We noted the bear flag in SPY in yesterday’s NFTRH+ update. We have also noted that the precious metals have been leaders of the broad rally from Q4, 2023. Hence, pressure on the broads (as the bear flag breaks down) is likely to pressure gold stocks.
Today, despite the fundamental tailwinds of counter-cyclical winds blowing and short-term Treasury bonds gaining risk-off bids, the miners are aping the stock market. Previously, we reviewed concerns about FOMC week being a time of knee-jerk energy, overbought gold/gold stocks and a playground for day traders and machines.
GDX daily made its higher high (a positive for the forward view) and it did it to overbought levels with a negative divergence by RSI. End of the world? No way. Time for a correction? Quite possibly.
We should keep an eye on 42.60 support and a little gap below it. Also in play – if the correction scenario is correct – is support around 38.60 and the gap below there at 38.25. I would actually prefer to keep that gap unfilled, because to fill it would require a lower low to the last significant low. But that could take the form of an in-day candle spike down and reversal, leaving only a tail down there, not a close. That would be okay. On the plus side, a gap fill down there would also test the uptrending 200 day average, which could outweigh the negative of the lower low, obviously if the test were to succeed.
Per yesterday’s update and the bear flag scenario, I shorted QQQ and SPY yesterday, still hold the Euro short (USD is trying to muster a bounce and its fellow, the Gold/Silver ratio is spiking a bit) and still hold a majority of my short hedge on the miners, DUST.
The SPX bear flag could be a one or two day thing, but in yesterday’s update we also reviewed significantly lower levels that could be reached even as SPX would remain in a bull market. So as long as today’s bearishness does not immediately reverse in a hard way, I’m inclined to hold short.
As for the miners, I am more of a hair trigger on that short because I am bullish, not bearish beyond a pullback or routine correction. I’ll hold the Euro short pending the USD view. If things get really bad USD and the Gold/Silver ratio could ramp and wreck much of the macro for a nice and broad correction.
We shall see. The above is simply how one guy sees it and is playing it. I’ll add that much like the gold stocks, the QQQ and SPY shorts are acting as hedges right now. But being bearish on the big picture for stocks, unlike gold miners I’d seek to be net short if the market goes that way. I’d not only see it, I’d appreciate it.
