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Summary

US Stock Market: Post-correction recovery fills/nears upside gaps. Also near gateway to higher prices. High risk market technically favors bull view due to existing trends and the hard summer sentiment reset.

US Market Sentiment: Sentiment indicators are resuming toward contrary bullish, but no extremes in view. Short-term risk is in play, however.

Global Stock Markets (per last 2weeks): World (ACWX) still trending down relational to the US. Generally in the same short-term condition as the US. It’s a global bull market that would come under pressure and in some of its aspects, go bearish when the US enters a bear. Last week: Despite its recovery, the World continues to be trending down in relation to the US S&P 500.

Precious Metals (last week): It’s complicated. See the segment and let me know if you have questions or alternate views. But the issue is related to the precious metals correlation with cyclical markets generally running anti-USD and vulnerability out ahead. But first, HUI 330 is the next target. But the next major target is 375. That could determine whether a coming correction would be from a nice but unexceptional new high (375) or a 5th wave bull killer (500); the latter of which would be a selling opportunity prior to a “table pounder” buy out in the hazy future, brought on by what is noted just below in Currencies.

Commodities: See segment for details. Best takeaway I had is that the Energy sector (XLE) is poised bullish while the Energy commodities, oil & gas, are hard down (oil testing previous lows). Industrial Metals complex looks constructive and we’re considering whether Uranium sector may have already bottomed.

Currencies: USD is and has been bearish since losing support at 104 back in July. One possibility shaping up (it’s a rough draft currently, please keep that in mind) is that the buck can continue to weaken, spurring an upward acceleration and blow-out by asset markets (led by the more ‘anti-USD’ items) in the coming months. Then comes the bigger picture rush to liquidity as USD (improbably to most) bottoms, turns and burns into the next deflationary liquidity crisis. That could be a few or many months out, after a selling opportunity across asset classes.

US Stock Market (Status & Indications)

With reference to Thursday’s NFTRH+ update, the market regathered itself at the initial support levels that were noted. We used daily charts to note deeper potential objectives, but in holding initial support, those would remain theoretical at this point.

As part of the process, SPX did fill the upper gap, which we have viewed as the gateway to new highs. It could also be the final piece of business prior to a double top. But technically speaking, the odds favor a rally continuation based on the sum of indications I see on this daily chart, primary of which are the firmly intact uptrends.

We noted on Thursday that NDX was sitting heavy on its SMA 50, and Friday it put in a candle that held that support marker. Hence, the trends are firmly up here as well, and would not even come under suspicion until the SMA 50 would be lost. NDX still has an open gap at 20266.

SOX put on the most severe downside correction of the three and would be expected to eventually put on the most striking recovery. So far it is recovering in line with the others, but certainly not distinguishing itself as a leader.

Hence, we should watch the SOX (and I’ll be keeping an eye on personal holding NVDA) for clues. This is an old daily chart we have not reviewed in a few years. It includes the two Semi Equipment stocks (LRCX and AMAT) in ratio to SOX. The idea being that a new Semi cycle first sees ramp-ups in orders for the equipment that produces Semiconductors (e.g. AMAT, LRCX, KLAC, ASML, etc.), leading the manufacturers’ (e.g. AMD, NVDA, TSM, etc.) next cycle.

We used to use the Semi Equipment book-to-bill ratio, which is no longer available. But a look at the stocks’ relationships can tell a story as well. LRCX and AMAT are not looking good vs. broad Semi. As for our usual leadership indications, all that can be said for SOX/NDX and SOX/SPX is that the are on a bounce within a still potential roll-over (could the Equipment stocks be leading that?). We need to keep it on watch. If Semi abdicates leadership, the market could well rotate (SPX is everything from Tech to Healthcare to Energy, etc.) and keep on going. It would be a bearish cycle signal, however, fitting with our view of a high risk market.

A final note that NDX/SPX is also in suspect shape right now. The sum of this picture in my interpretation is that US market leadership is barely intact, at best, and potentially seeing internal rotations.

On that subject, the Energy sector (XLE, daily) is in something of a Cup with an elevated right side and an ongoing bullish looking handle. Why bullish? Because it is riding the up-trending moving averages. As such, I am holding XLE after increasing the position and also CVX, which was added recently. AR is its own gassy animal, also still held. But the sector on balance appears poised for upside despite weak commodity prices, assuming the trends hold up and the commodities eventually turn up. The objective for XLE would be a new high above 98, or 10%+ from current levels.

Let’s also look at defensive Healthcare, which is bullish in an ongoing way (as opposed to XLE’s consolidation). I am not interested in buying this chart, but its components in Bio/Pharma and Medical Devices are of some interest (IBB is held in the taxable account). Medical Device (IHI) actually looks interesting on a weekly chart as it attempts to break out of a 2+ year old pattern going sideways with an upward bias.

Biotech has already broken upward from its pattern, first noted in this June 25 NFTRH+ update. I’ll just hang on to IBB in the taxable account for now and be careful about any individual names I might be interested in because those individual names can go boom or bust at any moment, depending on clinical trials, FDA, etc. But on balance, Healthcare is collectively assembling as a defensive sector in a late stage bull market, as it should. Rotation could be in play for Biotech and Devices.

The XLV/SPY ratio acted as a good warning on bear markets in 2000 and 2008, by bottoming and turning up. It failed to work that way in 2011, and as I recall there was a lot of politics involved with the Affordable Care Act, which probably distorted signals. Then it worked again for the 2022 market correction. Now with a little ‘V’ upturning, we can keep an eye on this ratio for signs of players shifting more defensive as a precursor to a potential bear market.

US Stock Market Bottom Line

The market remains intact, but may be undergoing a phase of rotation into a more defensive posture, which would make sense if our theme of “late stage” bull is correct. The SOX > NDX > SPX leadership chain would indicate that, if it breaks down. SPY/XLV would indicate that, if it continues upward from this bounce. The XLU (Utilities)/SPY ratio (daily) is another defensive vs. broad indicator and it is constructive to have bottomed (I am holding XLU). The Utes become more popular as market-based interest rates decline, which is what usually happens in a decelerating economy.

US Market Sentiment

Dumb money is springing back hard and risk indications show that the market may not be out of the woods, short-term, regardless of Friday’s up day. Of note, gold bugs: If we are being fair and balanced, we realize that the metal is loved at least to the degree stocks are these days. What this means is that given our long held view that with the precious metals rising as part of the broad rally instead as a unique situation, they will be vulnerable when the stock market bull terminates. More on this in the Precious Metals segment.

NAAIM (investment managers): Boosted from a heavily retrenched 56% to a moderately over-bullish 74% last week. NAAIM often signal imminent danger of correction/pullback when they leverage bullish above 100%.

Investors Intelligence (newsletters): No updated info last week, but they were heavily in pullback mode toward over-bearish at 2.07 bull/bear on August 13, which squared well with the market ‘V’ bounce since.

AAII (Ma & Pa front porch): Increased bullishness on August 21 per the following…

Market sentiment has ticked upward along with the rally. It’s not at a rally killer contrary point but it is doing as would be expected, suckin’ ’em back in, FOMO style.

Precious Metals

And again, don’t think for a minute there is not FOMO going on in the precious metals and the venerable anchor of stability, gold itself. With Friday’s hold of clear initial short-term support, gold was much like the US stock market. But that should be no surprise because gold (and the sector it lugs around with it) have been part of the broad rally and thus, not yet unique in that regard.

However, that does not minimize the importance of improving fundamentals, which is the most important aspect of our long-term macro view, and gold’s grinding progress in ratio to cyclical commodities and markets. People ask me when I will pound a table on the bullish fundamentals and the answer is not as simple as ‘when da funda are complete across the board’. Why is that?

That is because with the PM complex traveling more or less along with the broad markets, if said markets top and begin a real bear market, as expected in the coming months/quarters, the MOMOs and FOMOs are going to sell when the herds start puking the broader bull market. Fundamentals be damned.

A table pounding buy opportunity? Well, it could end up looking like the glorious one we had in Q4, 2008 as the metals and especially the miners were crashing, falling like knives, severing my greedy hands (miners were, in some cases, selling for cash with gold in the ground for free) while gold’s ratios to stocks and commodities (including mining cost inputs) were screaming, utterly rocketing higher (as nominal gold corrected hard). The puking herds cared little about the fundamentals. That was a massive sentiment unwind, aided by the margin man making his calls.

So at this time, we are bullish, we are transitioning to a proper macro and we’re going to live happily ever after… have a profit taking opportunity prior to raising cash in preparation for the TABLE POUNDER. But that table will be pounded amidst widespread panic in the markets, including the precious metals as they unwind the unhealthy association with the broad markets.

That is not a crystal ball talking. It could be way off the mark. But it is the favored game plan for your letter writer. First things first…

1. Let’s finish up this bull move.
2. Let’s appreciate its profit-taking opportunities.
3. Let’s anticipate that before a table pounding buy amid tanking stocks we may have a selling opportunity and an opportunity to cash up in preparation for a table pounder, which would come amid stock price destruction.

That is an outline as of now. Not a set in stone plan. My question would be ‘would such a selling opportunity come at the 375 objective, or if things get really bulled up, in the near-term, the 500 objective?’ Regardless, if we get a hard leg up to 500, that could be interpreted as the end to a 5-wave bull market, prior to a long-term buying opportunity (AKA table pounder) out at some bear cycle low in the future. Please advise any questions you may have. It’s an important juncture for we gold buggers.

Right now, first things first. We are managing 375, and if/when Huey gets there we will evaluate the macro to try to refine an answer to the question above. Right now we are focused on 375, although…

…the thing before the “first thing” (375) is the initial objective, which the weekly chart shows at 330.

Precious Metals Bottom Line

We remain on a rally as part of the broader market rally. Volatility can and will be introduced at any time. But subject to revision by incoming signals, the plan is for one more sell (profit-taking opportunity) prior to a real-time table pounder. Ref. Q4, 2008 or to a lesser degree, Q1, 2020.

Global Stock Markets

Status unchanged on the world (ex-US) as a whole. ACWX ticked a new all-time high on Friday and it continues to trend down vs. the US S&P 500. That does not mean it is not bullish. It is. It just means that it has not taken leadership from the US.

The most notable market for your letter writer’s purposes is the TSX-V, which is a guide for the commodity/resources markets and the speculative spirits within. It is flying in the face of said letter writer’s Head & Shoulders projection to 503, as shortly after the target was produced a sharp rally began. I still see the bounce as a move that is counter the new downtrend, keeping the 503 target alive. But it is also nesting on the SMA 50, which would need to be lost in order to start managing such a decline again. It may also have been an A-B-C downward correction, now complete.

Europe 600: Has rallied hard to a lower high. Still firm downtrend related to SPX.

UK 100: Still bullish, trending down vs. SPX.

Nikkei: Has rallied hard to underside of SMA 50. Trending down vs. SPX. I took profit on DXJ.

China large caps & A-shares: FXI looks constructive, ASHR less so. Both in downtrending Drubsville vs. SPX.

Canada TSX: Firmly bullish at a new high. Trending down vs. SPX.

Aussie AORD: Fumbling along bullish. Firm downtrend vs. SPX.

Brazil: Made a big spike to get back to neutral, technically. Trending up (via that spike) vs. SPX since June low.

India SENSEX: Bullish in a sloppy pattern. Neutral/down biased trend vs. SPX.

Commodities

• CRB/GNX Commodity indexes have been drubbed, mainly with crude oil’s weakness. Yet the Energy sector (XLE, shown above) seems to think that will change for the better. The commodity indexes may be in something of a ‘W’ bounce posture after declining to test the December lows.
• Copper/Industrial Metals actually see the complex (GYX) out-performing the headliner (Cu) lately, in attempting to reestablish the uptrend. I took on some FCX and ignominiously continue to hold TLOFF/TLO.TO (Ni & Cu prospector). There are several other industrial metals plays out there, from TECK to BHP to RIO to HBM to VALE, etc..
• On a hunch that the Uranium sector has gotten hit hard enough, I added back URNM (taxable account). Watching CCJ, UEC, NXE, etc. but in no hurry.
• PGMs (Pd & Pt) are as they have been. Trending down and trending sideways (positive bias), respectively. Still no immediate interest, but SBSW is on watch. As are MP and LYSDY in the Rare Earths patch.
• Agricultural sector has been decimated. And still your grocer is charging 2022-2023 era prices? Somebody’s gouging in the supply chain and there’s nothing I know of that can convince me otherwise. One wonders if the stocks of companies within a grocer’s supply chain may be seeing puffy margins.

Currencies

Well here we are. USD has smacked the next expected support level at 100.70.

The weekly chart shows that support, and its longer-term touch points. If USD does not hold here the next objective is 97.

Let’s look at the bigger picture view that we’ve long-held, of a cyclical bull from 2008. The US dollar bull market cycle from 2008 is not dead. But it could be taking a decline toward 90, which is clear support (not drawn in on the monthly chart). It is defined by the 2009-2010 highs and the 2018 & 2021 lows.

In the meantime, the “dedollarization” camp may hold sway, and if you hear too much hype about Chindia, BRICS and gold-backed currencies getting too loud at those lower levels you might want to at least consider the prospect that the buck could put on a contrary play, amid deflationary pressures, and wreck everything. Of course, in such a liquidity crisis, the Gold/Silver ratio (GSR) could be in play as well.

Here I want to add that the USD has no fundamentals, much like its global competitors. But at a point such as that described just above, it would not need fundamentals at a contrarian sentiment extreme combined with the rush by those herd members not yet dedollarized, in the dollar’s liquidity have. As for “dedollarization”, I think it is viable. Over many years, most likely.

In a casino built upon debt, it’s all speculative. But this is the reason we have long-term blueprints on what is possible. For now, I am personally speculating anti-USD, even with the precious metals as they run with the herds. The contrary bullish USD play could serve as the trigger to what was discussed earlier, an interim high in the precious metals (along with most everything else), silver tanking harder than gold, and the end of the bubble years in a deflationary episode that policymakers will not be able to effectively resist.

All of that, please remember, is one man’s vision into the future. That vision is a possibility, if not a probability. But it is time, well along into the asset market party, to have our longer-term plans and contingencies so we will not be caught flat-footed or worse, stupidly confident, about the gains that could continue on for a while yet.

It looks like the market is electing this prospect, where the USD declines further, even to the point where it is declared dead and the dedollarizers declare themselves the winners… and yet Uncle Buck still resides in his bull cycle. If that remains the case one day, perhaps in H1, 2025, and you hear the “death of the dollar” stuff too consistently and aggressively, at least be on the lookout for this scenario with Unc rising fiercely with the GSR at his side.

Meanwhile, there are two other gentlemen holding sway, and after the summer sentiment clean-out, we can continue to party (well, not party, but personally, I will continue to speculate amid risk management) with them as long as trends remain normal.

Meanwhile, with USD in bear mode, the heavy would-be macro bear lifting is being done by the Yen carry trade, where market jitters are concerned. As per the short-term ‘Risk’ indication in the sentiment segment, maybe the still-firm Yen could go along with that…

…not to mention a VIX (volatility) indicator reset to full complacency. A bad, even terrible timer. But a good contrarian condition in place for some renewed volatility.

Portfolio

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

The new(ish) taxable account has its holdings and appreciates its interest-bearing cash and equivalents, and will accept a bit of risk in service to a would-be MOMO/FOMO end-stage of the bull, if applicable. Also, it will continue to shift cash – due for rate cuts on its interest – to short-term Treasury equivalents over time.

As a side note, check out AE.V, added as a long-term hold and damned if that’s not what it is, a bag being held many months later after not emptying the bag for significant profit. But that was the goal of the trade (long-term) and that’s what it remains. I care not a whit. But it’s a good tale you hear all too often among junior/exploration resources investors. Buyer beware (at least in the interim).

Roth IRA (non-taxable, no contributions)

Cash/equiv is in at 82%. About right (for me) at the moment. I would lever this account more “in” than the one above if I start to get feelings of a future upside blow-off situation. But right now I am just being patient, as they pay me (Fed Funds Rate) to be so.

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.