Blog

From a crowded train, an update.

Classic. This morning’s big upside in pre-market is getting reversed in-day because… SILVER. Hence why we had other parameters (like the Silver/Gold ratio’s unconfirmed low) in this morning’s update.

Observations

• Silver/Gold ratio has not confirmed a bottom (ref. this morning’s update).
• USD (DXY) is just as badly off now as it was early morning, when I wrote the update.
• As it stands now, gold is making a bearish engulfing candle.
• So is GDX, with a heavy down candle.
• In a wider angle view, it is mid-February now, exactly when the seasonals we have reviewed implied some market turbulence.

Precious metals are obviously getting sold down by inflation bugs after some poor consumer data this morning. It’s a sign that too many of the wrong kind of bugs are in the market. Inflation bugs, concerned that weak economy = weak inflation = weak gold/gold stocks, when actually it is the opposite condition (deflationary, economic contraction) that would one day materially help the fundamentals beyond today’s slow, disinflationary easing.

Or maybe it is an excuse to take profits. I like to blame inflation bugs, but there are obviously lots of inputs, including an overbought sector ripe for profit taking.

I dumped recent bottom feed SA before it could start doing some damage and am probably going to do more selling from my very uncomfortable seat on the train. And not just gold stocks, either. Indeed, maybe not primarily gold stocks because Treasury bonds are popping and yields dropping, indicative of a favorable backdrop for gold/gold stocks, all other things being equal.

After this update I will get my bearings and figure out what adjustments I want to make. Hedging (DUST, JDST) is a thing, too. Personally, I think there is a decent chance that this reversal kicks off a correction in the precious metals, and probably a healthy one. I might have known (and advised) what it usually means when the silver bugs put on a show like that. But we did have the SGR’s still non-confirming status. I tend to be fairly disciplined (some might say, mechanical) with my indicators rather than guessing.