Summary
US Stock Market: Late stage bull market, as has been our projection all year. Very high risk per multitude of indicators and…
US Market Sentiment: Risk is and has been very high from a sentiment standpoint. Gold is right there in the same “price” risk category from this vantage point as well.
Global Stock Markets: Still bullish on balance, but under pressure lately from the USD spike. Still trending down relative to the US on balance (ACWX/SPY ratio).
Precious Metals: Next objective for HUI is 375+, upside “blow-off” potential to 500. Gold targets 3000+ and silver 35 to 41.
Commodities: A continued mixed bag of leaders, laggards, bottoming “catch-up” plays and non-starters. A weakening USD would help here, as would a rise in silver vs. gold, which made a big move on Friday.
Currencies: All eyes on USD, which has spiked upward to the best target at the SMA 200. What it does here is pivotal for many/most markets. Daily trends biased down, long-term bull market from 2008 intact.
Indicators: Everywhere you look, there is risk. Risk in ticking time bomb indicators like the 2yr/T-bill divergence to steepening yield curves, to the sleepy real-time Junk bond spread indicator, to the still depressed but diverging VIX. Risk, baby. The bull market is towing that word around with it every step of the way. With our “to or through the election” time target a clear and present objective, risk awareness is highly recommended.
Gold Stocks – Time for a Pullback Already?
Either the current stair-step rally higher is going to halt soon in order to preserve its very orderly, methodical nature (and uptrend channel) or it is going to accelerate higher and become disorderly to the upside (channel buster). On the most recent stair-step down, Huey did the logical and held support at the SMA 50, and rallied from there.
At the upside bound of the channel, day traders are probably taking profits. Personally, I sold nothing because of my targets that are higher (375+ the next significant one).
Obviously, if HUI is going to go for 375+ in short order on this rally it is going to have to bust the channel, unless there will be an extended sideways grind that brings the channel top closer to 375.
But with the macro fundamentals coming in line ever better lately, I am simply not going to get caught guessing about pullbacks or channel busters. I am going to hold what I hold (unless a selling urge crops up for reasons specific to an individual miner) because, this…
The monthly chart is doing what we projected for it to do, which was to break a 4+ year long correction channel that surely built up a lot of emotional fuel by crushing the spirits of gold bugs, many of whom still seem utterly convinced that the miners will always trend down vs. gold. Gold stocks are ultimately a trade, but this trade could be a long one. This would be pending the question about vulnerability to the broad market’s fate. My view is that the miners could be initially impacted by a stock market bear. But first, an ongoing bull market leg up.
I don’t want to focus on negativity in the interim, when we are managing the monthly chart’s next resistance at 375. Short-term volatility or not, the objective remains 375+ to make a higher high to point 3. That high could open a door to a significant correction. But again, with the way this tiny sector moves when the herds glom on, it is possible to envision a screaming rally to 500 before a serious correction manifests.
HUI has made two monthly closes above the channel and it looks good to make a third. It is doing as we asked and I am not going to over-think the short-term moves. Old Turkey: “It’s a bull market, you know”. And that bull market has, as we’ve been noting for years, painfully been grinding along since 2016. Looking at the chart, it is not out of the question that Huey could put on a final (5) move up to 500 in spectacular fashion. Maybe I am being greedy, but if that is in the cards, I don’t want to miss it.
Whatever the “next leg” will be, it is now in play, with 375+ as its next objective. Depending on how it proceeds I’d have much caution (and personally do some selling) if things get hysterical on a spike to 500 driven by unhealthy MOMO/FOMO players, with Gold bugs loudly lecturing, media touting and the whole cacophony whipped up again (ref. this article I wrote during a particularly unhealthy period in 2011, just before a big time bear market unfolded). But a clearer “sell” signal would be if that stuff happens amid fading fundamentals, which I don’t currently foresee.
Or… I’d have less selling conviction if the miners instead hit 375+ and then grind off any sentiment excesses. In other words, I’d plan to sell a hype-filled spectacular moon shot and have more temperance with a ding of the next target and subsequent correction/consolidation. Again here, the state of the forward fundamentals would also weigh heavily into decisions.
Today we are nowhere near such hype and emotion. The charts point higher (gold targets 3000+, silver 35, possibly 41 and HUI 375+). So let’s just keep caution in our back pocket but not overreact until given reason. On that point, I am not saying hold resolutely. Taking profits is always allowed and you may be more trading-focused than I am. So I am outlining what I see ahead and you are doing as you will with the info.
I am focused on 375+, 3000+ and 35+.
As a final note, people of the world unite! Per a chart we have not reviewed in quite some time, gold is trending solidly up in ALL major currencies (including USD). In other words, it’s a real gold bull market and global citizens will be taking note of what is happening to their local paper in relation to the “monetary value” asset. Gold is even crushing the Swissy (CHF) which, legend has it, is a sounder, safer currency.
Gold Stock Charts
Because it is time to have some fun. We worked, we slogged, we managed a creeping macro for months, for years. With HUI 375+ as the operating next objective, let’s see where some of these items are at. Let’s get a bigger picture view of the large miners/royalties using monthlies.
AEM is getting overbought on the monthly, pushing its upper Bollinger Band and bringing RSI to the point of the last 3 corrections. However, with our view that the macro is shifting to a state similar to the 2000-2003 period, note how overbought RSI became then (and in 2005). As with HUI, a volatile bull market in AEM has been going since 2016 (and viewed literally, over the history of this chart, since 2000 with its intact higher highs/lows).
A quality operator like AEM is making new all-time highs, whereas HUI is looking up at 500, far below its ATH. Personally, I am allowing for an extreme overbought situation in the index and in the quality individual miners before getting shaken out. “Allowing for”, not necessarily expecting.
AEM can be viewed as jumping to blue sky with an impulsive move and the proper macro funda aligning behind it. I’ve been holding it and not looking at it. At some point of caution on the sector, profit will be taken.
Old war horse NEM is on a spike of its own after having apparently been burdened by questionable management decisions at Goldcorp and maybe Newmont as well. The large combo company may be getting its house in order and it is the kind of stock the institutions flock to. Large, global, diverse, and highly visible. It is conceivable that NEM could follow its fellow above to blue sky and so I am holding for now. I have two positions, so there is temptation to take profit in one of them (others double-held are AGI, NGD and RGLD).
WPM has been calmly held for a while now. I was certainly not early to the game, as I bought for a pattern breakout at 55.27. But break out the pattern did, so all good so far. The measured target is 74.
Fellow royalty RGLD has taken out the top of a sloppy pattern that I would not have read as bullish. At best, it was read as “sloppy”. But that 5 year long mess does have a measurement to 186. If RGLD can close the month of October above 138 +/-, the target would be loaded.
Moving on from the most visible big boys, let’s revert to daily charts for closer-in views of some other items.
First, an index that would provide a tailwind indication for the precious metals in general (and probably silver relative to gold, and commodities) and smaller more speculative juniors and explorers in particular. TSX-V has thus far denied the open downside target in favor of a gappy rally (blue gaps are unfilled) now testing the previous high, which did fulfill our then-upside target. Danger here? Not necessarily…
…the weekly chart shows the index with healthy RSI and MACD, already through resistance at 600, and knocking on the door of what would be a breakout above 623. The final objective to set this free would be the 2023 high at 644.49.
The point being that if da ‘V’ were to break out, a serious – and I mean serious – rally in the more speculative end of the commodity/resources spectrum would be indicated. A knock-on of that would be that you can make your year (or decade) with such a trade. But traditionally, the TSX-V features “late stage” speculation items, that catch fire at the end of a major bull phase, signaling its coming end.
Wouldn’t it be great if we were to one day see HUI at 500, gold bugs lecturing the unlearned masses (as they will), incredible momentum and FOMO with TSX-V spiking into the 760-800 zone? There are other less exciting options on the table, but that speculative blow-out scenario is definitely an option, in my opinion. Part of the reason I am involved in the markets right now despite the terrible risk proposition is the very notion of a melt-up. Risky, exciting and one day, heartbreaking for those who don’t know what its true nature is.
Okay, speculative dreams aside, let’s chart a few more after an NFTRH+ update on BTG on Thursday.
NGD has been a winner since it was added for its Canadian mines and a projected cleaning up and turnaround of the company, centering on Rainy River. I yawned through the last hard pullback and that lack of emotion was rewarded with a hold of support and the SMA 50 before a new pop higher, which has a decent volume profile. What’s more, check out how not overbought RSI and MACD are. Not bad, sir. The immediate objective is a new cycle high.
KNTNF (KNT.TO) was added on a downside test of the uptrending 200 day moving average and has performed well. I did a little research, decided not to fear Papua New Guinea politics and added this little grower. Then I found out Jordan also likes it and that gives me a fundamental babysitter built into the equation. There was a news-driven spike up above resistance (now support) and the next objective is 7.50.
Silver miner HL was added because its charts “speak to me” (per trade log) on daily, weekly and monthly time frames. Here is the daily speaking of a support hold and acceleration back upward, along with a measurement targeting 8.10.
Another silver miner, ABBRF (ABRA.V) was added per this October 8th NFTRH+ update. The focus of that update were daily and weekly charts, each bullish (the daily chart in its trend and the weekly in its base breakout). With the rise since and a potential breakout of consolidation we now have a would-be measurement of 2.70. “Would-be” because one day at new highs is not “IS”. But the move came on volume and if this is real we’ll be looking for 2.70.
Let’s move on now to some other areas.
Broader Markets
I want to focus some attention on the VIX divergence to SPX that has raised caution and saw me possibly introducing a little anxiety to your operation last week (see October 16 NFTRH+ update) as VIX looked like it wanted to break a flag. It ended up doing no such thing. Indeed, it then weakened and soiled itself to end the week. Thus continues the high risk and bullish stock market. Here is the risk indicator on the bigger picture, still in play…
…but like its fellow real-time indicator, High Yield (junk) spreads, there is not yet a real-time signal. Boy, is risk high though… by definition of this chart’s extreme sleepiness (complacency).
A logical deduction would be that risk will be realized sooner rather than later, considering the divergence in VIX and the state of Junk spreads. But that has been the case for much of the year, and yet here we are.
Oh yes, the election is on November 5. Go figure.
With reference to an X post I made on October 14 measuring a target on SPY…
Let’s plot the equivalent for SPX. The pattern is the pattern. It does not necessarily need to register the target, but RSI has room to run and well, there’s a certain highly divisive political event upcoming that will have profound implications on the corroding society we call the good old US of A.
Whatever happens, half the country is going to be utterly pissed. One party is doing all it can to keep the White House and make sure it’s the other guys who are pissed. *
* This is no tin foil hat talking. This is strenuously strong and unprecedented government hiring, fiscal debt spending and (IMO) the Yellen/Fed connection talking. It is in fact the very foundation of our “to or through the election” bull view we’ve had all year long.
As you can see, SPX is the most consistently strong of the 3 major indexes we watch. That is because SPX is Tech, is Semi and is a whole lot more, like Energy, Financials, Healthcare, Industrials, Materials, etc. In other words, the market is rotating like a spinning prize wheel in its latter stages.
As the leadership chain (SOX > NDX > SPX) continues to wobble along, stuck in neutral after taking out the (now green) short-term downtrend lines. If the chain is not repaired in a speculative market frenzy, we’ll have another indicator flipping bearish as it is already hinting to do.
Complacency continues to hold, shown here in a broad index ETF (SPY) vs. a defensive sector (Healthcare). The XLV/SPY ratio is digging to new depths, and that indication, as with narcoleptic High Yield spreads and the formerly sleepy, still depressed but currently negatively diverging VIX, is bullish and indicative of a whopper of a market risk profile in development.
So what do we do with that information? Hide under rock? Build a bomb shelter? Gross people out at cocktail parties, sending them running to discussions about college football, the Trump/Harris cartoon or how harmful social media is to our children, swearing never again to engage the perma-bear over by the punch bowl with baggies of suspicious brown matter?
No! We stay cool and collected. It’s a bullish market at nosebleed risk (by its internal indicators, including steepening yield curves and the big daddy of the bearish indicators, the 2yr yield divergence to the T-bill yield).
So, Stonks…
…insofar as one chooses to speculate in this market.
Note: I have marked gaps on some charts below, but not all, because it is time intensive marking them all up. But suffice it to say, in established and upstart (catch-up) situations alike, there is a lot of gappiness going on, which implies a speculative market in its latter stages as the FOMOs put on a show.
Let’s start with Mister Softee, which I’ve held for a while now and which a bear might choose to see in an H&S topping formation. Long ago we established a target of 475 off of the Cup, which was essentially put in (467), acting as the head of the would-be bear pattern. It will no longer be held if it loses the moving average convergence. But for now, it’s a member of my late stage market holdings.
GOOGL was added for some Tech “catch-up” exposure, but it too needs to hold the uptrending daily moving averages or else it’s probably gone.
ZM was a previously successful bottom feed trade on what I’d perceived as a relative value in Tech. It was added back on the downward flag and has since begun to move upward again. I’ll be patient unless the market advises otherwise.
Over in Semi (or should I say AI?), profit was taken on NVDA simply because it is owned by everybody and that makes me nervous. A booked profit does not make me nervous. This is a still-bullish chart, however.
Semi Equipment maker AMAT sports a bearish chart. Some Semi-related geopolitical news croaked the sector and hit the Equipment makers (e.g. LRCX, ASML, KLAC, etc.) hardest. One position in AMAT was sold, the other held. But I tell you, I am very ready to dump positions (outside of gold stocks and perhaps some commodity “catch-up” plays) at the drop of a hat. So failing charts like this will not be tolerated if it keeps up.
Medical Device relative value MDT put on a nice move on Friday to break the consolidation cluster above key support. A bullish chart for this item held in both accounts.
XOM is one of three Energy sector holdings (CVX, AR) and the chart has given me no reason to dump it yet. This pullback could lose the support line and test the SMA 50 and still be intact. Below that, I’d probably stop playing ball.
LAC was added per the trade log and NFTRH 831 and it boomed upward on some nice news out of GM, which is investing to secure future Lithium production. That is a material development, but this is also a tax loss selling candidate, so that could introduce pressure, which started to come in at the end of the week. I’m holding it rather than taking a quick profit because the whole of the portfolio is doing well and I don’t need to try to maximize every positional trade.
Currencies
Folks, I’ve got to step it up now as I have some commitments today. Let’s quickly get a look at USD (daily chart) and wrap ‘er up. The main options are…
- USD fails here at the primary resistance and target area (SMA 200), springing to life the inflation trades and “commodity catch-up” plays, or…
- USD busts through and the high risk market bull likely ends (or gets a hard correction) as the reserve currency gains a global “liquidity” bid.
Why not let it play out before making a firm commitment to either case?
Portfolio
Gold is long-term risk management & monetary value/stability in a balanced portfolio.
Taxable Account
This account continues to hold some items, take profits/limit losses and hold a lot of cash, which the Fed is now actively cheapening. Which in turn has me patient with certain asset positions, but also still looking to increase short-term Treasury bond holdings, as their price rises as interest rates decline. The weighting – overall very light positioning though it is – is heavily weighted toward precious metals positions. Positions are in order of size.
Roth IRA (non-taxable, no contributions)
The chart is starting to hint at an upside channel buster, the potential for which is the main reason I am playing this high risk market. A bull-ending melt-up is one of a few ways bull markets can end (e.g. Silver in 2011, Nasdaq in 2000, etc.).
Cash is 75% and that is about much risk as I want to take. But again, I am relatively risk averse and I ask you to consider the market analysis above, not so much what one investor – who is very different from you – is doing.
This portfolio is a mix of precious metals (bullion and stocks), commodity/resources-related bottom feed “catch-up” plays and broader stocks. Here too I would look to increase short-term Treasury positioning if/as the fed continues withdrawing the income associated with cash.
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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