Blog

An abbreviated edition this week. Surgery went well and I’ll be recuperating over the next couple of weeks.

[edit] It turns out the report is not quite as abbreviated as I thought it would be. Sit a market nerd at a computer and he’ll power through the post-op entanglements, of which there are plenty. :-(

US Stock Market

SPX and NDX held support last week after a decline and a rally on Friday. The Semiconductor index made a breakdown, however. Below 4860 it is in breakdown mode. Current index price is 4766.

NDX/Tech includes Semi companies but also lots of other Tech sectors along with areas like Biotech and consumer related companies that use the internet to provide service. SPX is even more diverse, cutting across many different sectors (hence it tends to hold a middle ground as some sectors experience selling and others buying during market rotations).

So one thing I want to put forth (against my own 2025 bearish view) is the possibility of a market that rotates instead of going universally bearish. We have a new and wildly different administration in the White House and in my opinion, this thing could blow itself up at any time due to the president’s impetuous personality and decision making. But it could also instigate rotations to areas that would come into favor. In other words, “Trump Trades”, not all of which are well defined yet.

SPX held support and filled a gap. There are plenty more lower, so let’s take seriously any loss of support and the firmly uptrending 200 day average. The rotation theme is just one possibility. Another possibility is our original plan of ominous macro indications playing out for a bear market that takes most sectors down, Trump or no Trump.

NDX is closer to testing its SMA 200, has filled one gap and has another that would fill on a test of that moving average. It looks about to fill the next gap as well.

Again, Semi leadership is abdicating. XLV/SPY (Healthcare/Broad) could be making a good bottom, which can be normal rotation or could be in line with our current plan as a bear market signal.

Watching Trump bully Zelensky the other day my jaw hung open. I have never seen anything like that, with his hand puppet VP piling on as well. It was like reality TV and personally, I don’t want my White House – the peoples’ White House, equating to dumb ass reality TV. But you elect a popular culture figure and reality TeeVee star to the highest office in the land and I guess that’s what you get. Theater.

I’m not saying who’s theoretically right or wrong on the wider war-time view, * but I am saying it was pretty alarming. Trump is either going to make us great again by sheer will or he’s going to implode and take us down with him, in my opinion.

He is now alienating large parts of the world, while appearing to befriend or at least admire our traditional enemy. But outside of the geopolitical, in theory the DOGE initiative to ferret out waste in government is a good one. We’ll have to see how it goes in practice. I am not naive enough to believe the practice of ferreting waste will not include abuses of its own.

Current holding MP Materials is doing well amid the Rare Earths drama. If the picture swings to rebuilding Ukraine, I think other materials and industrial metals will get rotation.

As to the stupid media garbage last week about the 10yr-3mo yield curve signaling a recession, well, ha ha ha is all I have to say, along with this post on the matter. CNBC came to the same conclusion we’ve been working (economic deceleration) and that alone asks us to at least consider “maybe not” (for a while yet).

Trump is a wild card and boy is he wild. Like, untamed, obsessed and very driven. But where is he driving us? That is the question. Is he really fixing the deficit and planning to distribute the savings to the everyman? Or is he going to throw some table scraps to the little guy while serving a gourmet platter to the mega wealthy? Will the net result be deficit reduction or will the deficit merely shift to tax policy as opposed to government waste?

What is going on now is so dynamic that it has already put NFTRH 851 at more words than I’d planned, and I’ve barely been at it for 30 minutes. The bottom line is that I’d like to be open minded in the face of the wild cards in play. Let’s continue to track the macro indications and especially the technicals of the main indexes and various sectors that may or may not get rotated into or out of.

For my part, in a drug addled state I added Google back as it declined to a would-be buying opportunity per this Feb. 12 post. Added a second ALAB position (it’s AI, so hype alert, but it’s been beat down badly and is a solid company with good prospects). A couple ANET positions as well.

In these interesting times I am watching Energy, Copper/Industrial metals and other areas for potential entry, given a rotation theme. But more than those, I am watching USD and the Gold/Silver ratio for macro indications. The favored view has, after all, been correction/bear market, economic downturn and a contrary play against the “Trump is a businessman who will benefit the economy” popular view. “Interesting” does not mean “good”. In this case it means “wild”.

* Because I tend to filter the direct news of the day as noise, when managing markets. In other words, the last thing I want to be, as a market manager, is a political commentator.

Precious Metals – Gold Stocks

GDX declined to the first support level. This time I decided to take the darn profit on the short positions (DUST) rather than over-stay my welcome. On a bounce I’ll decide whether to re-short or not. On an uninterrupted decline, I’ll just sit and not do much. However, with the macro fundamentals still improving, I’ll try to be a buyer at the right levels, adding to my not overly abundant positioning.

If the situation starts to look like new upside beyond a bounce, I’ll look to add to positioning. This would include increasing current positions and adding new ones (off the top of my head, NGD, BTG, SVM, etc.), some of which I’ve held previously. Usual suspects, I guess. BTG is a turnaround spec, in the wake of the Mali political situation. But the Canadian Goose project is of interest.

If GDX loses this support (bounce or no bounce) I’d like to get that upper gap (38.25) out of there and test the moving averages and the 62% Fib retrace level (36.92). And extreme short-term correction could run to a test of the December low at 33.42. I don’t expect that, but the market has not consulted me on my expectations.

HUI daily gives the appearance of having already hit a buying opportunity as it spiked down to the moving averages and lateral support and hammered on Friday. This is another view favoring my short-cover, as it is a classic buy level on a normal pullback. But, it’s the gold stocks, which always seem to correct more than you (or at least, I) originally expect. But this picture is classic as it stands now.

Hammer candles usually get people excited but then are followed by negative price activity in the very short-term before any positive implication. It’s sort of like how a Golden Cross of the moving averages works, only on a much more compact time frame.

The big picture monthly chart continues to indicate that the next leg of the bull market is on with the price grinding but in breakout mode from the channel that represented a 4 year correction. Positive monthly RSI and MACD only aid the case.

Precious Metals – Macro Indications

Counter-cyclical gold miners are still in base breakout mode vs. cyclical copper miners. As long as that is the case it favors gold miners and as a knock-on, favors our counter-cyclical economic view as well. That is a long base that represented the inflationary bailout of the post-COVID economy.

Gold has been pulling back relative to inflation expectations, however, and that is logical with the pullback in gold miners. The trend in Gold/RINF from 2023 is up, which means a sound gold stock fundamental is up on its larger trend.

The Gold Miners Bullish Percent index was indeed a buy at the last low (which bottomed above our anticipated 30 area). Now the question is whether that was it or there is more downside to come. Either way, the reading is not extreme right now so it would not stand in the way of a sector rally. The BPGDM’s monthly EMA 20 has bottomed and turned its trend up in a bull market backdrop.

HUI/Gold ratio and HUI/SPX ratios have cut through their short-term uptrend lines. I do not give as much weight to trend lines as most TAs. But on the basis of the trends themselves (as indicated by moving averages), HUI is still going sideways vs. gold and to my eye hinting at an uptrend vs. SPX.

Let’s take another view of HUI/SPX, using a weekly chart. There is work to do here, but at any such time that HUI/SPX would take out resistance and clear the 2024 high, it would indicate a big time relative rotation to the counter-cyclical sector by broad stock market players. As yet, it’s back in lockdown after the failed 2024 breakout amid the coming of Trump and the “he’s a businessman who will fix the economy!” contingent.

The daily view of gold ratios to cyclical markets shows an attempt to take leadership from SPX that has not yet succeeded, an uptrend vs. global markets, and uptrends vs. three important commodity areas. All in all, the situation continues to evolve (or devolve if you’re a stock market/economy enthusiast).

The weekly view dials out to the bigger picture and shows us the sideways trend vs. SPX, and post-2021 uptrends vs. global, CRB index, oil and copper. That is not positive economic signaling. If the indomitable SPX joins its fellows we will be on a major shift to a counter-cycle and the precious metals on a global macro basis.

Gold & Silver

Let’s use the big picture monthly charts and note that gold has come within 2% of our upside target of 3000+. That slim margin qualifies as “target in”. It does not mean that gold has topped, but it does mean that IF it has topped, our target will have been registered. Just stating facts, folks.

Let’s gaze at the monthly log scale chart of gold, which we have not viewed in a while. It shows a 2012-2019 bear market within a much longer bull market. Gold is fine, technically, on the big picture and it (the real stuff, not the paper stuff) is always fine as a necessary countermeasure within a portfolio filled with paper and digital products.

This monthly line chart does not show it, but silver (much more a speculation than gold) also effectively hit our upside target off of the Inverted H&S pattern. However, we have a next target of a Cup & Handle pattern on a daily chart.

Here is that daily chart showing a decline to a clear support level that includes lateral support and the uptrending daily moving averages. To keep the sector’s near to intermediate bull case going silver should hold here. Much like GDX, it can decline further for a deeper, more concerning test (in this case the December 31 low of 28.78). But for a bullish market, the proving ground is here at the daily SMA 50 and 200.

A final note on the precious metals is to be aware that sentiment, in gold especially, got really over-baked. There were the stories of central bank buying, shortages in London, Fort Knox audits and revaluation of said Fort Knox gold. Hype like that often tends to be a negative indication, especially when it comes with an upside target that is registered as shown above for gold.

But for me, the gold miners’ leverage theme not only is still in play, but should gain force in the coming years. That is because their product is asserting over the products of monetary and fiscal policy bubble-making. It will be a patience play. As noted all along, this year+ rally has been along with the bubble stuff, not apart from it.

USD & Gold/Silver Ratio

Let’s end with a look at the two would-be liquidity killers for broad markets, USD and the Gold/Silver ratio (GSR). If silver’s pullback shown above ends at the logical support area we may see a breakdown in the GSR. That would be beneficial to the gold and silver miners as well as other commodity areas and global markets. In large part because it would be a negative indicator for USD, the would-be global liquidity receiver in times of stress.

Here I find it interesting to think about the near universal global support expressed for Mr. Zelensky in the wake of that White House shit show. For example, does something like that accelerate an anti-USD/BRICS (and now maybe Europe) “dedollarization” story? Maybe, maybe not. As usual, the technicals will tell the story, and as of Friday’s close USD has held base breakout support and is biased bullish (as is the GSR).

That means that a global macro caution signal is still viable. If USD breaks down and so does the GSR, we’ll go asset market party time.

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