Summary
US Stock Market: Weakness of late, during Santa silly season. But trends are up and the positive seasonal runs into February on average. I don’t want to be an incessant top caller, so the analytical view is of high risk and bullish trends. We are on watch for a top in the coming weeks. “On watch” is far different from a prediction, but it is an expectation at this time.
US Market Sentiment: Structurally over-bullish, as has been the case for months. Short-term holiday jitters with the minor holiday pullback have reset short-term sentiment, however. That is what typically happens when an unfinished stock rally looks for a next leg up.
Global Stock Markets: Still generally under-performing the US. China/Asia may have bottomed and based vs. US stocks, but Europe is purely trending down in relation. As is Australia, Japan, India, with Canada going sideways, relational to US. USD dollar is a general headwind, globally.
Precious Metals: Correction still technically in progress. Good work done so far. Friday’s bounce came right in line with the bullish seasonal. That’s a tailwind. But the sector did not break through any important resistance markers and so we remain aware of the lower corrective targets.
Commodities: Against a combo of the strong USD and firm Gold/Silver ratio, commodities appear to be bullish and bearish as the hedgies rove across the landscape, playing the sector’s various components and then dumping them, Whack-a-Mole style. It’s tradition in the commodity patch, and a more consistent bullish situation would be dependent on the USD and GSR easing/declining.
Bonds: 30yr Treasury yield closed 2024 in bull flag breakout mode. Why is the market not overly concerned? Does it think coming tax cuts will offset the negatives? Regardless, the yield curve steepeners continue apace and are very negative economic signals. With nominal long-term yields in flag breakout mode, the indication is an inflationary steepener right now. This can and probably will tag team markets with alternating inflationary and deflationary steepeners going forward.
Currencies: Right now, our main concern is USD, which is still the reserve currency, despite magical thinking by Team De-Dollarization. USD is in base breakout mode, and…
Indicators: …if the Gold/Silver ratio also rises, pressure would be indicated on wide areas of the markets, especially commodities, resources and likely, precious metals. If USD and GSR decline, those same areas should out-perform. Yield curves, as noted above, are negative for the economic cycle. VIX is still on the floor, sleeping fairly soundly (but still on a negative divergence for the stock market). High yield spreads are still sleepy as well, but have recently begun a modest lift off the extreme lows (highs in complacency and speculative froth). On balance, the message from indicator land continues to be clear and present caution signals in play while more real-time risk signalers like the VIX and HY Spreads remain relatively calm.
Admin Note
While there is brief trading talk in NFTRH reports (ref. 1st paragraph in the US Stock Market segment) and a portfolio snapshot each week, I have ongoing reservations about talking too much about my trades or about trading in general. That is because I feel that a trading mentality is far from NFTRH’s main mission, which is to properly define and manage the macro markets, not micro situations like one trader’s buys/sells/shorts.
Most recently, the flip flop in silver comes to mind. It must be understood that stuff like that is the product of one faulty trader’s best efforts to do what is right for himself, and not anyone else because no one else has the same makeup or financial situation as said faulty trader. I could easily short silver again tomorrow, leaving someone looking for stable guidance with her head spinning (e.g. “why is he short silver if he is bullish on silver?”).
From the Trade Log:
Be aware that most of what is noted here should not be considered actionable for anyone but me because I buy and sell for reasons that can only be my own, and no two investors are exactly alike.
and…
I tend to be a portfolio balancer as opposed to pure stock trader. This means I often take or exit positions for portfolio balance, not necessarily to maximize or even succeed with every trade. NFTRH is not a trading service. It is a top-down macro market management service. Hence, stock trading and in-depth individual stock analysis is, by definition, not a focus.
That is the NFTRH service. Macro, getting the markets right, not recommending trades or stock positions. I am managing the portfolios, my real portfolios, to my specs and no one else’s. Now that I will have help in 2025 and beyond (my daughter Izzy has agreed to come aboard) I plan to do less “grunt work” (admin, marketing, etc.) and evaluate what more the service can offer to subscribers.
Maybe an NFTRH++ tier will be introduced, including not only the weekly report and regular in-week NFTRH+ updates, but also more direct discussion of trade setups in stocks and ETFs, with TA being the primary tool advising buy and sell targets, stop loss, etc. Your feedback is welcome on this. But in the meantime, please be aware of the terms of the Trade Log, which is definitely for reference only, with no recommendations implied.
US Stock Market
SPX (daily) sagged to the initial support area and at least temporarily found support there for the second time. However, Friday’s bounce saw the index close below the SMA 50. Also, a ripe gap sits below at 5783. The upshot? While I am open to an upside resolution to this bull market (AKA upside blowoff), I held my short on SPY pending the SMA 50 and the EMA 20, which is dropping to meet it.
NDX, on the other hand, has held its 50 day average, after bumping up to its EMA 20. The most bearish things this chart has going for it are the RSI divergence and the unfilled gap at 20249. And those aren’t very bearish, considering the firm uptrends in both the SMA 50 and SMA 200. So, shorting this market right now is shorting against the trend. I am aware of that in both my shorts, SPY and QQQ (which are actually partial hedges for long positioning at this point). If SPX retakes the SMA 50, they may be shelved until I take the next shot at shorting.
US Stock Market Sentiment
Indeed, the market is resetting itself from over-bearish, should the play be another drive upward and potential bull blowoff. Note that the short-term risk summary is very skittish and probably shot into the red because of one bullish day (Friday). But generally, through the holidays dumb money sold and smart money started eating stonks.
NAAIM (investment managers survey) also shows a potential for a rebound in stocks as the over-bullish reading near 100% on December 11 has tanked to 64% on just a minor pullback in the major indexes.
Investors Intelligence (newsletters) took a hard sentiment pullback from a bull/bear ratio of nearly 4 to 3 on December 31st. It is still mildly over-bullish, but another indication that stocks could have regained contrary-sentiment fuel for another leg up.
AAII (Ma & Pa) is at a neutral bull/bear ratio of 1.04 having ground down from 2.4 over the last few months. Let’s also recall that Ma & Pa are resolutely bullish about stocks in 2025, per a recent survey. The 1.04 reading could easily fit with the above-noted potential that markets may have reset from over-bullish in support of another rally.
Global Stock Markets
The Global ETF (ex-US) continues to sit below the trend channel and lateral resistance. If I were discussing trading from the short side, I would note that situation with a very tight stop loss on a break through resistance and the moving average convergence.
Generally, the US dollar will inform global markets as usual. One important market to our commodity/resources views, the Canadian TSX-V, put on a move last week. This is logical, given the “January effect” seasonal in small caps, post-tax loss season. From an NFTRH+ update on Friday on the precious metals:
One final and very indirect internal is the state of the Canadian TSX-V index. It is a tailwind for the junior and exploration area of the gold stock spectrum.
It is a tailwind for much more than junior/exploration gold stocks. It does not seem to think that the US dollar’s rally will continue.
The daily chart above has many downside gaps. But if this goes beyond a brief seasonal surge let’s recall that a break through 627 could spring a sizable rally to the 680 area (much of the rationale for that resistance area is not shown on this weekly chart, but it does exist in the form of the August, 2022 high and especially, the September-October 2020 lows). In short, a successful break through 627 would target 680.
Generally, EM, Asia, China and many other global areas would like to see a weaker US dollar in order to a) rally or b) even think about out-performing US stocks. USD remains bullish as of now. Quite so.
While there are many global areas investors may find of interest, I am sticking close to home since the USD is firm and US stocks, including some sub-indexes/sectors, continue to out-perform world stocks, on balance. For example, even the under-performing (vs. SPX) US small caps are constructive to bullish in relation to the global ETF/indexes. Weekly chart:
Precious Metals
Gold (GLD) is actually in a very moderate uptrend vs. those same small caps (lower panel) while the GLD/SPY ratio (top) slithers along sideways, as yet not actionably bullish.
We have consistently observed gold uptrends vs. commodities and more recently, the balance of global stocks. But the top panel above remains the psychological linchpin, the macro pivot that probably needs to happen before we can adopt a uniquely* bullish view of the gold mining sector. Psychologically speaking, the S&P 500 needs to crack and gold, at worst, needs to crack less. At best, rise or maintain.
* Which does not mean gold stocks will not again participate in or even lead the broad rally if it continues. But it does mean that the longer-term counter-cyclical macro will not be in place, which is fundamental on a bigger picture basis.
Hence, gold mining funda in general, remain on track. It’s a process. The TA has been more questionable, as you know I’ve been projecting a ‘C’ leg down. If this is a completed ‘C’ leg down, it was a short one. Again reviewing the GDX daily chart we see lateral support having held to close the week. GDX left a gap behind and as it bounces to test the channel line (black dotted) and/or the 50 & 200 day moving averages, we can be aware of a potential for lower point ‘C’.
But we also have the now-positive seasonal for gold, silver and the miners into February. So the bull case has a couple of tailwinds as well. Traders are trading and those who would like positions for a longer hold should be careful not to over-trade and risk getting left behind. Of course, that takes a steady hand because the other risk is point ‘C’, as noted above.
Personally and strategically, I have added back a couple favored items based on their individual charts (WDOFF & KNTNF, which don’t tend to reliably track the sector), and RGLD just to begin repositioning in the regular account.
HUI weekly is still suspect as it grapples with support and tries to take back the channel line. Better “no brainer” support is in the 240 to 250 range. But support is valid here as well. The intermediate trend in the gold stock sector is down. But it is an interim downtrend to correct the sector, so we are looking for a low, not an end to the bull market. 240 to 250 would be the preferred buy. But if last week’s low of 271.46 happens to be it, so be it. It will have been valid as well.
Gold’s daily chart continues to indicate potential lower prices to come. Take out the SMA 50 and hold it, and I will change that tune. I drew a channel that makes sense because the “head fake” high was immediately reversed the following week. The gold price is also right at that upper channel line.
If gold breaks upward here it will have been a decent but not vigorous correction on the way to the target of 3000+. If it fails here we have the preferred downside support in the low-mid 2400s on watch as a buy level. Again, this negative TA goes against the view of the positive seasonal.
Silver’s daily chart (the battle of the bullish would-be Cup & Handle vs. the bearish would-be H &S) shows a small ‘W’ pattern, which instigated a bounce to resistance. Break through 30.50 and we can watch for the next resistance area around the SMA 50 (31.41 and tilting down, but trending up).
I covered my shorts on that ‘W’ because even if silver remains in correction in defiance of its bullish seasonal, it can bounce as high as the SMA 50 and still be in the Handle’s intermediate downtrend. It was just not worth it to me to be guessing in a mush zone like this after the ‘W’ formed.
Precious Metals Bottom Line
If the correction is over, it has done a decent job of cleaning the sector. If it is not over, it will do a better job of cleaning it. Either way is fine by me, because I believe 2025 will be a strong year, fundamentally, assuming the view of a cyclical market top and economic downturn is correct. Technically, we are targeting gold to 3000+ and silver, having already hit the primary target of 35, could have another leg up to the low 40s in it. But both metals are technically still in an interim correction.
Gold stocks have been in a very volatile series of higher lows/highs since 2016. It’s a bull market. We are currently looking for a buying opportunity for another leg up, if the low has not already been reached. Sentiment and momentum have been addressed and the sector is no longer overbought to frothy, per the BPGDM. Our pullback target is 30 (+/-), but as you can see it’s a good portion of the way there now.
Commodities
Get the direction of the US dollar and Gold/Silver ratio right and you’ll probably get commodities right, as a whole. Meanwhile, the traditional “commodity Whack-a-Mole” game is in effect. That is when one commodity pops its head up and summarily gets its head bashed back down (e.g. Palladium back in October and NatGas last week).
Most recently, the Uranium sector popped last week. URNM is in the process of changing its trend from up to down while CCJ maintains a mild uptrend. Favored U stock NXE put on a big spike and is trending sideways. It feels like Uranium is getting played by the hedge hogs, who’ve left the PGMs and Gas behind. But with the bigger picture fundamental view very positive, that view could morph back to bullish at any time.
Oil/Energy is in a similar situation, getting popped of late. I still hold Gas stock AR because its own chart is constructive and Gas is still trending up above its 50 day average, despite the pullback.
Copper, industrial metals and their miners are still putting on quite a struggle. If the broad economic cycle is so strong, why are these economic building blocks so weak? Inquiring minds want to know. It’s a counter-cyclical look and in my opinion, we are waiting for the stock market to finally get that memo.
USD & GSR
The 2 Horsemen of Macro Liquidity Apocalypse are poised for higher levels and in base breakout mode, respectively. It is no surprise, however, that the GSR pulled back to end the week and markets were positive. We will stick with the view that if the GSR goes bullish and USD remains bullish, a macro caution will be in place. If they go the other way, a macro party would be likely. As yet, they are biased against said party.
Bond Market
Let’s update a few bond market indications. Primary among bond market indicators, the 10-2yr yield curve is well into its steepening. Goldilocks may exist within this relatively young move, but a continued steepening would bring increasing deflationary or inflationary pressure as short-term Treasury bonds and their risk ‘off’ safety character would gain bids relative to long-term bonds in either case.
Importantly, the 10yr-3mo curve is also still steepening and un-inverted.
Dialing out to a wider angle view, the fact of a steepening yield curve is usually a big negative for the stock market. The fact of the last two real bear markets in stocks and economic recessions was a steepening yield curve. The fact of the boom years* from 2009 to 2023 was a flattening (to inverted) yield curve. Today, the fact is that the yield curve has steepened and un-inverted.
* Boom in this case being a cyclical up phase, propped all along the way by inflationary monetary and fiscal policies.
The 30yr Treasury yield “Continuum” did indeed close December and 2024 in breakout mode from the bull flag. Now, it may be just me and my reclusive tendencies, but I have not heard much out there in the media directly in response to this situation. What we have heard is that Trump will impose tariffs and spend from the massive and still increasing $35T debt bag. Perhaps the market is thinking something like “bond yields are rising, which will be a drag… but coming tax cuts should counter that“… leave it to the perma-bulls to always find a rationale.
Portfolio
Gold is long-term risk management & monetary value/stability in a balanced portfolio.
Taxable Account
In order of position size. Cash and equivalents remain very high because… income. Because… risk management. Because I am not greedy. However, if the market starts to look like it wants to take a new leg higher I’ll position further in the near-term.
Roth IRA (non-taxable, no contributions)
After a couple weeks of stability (thank you risk management) the potential double top in my IRA still exists. But it remains above the trend line, has taken on a bit better look, and dog gone it, I am open to new highs… just like the stock market!
Cash/equiv. is 91%. That is too high for even this conservative speculator if the market holds and turns back upward. Coming out of the holidays, it’s right where I’d like it to be. I am actually hoping for another market up-surge because it would be gainful and it could help signal a future bear if it’s some sort of dynamic blow off and blow out. Of course, the other option is a market rollover, which is why I am at 91% cash to begin with. Sound logical?
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 on X @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.
