype, but this is where it is heading as only a matter of time, in my opinion.

Currencies

Here is the close up view of USD’s bear flag rising to resistance and the daily chart moving averages. Until proven otherwise by taking out and holding the SMA 200 (orange) we can view it as a bear flag destined to fail.

Here is the normal daily chart view showing a neutral trend taking place above what are very valid long-term support levels, which a longer-term chart would show.

Meanwhile, gold is turning bullish in USD terms and is bullish and trending firmly up in global currency terms. This is a global bull market in gold. What does that say about paper currencies? It says they are debt riddled markers that governments ask you to have confidence in.

Finally, BTCUSD shot upward in a renewed speculative frenzy and turned down from overbought last week. Minor support is in the 62000 area and best support could be a 50% Fib retrace (55700) to test the SMA 50 or a 62% Fib retrace to test visual lateral support at 52000.

Portfolio

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

The AE.V position is doing well, but that is not what I care about right now. Indeed, if it were to drop I’d probably add some more. Profits in H1, 2024 are not what I am interested in. The profits, highly speculative though they would be, that could be seen if Cu/Au exploration continues to impress in the coming months/years, could be special.

Roth IRA (non-taxable, no contributions)

Cash and equivalents are 80%. A few partial gold miner profits were taken, but I do not want to sell. I am more inclined to buy. But for the short-term moderately overbought situation I tucked a temporary partial hedge in there (DUST).

The other stuff reflects fewer Goldilocks/Tech/Growth related holdings and I want to make sure I am watching the TSX-V and commodities in the event that the rotation themes play out.

Also, I took another loss trying to bottom feed AEHR, but there are other Semis pulling back now (AMD comes to mind) that I’d like to keep on watch. Maybe if Nvidia and Super Micro get a final hard pullback the sector’s correction will end and provide a buying opportunity. I am being patient for now.

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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