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US Stock Market: A-B-C correction view in the dustbin of history. SPX ticks new high and SOX > NDX > SPX leadership chain intact. Can only call this bullish, despite…

US Market Sentiment: Risk aplenty. Over-bullish sentiment is a feature of a bull market. It will also be there as a condition of the bull’s end. On balance, participants are briskly over-bullish if not yet nose bleed heights of over-bullish.

Market Indicators: Sleepy indicators sleep, which implies risk from a complacency viewpoint. Also the Gold/Silver and Gold/Copper ratios did not go to sleep. They got hammered upside the head and PUT to sleep as froth momo speculation (and associated risk) ensues. Other slower moving indicators like 2yr yield divergence to the T-bill and Yield Curves are slogging along a muddy trail to the time they will one day end the party.

Global Markets: See segment for individual markets. Key feature this week is the TSX-V/TSX ratio’s break upward and out of its base. Again, see segment. I think this is very important.

Precious Metals: GDX up and out of the triangle, eyeballing the target around 40. Silver is doing silver things, blasting off and gaining worldwide attention. Gold is getting trounced vs. the more speculative silver and cyclical copper. These are messages in alignment with the TSX-V/TSX signal noted above.

Meanwhile, gold is flat out bullish nominally. What’s more, it is threatening to shift to an uptrend vs. stock markets. Gold is a rock and a holder of value, and little else. Don’t assign speculation to it (would be my advice). When the time is right, possibly out in H1, 2025, the speculation will happen in gold miners as the “rock” simply sits there retaining value while all the cyclical stuff it is a counterbalance to declines. They you will see that elusive positive leverage in the miners. But for now, the PMs are part of a widespread global asset play. Don’t confuse the two situations.

Commodities: Interestingly and as planned, several beat down commodity areas are perking up. Of particular interest in the Laggard Olympics are the PGMs (and SBSW), REE (and MP) and Nickel (TLO.TO, VALE, etc.). Also, the Ags may wake up soon. Copper is on full bull and I’ll leave it alone (currently held AE.V & TLO.TO do have copper components) being a bottom feeder. I do have an eye on China A-Shares, given copper’s traditional ties with the ‘China trade’.

Currencies: USD is intact to its intermediate rally despite a world of assets flying in its face. With the tanking Gold/Silver ratio (GSR) there is a case for USD to break down. But in silver’s impulsivity, there is also a case for a flame out directly preceding a negative market liquidity event.

Sorry I cannot find my membership card to the well appointed up town private lounge inhabited by gurus (cognac sipping, ascot clad and otherwise) who would gladly make ironclad predictions for you. But here is one prediction: If USD breaks down along with the GSR things are going to wild to the bullish side, on balance in the asset world. If USD holds, GSR reverses and starts to bull, and USD resumes upward things are going to get painful in the asset world.

As a final note, that TSX-V/TSX breakout, if real, would argue “party on Wayne, party on Garth”, especially up there in the beaten down cow pastures of the great white north. But it would bode well for many other markets as well.

Bull

Last week’s bottom line from a segment of the same title:

Bottom Line

SPX took back key milestones to set itself free to resume bulling. If it does, the sky’s the limit, with “sky” being whatever heights a combined fiscal (government) and monetary (Fed) policy tag team can pump it.

But SPX is not quite out of the woods, below the 3/28 high. A failure (or even a tick higher and bull trap reversal) would reload our downside target at the rising SMA 200 (4720).

Let’s assign similar status to big Tech (NDX), and also note the ongoing negative Dow Theory divergence for the Ascot and Cognac crowd. However, let’s also consider another bullish option:

The Semiconductor index may have already completed an A-B-C correction and this is our confirmed leader in the US markets. Hence, Captain Obvious would ask you to watch the Semis for guidance!

NFTRH 809

The Semi index has reestablished leadership in the chain we use Semi > Tech > Broad SPX, recovering back above the daily SMA 50 (black), and this has been our best long-term indicator of the condition of the US stock market. Long-term subscribers will recall that we began using the Semi sector as a guide to both the market’s internal situation and the economy back in Q1, 2013 coming out of the “Fiscal Cliff” uproar as the Semis indicated bullish, not bearish.

Back then our theme was to watch the sector’s internals, which meant leadership by the Semi Equipment stocks, which logically would receive orders from Semi manufacturers ahead of new Semiconductor cycles. Back then we also used the Semi Equipment book-to-bill ratio, which is no longer available. A reading above 1 implied sector growth and when combined with the charts of the Equipment makers’ (like AMAT, KLAC and LRCX) performance vs. the broad SOX index, gave a clear view as to the forward state of the Semis.

While we no longer have the b2b data, we do have a picture of the Semi sector maintaining market leadership and within the Semis, the Equipment stocks maintaining leadership. It’s not strong leadership, but it just needs to be firm. For example, notice how AMAT and LRCX had long-since been trending down relative to SOX to precede the 2022 bear market (that wasn’t, it was a hearty correction). I have noticed over the years that KLAC is its own (bullish) animal, likely owing to a wider technological moat than the others.

And so here we have the headline index, the S&P 500, ticking a new high after the previous overbought situation was bled off by a negative RSI divergence and a moderate pullback only. This is why we watch the leadership chain above along with other indicators of an intact or ‘at risk’ internal market situation.

US Stock Market Sentiment

I’ll remind you that if you want momo analysis that would advise you to make hay while the sun shines by jumping the trends until they end, NFTRH is not the right source. If you want analysis that illustrates the bullish signals along with the risk signals, allowing you to make your own decisions in a more balanced way, I think it is the right source.

Dumb money indicators are now hungrily eating the stock market while Smart ones are on a hard fade. This is a risk. It is also a feature of market in bull mode. Do with the information as you will. Overall, risk is quite high in US stocks.

NAAIM (investment managers) were also dining on stocks as of May 15th. That was the day that SPX ticked a new all-time high, but the NAAIM reading was very likely not inclusive of that. Their last over-bullish reading of 89% is likely higher now.

Investors Intelligence (newsletters) reading shot upward a full point from the previous week’s contrary positive reading of 2.2, registering 3.19 on May 14th, even before SPX ticked its new high. So consider the newsletter crowd back in a bearish contrarian stance.

AAII (individual investors) bull/bear ratio is bouncing, mainly on relieved pessimism, not so much on renewed bullishness. The reading is a mildly over-bullish 1.76.

Speaking of AAII, here is their response to the inflation problem. If AAII, or front porch America, is a contrary indicator that indicator is healthy for the disinflation case. 72% of respondents feel inflation is still a clear and present danger.

Global Stock Market (and Macro Indications)

The World (ex-US) proceeds happily along its ‘anti-USD’ way (daily chart).

Or does it? Or do US markets, for that matter? An interesting situation has unfolded. Global (ACWX, orange) and US (SPY, blue) are in unison and bullish. But much of this has been in alignment with a bullish USD (inverse USD trending down). That is not the norm. Not by a long shot.

There is either something very wrong with the US dollar and stocks (not to mention precious metals, commodities, etc.) know it, or USD is preparing to abort its short-term pullback (inverse bounce) and wreck the markets.

Here is the literal view of the US dollar index still within its 2024 uptrend and grappling to hold the 50 and 200 day moving averages. Either the “de-dollarization” chants are going to finally prove out or a lot of people are going to get caught off sides…

…as silver’s relationship to gold instigates massive bullish FOMO across many markets. Seriously though, WTF? This is either the start of something big and bullish (esp. for precious metals and commodities) or it is something dangerous. We’ll have more in the Precious Metals segment, but suffice it to say that often when silver gets an impulsive move on it is a countdown to something that will go in the opposite direction. In this case the Silver/Gold ratio is indicating market liquidity, inflation and speculation ‘ON’. But if it blows out and reverses (as spikes often do) and USD holds its 2024 uptrend, the party could end abruptly.

<Insert here once again the statement that NFTRH tells what it sees and discusses potentials, good or bad, not what you or I may want to see>

For now it’s ‘party on’, Garth. That could end on Monday or, well, you know, it could intensify. I will resolve to track and closely call what I see. What I see at this time is an immensely bullish situation with risk aplenty along for the ride.

Back to our regularly scheduled Global Markets segment, Europe STOXX 600 is motoring along its uptrend.

UK 100 is consolidating its big upturn and is bullish.

Canada’s TSX is using the SMA 50 as a bullish underpinning.

Canada Junior (TSX-V) broke bullish as anticipated. While not shown on this chart the next target is the gap at 622. With the index price at 615, it’s getting close and it would be advisable to watch the index as an indicator to speculative excess going forward. In other words, if da ‘V’ continues bulling speculation will be indicated to be intact across wider global markets and asset classes. If it starts to weaken, we’d use that as a fellow warning to the USD and Gold/Silver ratio (or Silver/Gold ratio if you prefer). The higher TSX-V rises, the higher risk rises, in my opinion. Meanwhile, our next target is 622. Let’s watch its progress.

Now the fun part. TSX-V/TSX ratio made the move out of the basing pattern we’ve been tracking lately. This to me is an argument to try to be patient about holding some paper profits and not cashing in too early. This indicator to speculative spirits in the commodity/resources areas is only just beginning a bull move if, of course, it is not a head fake. Let’s see how this develops.

Aussie AORD is similar to Canada’s TSX, which is often the case for these two resource rich economies. AORD reclaimed the SMA 50 and as such, is bullish.

Emerging Markets are bulling along in the wake of China, copper and the global de-dollarization and BRICS touts. Will they resolve as merely touts once again or is it the real, macro altering deal this time. Stay tuned.

China’s large cap segment has busted bullish as we have tracked over the last month.

If this global bull phase is real or at least destined for a longer run, the A-Shares look more buyable than the overbought large caps. It stands to reason that the most well known stocks would have gotten going first before the play fans out to the little guys.

Japanese Nikkei is muted after it was a global leader into April. Below the SMA 50 it is suspect. Above it and it would likely resume the bull. Otherwise, I will personally wait for at least a smack of the SMA 200 before considering Japan exposure.

India BSE Sensex was another leader that appears to have been rotated away from on a relative basis to other global markets. This is one I will definitely keep on watch if I come to believe that the global rally has a long ramp ahead of it. This market was a leader for a structural fundamental reason, given India’s slowly rising global status.

Latin America 40 still has my interest. The daily chart does not show it, but that dashed line is a long-term breakout line from a bullish pattern. The sideways daily chart consolidation has a bullish flavor by its status above the moving averages.

Within LatAm, Brazil’s BVSP continues to trend down. But as noted previously by weekly chart, there is a potential basing pattern in play. At any such time BVSP may take out the daily moving averages and the downtrend channel, things could get pretty bullish here. The LatAm play is on watch in the event of a longer-term global market bull phase. *

* When I state “longer-term”, what I mean is our main operating thesis, which has been that the US/Global bull can extend to or through the US presidential election. After that it’s all bets off, IMO.

Precious Metals

If we are going to use Silver vs. Gold as an indicator for other markets we are sure going to use it for the precious metals as well. As long as silver is leading gold, the indication is bullish. Bullish and at risk.

Hearkening back to 2016, silver tore ass and nominally (chart directly below) and in terms of gold. That lasted for 6 months, blew out and failed. The current move is now about 3 months old. My point here is that despite the momo and the negative implications of the post-silver momo environment, the extreme bullishness can last longer than when you first see its risks.

Apply the 2016 comp to the Silver/Gold ratio we see that there was an initial surge, a pullback and then a big spike to termination in July at around month 6. One interpretation for the current situation may be that last week’s momo could get corrected prior to a resumed rise to the target (35). It is just a picture of what happened on a previous occasion. The 2020 spikes in both silver and the ratio show another, massively bullish alternative. Hence, I am hesitant to sell SLV right now. I have a few silver coins in my possession, but SLV is my price tracker. That price can get wild.

Daily GDX followed the Symmetrical Triangle’s normal implication, which is a continuation. GDX continued alright, up to the channel line…

…with an eyeball on the gap near 40, our on again, off again, on again target of the last many months.

The HUI monthly chart checks in once again to advise what could be in play, which is a shot through the downtrend channel line (launching legions of ‘bull breakout!’ players prior to a reversal back into the channel, which could follow the script of previous monthly candles (shaded yellow). That is our original plan, as it would fill the GDX gap near 40 and get that job done.

But there is a new wrinkle in the analysis that takes into consideration the potential rally time frames noted above for silver and the Silver/Gold ratio (SGR). Looking at the ratio in particular, might we not see HUI break the channel, pull back with the SGR to shake out the momos, and then ram upward again into its confirmed new bull market leg? We might.

In the more speculative areas, I continue to let the TSX-V shepherd over my TSX-V listed gold stock holdings. A note of thanks here to Rich (OGN.V) and Michael (AE.V) and if MAI.V is actually bulling for real, to Scott and Michael for bringing my attention to that one years ago (and Scott for putting me on a phone call with the classiest exec in junior mining, Doug Ramshaw).

AMX.V: Bullish, still in consolidation. As such, position was increased.

OGN.V: Just holding on and usually not looking at it.

RIO.V: Starting to get a profit taking temptation, but it is a mine developer making good on its plans, so as yet I sit and hold.

MAI.V: Pad permit, oh for a pad permit. But that takeout of the previous high is notable.

AE.V: Long-term, I tell you. Not looking at it as it is in a taxable account and if all goes to plan, one day a significant profit will be taken under ‘long-term’ tax status. It is in an orderly uptrend after having led the whole batch of them.

Gold is a constant. Not the “Golden Constant” of Harvey & Erb, but a constant measure of value in a financial world gone berserk. Let’s not manage its price this week. It is bullish and getting trounced by silver and copper. But it is bullish. That is its price situation. Its value situation is the constant.

Can you imagine that something this bullish is getting trounced by other assets? But in the nominal bullishness of this value asset, the indication is that there is something wrong out there in the wider macro (ah, we know, Captain Obvious). Gold is the anti-bubble and it is bullish. I think this is the precursor for the bubble’s end. All the more reason to manage the spike in silver vs. gold, because while those silver bugs are going to give you an earful about how bullish it is, the actual macro indication is usually very negative for what comes after (including, at least temporarily, for the precious metals). There I go again talking about future negatives during an intensely bullish moment in time.

Dialing back in to a close up view of gold’s inter-market relationships we find the GSR in tank mode, which is bullish for most everything. We find gold tanking vs. copper, which is bullish for most everything. Gold still bullish vs. crude oil, which is bullish for gold mining (a website comment advises that this is very different from refined fuels diesel and gasoline, but it is our general indication of the macro situation and its likely effect on gold mining). Of significant interest, during this time of pervasively bullish stock markets, gold has the appearance of a bullish consolidation vs. headline markets (it is already bull trending vs. US small caps, the Value Line Geo index and other broader market areas).

Bottom Line

The sector is quite bullish. But it carries similar risks to other markets before the macro transitions counter-cyclical, gold pervasively out-performs and gold miners leverage this to the upside as opposed ot the downside during the bubble years. So it is best to manage existing targets for now and evaluate if/when they are reached (GDX: 40, Gold: 2450 and a whisker away, Silver: 35).

Commodities (daily charts)

The Goldman Sachs Commodity index has held the SMA 200 and popped above the SMA 50. This keeps the bull biased look of its bigger picture consolidation in play.

WTI Oil is still technically vulnerable, however. But it is nesting at support and could be prepping a recovery of its own. The seasonal is positive into October. With oil fund USO still tracking well vs. WTI it is going on personal watch and I may add it next week.

NatGas is seasonally positive into June where it tops, pulls back and rallies into December (on average). So I am not going to touch it now, but will keep AR on watch for a potential buy if Gas and AR pull back in the coming weeks. I no longer wish to use UNG because it, unlike USO/Oil, is trending down vs. the price of Gas.

The Energy sector has been consolidating downward, but if oil were to rally so too would XLE most likely. I’ve been waiting for a touch of support at 90 but thus far the SMA 50 is holding.

Copper is booming as the whole world knows. I prefer to be watching the other metals and equities that have lagged far behind. One such case is Nickel, which as noted in the trade log on Friday when TLOFF was added, has been surging after building out a base and taking out the moving averages.

Here is little TLOFF (TLO.TO), lagging but begging for a catch-up move.

Here is a big boy metal producer, VALE, which is also a primary Nickel producer and likely a safer bet than the little spec above. For example, I speculated on TLO personally, but added VALE in my mom’s account (and also have it on personal watch). It’s got a decent pattern off of a trend line and is attempting a takeout of the SMA 200.

Over in the Rare Earth Elements patch, personal holding MP is also making positive strides. These are the types of stocks we’ve been anticipating to be latter stage ‘catch-up’ participants. MP is a long-term consideration as well due to its strategic US based production and forthcoming processing abilities.

Over in the PGM patch we also find the SBSW bottom feed working well as it based, held support and is on a second attempt to take out the SMA 200 which, if it holds and ticks a high above the April high, will set an uptrend.

I am being careful with Uranium, as it is the play that has been the most bullish for the longest. But all things being equal, I’ll plan to hold SRUUF as long as it holds support at the SMA 50.

Uranium prospect UEC is also held and has a comfortable look to it as it holds the SMA 50. As such, it is comfortably held at this time.

The Ags are finally making some noise of late as the index stair steps upward from early March.

Sugar (CANE) was added not for this terrible chart, but for the seasonal due to bottom now and the constructive CoT alignment. We shall see. I will not ride this down.

Soybeans (SOYB) on the other hand were added for the chart. The seasonal tops in July, however, so I will be mildly aware of that. But one thing it has going for it is that its seasonal declined from November to February, while it was supposed to be rising. So, I am not taking its current seasonal overly seriously.

Portfolio

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

Holding Au/Cu explorer AE.V in a separate account. It’s a 24% paper profit that I expect to tack on orders of magnitude more in the coming years if I can just not look at it and leave it alone.

Roth IRA (non-taxable, no contributions)

For novelty, here is the little snapshot of the 1 year chart of the IRA. It’s robotic and unspectacular uptrend had been the produce of profit taking, loss limiting and risk management. But more than those elements, it has been the produce of consistent cash infusion each and every month, compliments of a Fed trying to clean up its inflationary mess of 2020. So be it.

I am also aware that the chart is starting to hint at blow off mode. Again, a guy holding 77% cash is only going to blow off so hard and only going to suffer so much, given that soft padding of monthly income. As usual, I will take the market’s directions but all things being equal, I want to try to be patient while perhaps taking some profits and seeding them elsewhere. For example, SBSW and MP potentially breaking their bases and hence their downtrends.

But if/when this macro turns nasty I’ll have no problem selling hard and cashing up. That is because in my opinion the real play – to get short stock markets and buy gold miners – is still out ahead; possibly post-election.

Cash (and equiv) is 77%, which is okay for a guy who is aware of current and developing market risks but also wants to be a playah (that’s a joke, I am far from that). The mix of items represents precious metals, commodities, Tech and EM. I see things in pictures and the picture that stands out to me most this week is the TSX-V/TSX ratio in the Global Markets segment. It’s very early, but if that is real caution could get thrown to the wind in favor of some really stunning trades in the junior mining patch.

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.