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The Way It Should Be

It doesn’t happen often, but on occasions like the one we have today, my enjoyment of markets increases exponentially. That is because I (we) have worked hard not to be in the mainstream herd that now must ask itself “Is Trump gonna tank my IRA/Investment accounts or is it going to be business as usual, as the market always comes back?”

It’s a good question because over the years of the Continuum (multi-decade decline in long-term bond yields acting as license for policymakers to bail out the markets at every perceived crisis) the market has always come back. But we are in the post-Continuum world now and there are wild cards and spanners flying around everywhere. At least, I would not want to be a robotic thinker as a majority were trained to be during the Continuum years: “The market always comes back”…

That said, I enjoy this because hospital bed or not, I paid attention into and during the recent Trump-induced mayhem, and given the sentiment backdrop and oversold conditions, decided to buy some stuff that just a few months ago people couldn’t wait to chase higher and higher. Lately many of these items have dive bombed their 200 day moving averages. Off the top of my head, items added include the likes of AVGO, AMZN and TSM. If I get a firmer feel for a rally view, I’d like to pick up more former darlings for a trade.

While global stock markets have on balance been relatively strong in the face of the declining US dollar (logical and per our plans), major US indexes (e.g. SPX & NDX) have taken hard drops within their major uptrends. While I am not going to chase the erratic, dynamic and unruly Trump around trying to figure him out, I am going to watch market activity and signaling in a quieter vacuum.

In that vacuum I see a solid contrarian sentiment setup happening at the same time oversold major indexes are testing their major daily chart uptrends.

US Stock Market

“But Gary, SPX has lost its SMA 200 (orange)!” Yes, you are correct, and if it were to lose the point ‘C’ low of the 2024 A-B-C correction, we need to put our bear costumes on, most likely. That would be a point to start looking for short setups on bounces and rallies. At a higher low to that low, the major trend, though battered, is still up. Therefore the preferred view is bullish, in the short-term at least (we may well be in a topping process into the next bear market).

NDX double topped and nose dived at the behest of Trump2 as the media tell us that markets do not like uncertainty. Here is something they do like; they like to catch over-pumped FOMOs at peak greed and then tank their ass as punishment. The signs were all there, including the negative RSI divergences on both of these indexes. Also including the long VIX divergence that we followed into the correction.

NDX could theoretically keep dropping to test the August 5 low of 17435 and still not break down into the real bear market, although the media would be calling it that well before such a test.

Aside from the likes of AMZN, TSM and AVGO noted above, I held on to Tech items like ALAB, added back ZS, added NET, and held onto Medical Device plays ALC and EW, while adding GKOS, which had declined hard to support.

Also added was the Medical Device ETF, the rationale for which I included with a chart in the former Trade Log & In-Day notes, current Daily Notes. My tolerance will be one of the two noted. To really go bearish, the July, 2024 low would have to be taken out. I am just setting examples of what we will look for to start managing a bear market.

With due note that seasonals are often unreliable, they do illustrate historical fact. The fact is that SPX has tended to have a rough go of it beginning in mid-Feb, which we noted ahead of time.

By March the situation has tended to improve, especially in the latter 2/3 of the month, which we are now in.

April also has a tendency to be firm.

May is fine as well.

Then June through August starts to show volatility, culminating in a poor September and a volatile October. So without giving the seasonals too much weight, insofar as a bullish market resolution could play out in the near-term (still not technically activated), why don’t we manage this in chunks if you, like me, feel a bear market is likely out ahead?

A strong rally would actually work perfectly to suck ’em all back in before a real bear starts. That is my operating plan at this time. Subject to change, but it will not be changed in the absence of new macro indications or market technicals that beg a change. Right now, we have a decelerating economy and a guy throwing monkey wrenches around, breaking things. The fear is baked in. Sentiment could well be in play and manifest in a contrary way to what the herds currently think, making a rally possible, if not probable.

How many pictures of NYSE traders have you seen in the media with their heads in their hands and looks of bleak resignation on their faces over the last couple weeks? I’ve seen a bunch of them, and the media love to trot them out on bad days. It’s a tending of the herds and harvesting of their eyeballs.

Current preferred view:

1. Oversold market bounce amid terrible sentiment likely.
2. Suck ’em in and pull the rug later, maybe out in late spring, early summer.

Precious Metals

Gold officially hit the long-standing target of 3000+ on Friday before easing a bit. Woo Hoo! Okay, let’s move on. No hype here.

Where do we go from here? Well, a couple considerations:

I don’t necessarily fear a severe reaction against gold because it’s been nearly 14 years on the outs compared to US large cap stocks. So again I’d ask, who’s the bubble (or bubble recipient) and who’s not the bubble? The gold price is no bubble when considering the years of market-pumping monetary chicanery (2001-2020).

On a closer view, the base in Gold/SPX has been broken. One possible scenario is that the stock market puts on a bounce or rally as noted above and this ratio drops to test the base breakout. That would be good and healthy. Nothing goes straight up unless it’s a bubble blow off.

So no, I don’t want to be calling a top in gold here just because it ticked our target, because it’s a round number or because the herds are piling in. Evidently there are supply dislocations going on globally with the west seeking to greatly increase its holdings of gold. But you know me, while it may be true, it is also hype.

Supports in gold (current: 2984) are 2950, 2790, 2710 and 2660, toward which the daily SMA 200 is rising. But again, as yet there is little hint of a price top outside of a short-term negative divergence in RSI. If the stock market rallies, gold could get cast aside by the MOMOs that have surely bought its price trackers like GLD.

What I am going to do with gold, the real stuff, is just hold onto it as I have done for 24 years. The play is the miners. Another play is silver.

I have liked this monthly chart of HUI for years now. At least since it made its ‘2’ corrective low and turned up into its eventual ‘3’ high. From there a 4 year correction and now the 5th leg of this grinding, volatile bull market. Our current objective is to take out point 3 (373). It remains to be seen whether this leg will reach the main target, which is 500 (+/-).

First things first, let’s work on taking out 375. But depending on the macro at such time, it is not much of a stretch to envision a blow-off to 500 in a dynamic 5th bull market leg. Does 500 need to be a stop sign? No. But I do expect the miners to take a hit when the broad market rolls over into a real bear. Perhaps Huey will have already dinged 500 by then. I don’t know, but I am open to it.

What we can do is identify short-term overbought/oversold levels for traders to do their thing along the way. As you can see, Huey’s daily chart is bullish after testing support and the moving averages, but not overbought. This appears to be enough fuel to push it through 375.

I had to critique an article last week that was banging the 2004-2024 drum about gold stocks. We all know that gold stocks are terrible investments. I, then a relatively new gold bug, started learning that lesson 20 years ago. Then I came to look into the chronic under-performance of the miners to gold and eventually gold’s under-performance to stocks beginning in 2011. I realized that the under-performance and suckitude was deserved due to the absence of real (as opposed to imagined) fundamentals.

I do not tout this wretched sector on autopilot as perma-promoters do. I have not hidden my distaste for those humps (or others who micro-manage gold stocks obsessively, as if there is not a larger market out there). But I will also not be “perma” on the negative macro-fundamentals that rightly impaired gold mining stocks for those 20 years when I see things that may change those macro-fundamentals.

We should be prepared to manage risk when the signals say so and to take on risk and try to capitalize when the signals say so.

The bottom line is that fundamentals that I/we and not so many others have waited on for years are finally grinding into place. The Macrocosm is playing out pretty much as we anticipated it would one day when I came up with this pictorial way of explaining the proper (or my view of the proper) fundamentals.

In the face of promoters blathering on, trying to convince people to buy gold stocks because of China/India love trades, war and terror and/or INFLATION, we simply noted the following as the best funda setup…

Roughly in order of importance, and planet size (some planets are too big and some too small, but work with me here).

Jupiter: The economy is decelerating and confidence is declining.

Saturn: Gold is rising and setting uptrends vs. many cyclical markets and has broken out of its base vs. the big daddy of cyclical markets, the S&P 500. Junk bond spreads broke out of a base last week. This is indicating increasing real-time risk to join slower indicators that are and have been bearish. Here’s the view of High Yield spread breaking out of its base. It could be a brief alarm, but a real macro risk phase would have to start somewhere. In the short-term players are dumping junk bonds in favor of higher quality.

Uranus: Yield curves are steepening.

Neptune: Gold is and has been out-performing other commodities, although it has been wobbling vs. copper lately. This could be another sign of a risk-on bounce upcoming. But gold’s main trends vs. copper are up.

Earth: Gold is rising across the board in global currencies.

Venus: Stagflation? Likely, with the question whether we have a deflation scare/liquidity crisis first. I don’t buy tariffs as a driver of normal cyclical inflation or a positive economy, although they very well may shake out to the Stag. Stagflation, unlike cyclical inflation, is economically corrosive and hence, a counter-cyclical driver.

Mars & Mercury: Ha ha ha, promote on, promoters. Pumping gold stocks amid cyclical inflation (inflation pumping the economy, stocks and/or commodities) and touts like India and China love trades simply exposed the promoters, in my book. Problem being, all too many people believed it and suffered for it. Call me opinionated, because I am.

Global Stock Markets

With USD trying to bottom at around the 62% Fib (ref. March 6th NFTRH+ update) but obviously still trending hard down on the short to intermediate-term, global markets have caught wind in their sales. This holds true for nominal ACWX as well as its ratio to the US SPY/SPX, as global has out-performed from the day Trump was sworn in to make America great again. Perfect.

The nominal is bullish.

A special interest for junior mining and commodity/resources players, TSX-V continues to hold its new uptrend in the form of the now up-sloped 200 day moving average. If this trend continues to hold and da ‘V’ takes out 627 and holds it this time, our next target is 680. That could bring a lot of bull in commodity and resources trades if it plays out.

China large caps made a new cycle high vs. US large caps last week. At this time we are on a global rotation, although if US markets bounce as I think likely, an extended move like this one can take a pullback. But it’s important to note the relative trend turning up. That would paint a relative buy in China vs. US on a pullback to the moving averages.

• Europe: STOXX 600 declined for a thus far successful test of the 50 day average, although it appears that the trends are turning back up after a long period of sideways consolidation.
• UK: UK 100 is very similar to Europe.
• India: BSE Sensex had its death cross, bounced to screw the death cross knee-jerks, and now is robo-trending down. At support, it may try to muster a bounce or rally.
• China: Large caps (FXI) have been bulling for a year now, and especially since America got great again in January. As we know, FXI is extended. But a look at the broader A-Shares (ASHR) paints a picture of potential rotation into the smaller stuff, as it is bullish but only just getting going. It looks much like Hong Kong looked a few weeks ago when we noted its lag, but also a nice pattern.
• Japan: Nikkei had been going sideways, much like Europe and UK. But instead of going up, it dropped and is bearish.
• Canada: TSX-V is shown above, and its daddy, the TSX has double topped and dropped. It has not yet hit its 200 day average and has the appearance of more potential downside before any bounce/rally, for that reason.
• Australia: AORD, on the other hand, has dive-bombed much like the worst of US indexes. It is not far from its bear market trigger point at the August 6, 2024 low of 7838. Current price is 8013. Aussie bulls could buy for an oversold bounce/rally here, and use a decline below 7838 as a stop loss.
• Brazil/LatAm: Bovespa and the LatAm 40 (ILF) are both trending down, but made big moves on Friday. I don’t see anything I want to buy, but it could be the start of something, given the launch-like look to it.

USD, Gold/Silver Ratio & Silver

The world seems to think Uncle Buck is done for. The weekly chart of USD and the Gold/Silver ratio is bending in that direction. This is especially true with silver’s recent show of strength as the Gold/Silver ratio went from bullish bias to bearish bias. “Go silver bugs!” I guess.

Our theme has been USD and GSR up = widespread pain. USD and GSR down = party time Wayne, Garth. If the breakdown in the GSR holds and continues, look for commodities to join the party.

You would think that blue sky flying gold could see some of its bidding rotate to little bro, silver, as the target of 42 looks all the more readily apparent to more people. The target is and has been 42 since silver broke the wedge (handle) and held the moving averages, which are now trending nicely up.

Commodities

The sometimes disappointing Stockcharts.com is not functioning well this morning and I cannot access my chart list. So we will bullet point, as commodities are not yet fully in play anyway.

• Indexes/ETFs: CRB is turning to an uptrend from its long consolidation, while GNX and DBC are are going sideways.
• Copper/Industrial Metals: The play here is that these items will play a role in rebuilding Ukraine. They will also get mixed up in the global tariff war. So amid a potential bullish view are a lot of spanners and monkey wrenches flying around. The copper price is bullish and the copper miners have generally bounced off of long-term support. Miners of other metals are generally still grinding sideways to down, but many of them would be subject to similar dynamics to copper. I have a couple miners.
• Energy: Crude Oil is downtrend city. A gentle but firm downtrend. Gas has been trending up since August, 2024. Energy sector (XLE) is going sideways and uninspiring. I hold AR as a Gas play.
• Uranium: Bombed out. Technicals bad. I added URNM and NXE last week.
• Rare Earths: At the heart of global geopolitics. Again, spanners and monkeys. But I am holding MP for the reasons put forth over the last couple years. Also, Australian Rare Earth play LYSDY.
• Platinum & Palladium: Both going sideways, possibly basing out before future upside. No current interest, but an eye on them (and SBSW).
• Agricultural: Aside from Coffee, the whole segment – including related stocks – is a mess right now on balance. No interest.

Portfolio

Gold is long-term risk management & monetary value/stability in a balanced portfolio.

Taxable Account

In order of position size. Steady as she goes. I am and have been happy to collect income in what had been a high risk market and what is now a market that may bounce/rally. “May”… I’ve added a few things and would add more if a rally prospect gains an upper hand. The mix is gold stocks, medical devices and Tech/Semi, with a couple other odds and ends. Pardon me, I neglected to add a note for CXBMF, a value in gold stocks but to my risk averse eye, also political risk.

Trading Account

No positions.

Roth IRA (non-taxable, no contributions)

The chart broke its trend line. I do not over-value trend lines in TA because they all break sooner or later, regardless of whether or not the chart in question holds its bullish or bearish situation. But as noted previously, I will not allow support to give way without taking more action. As it stands, support ultimately held and turned up at the end of the week. As of now, it’s an extended sideways consolidation.

Cash and equivalents are at 80%. The mix is gold stocks, medical devices, Tech, and several commodity/resources positions (u3o8, REE, copper, nickel). I’ll look to play a market rally or defend against a market decline. Expecting the rally scenario. But… spanners and monkeys.

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.