US Stock Market: Bear Flag?
Ah, now I remember that special feeling I get when I short a market that I think “should” go down, it does just that the next day at the open, and then spends the rest of the day recovering. I also remember many an Op/Ex day doing stuff like that. I assume Op/Ex is still the third Friday of each month. #annoying
In an update we discussed the declining volume of a bear flag, but Op/Ex blew up the volume and I am not sure if that is material or not. But the formation is still a potential bear flag. We shall see next week. Sticking with the chart of SPY, it can still be viewed as a bear flag. But I am not releasing long positions, just hedging for now.
I shorted SPX (SPXS) and NDX (SQQQ) and did not cover Friday. But I will not tolerate any bull shenanigans that might break the flags to the upside.
The original view was for a market bounce at least, if not a full on rally. That remains the view, and the bear flag is a potential that a bounce would conclude with the indexes turning down again. Until the flag breaks down, the bounce is still on. Meanwhile, the short positions are partial hedges of long positions held.
QQQ similar, but a bit worse shape. Both ETFs (and the indexes they represent) nose-dived after sporting extended and negative RSI divergences.
Your move stonk market. Either break down with the flags or negate them. I am positioned in a balanced way until short-term clarity can be had. The larger view is a negative one. But the short-term view still has an over-bearish sentiment profile as a potential tailwind.
US Market Sentiment
Although Dumb Money began to eat itself some stock market on the bounce, Smart Money indications are still well elevated. The bottom line is that from a sentiment standpoint, a bounce or rally could continue from this alignment. But we should also remember that sentiment is a condition (in this case, for potential market upside), but a poor timer.
Gold, he of the price that ended the week with a 3-handle, is at high risk according to Sentimentrader. That has been the case since it was much lower in price, but now that we have clearly hit the price target, I want to be aware that a reaction could come at any time. A target is a target (and in this case has been the target since 2020), and gold is there.
Other US market sentiment indications show that Investment Managers (NAAIM) tanked their sentiment as the stock market declined. Interestingly, the data were taken on the day (3/19) that the bear flag ticked its highest level, so NAAIM were not buying the bounce. That is actually a contrary positive for the market to go along with the trend down since February in NAAIM bullishness per the table below.
The CNN Fear/Greed index continues to be contrary positive for markets. A condition for a bounce, not a directive for one.
Ma & Pa (AAII) are very disturbed by what they see in the markets. Bullishness is nearly as low as it gets and bearishness nearly as high as it gets. It’s a positive alignment on a contrarian basis. Folks, I don’t create ’em. I just read ’em.
Market sentiment remains as it has been recently, over-bearish to the degree that a bounce or rally could manifest. But sentiment is a lousy timer and a market bounce/rally could easily come from lower levels amid horribly over-bearish sentiment readings. For an idea on that, see last week’s NFTRH+ update on SPY’s bear flag, which included the August 5th low of 507, above which a real bear market is not in play.
Precious Metals
GDX actually put on a little hammer routine of its own on Friday, dropping and then recovering about half of the decline. I, a gold stock bull, admit to you I got a little annoyed at that as well because I am prepared for a pullback and frankly, think a little cleaning of the sector would be a good thing. Alas, maybe this week… or maybe not. It’s the gold stock sector, and sometimes when it moves it can rip your face off.
Hedging is my way of holding onto positions in a sector that I think can go much higher without trying to day trade in and out at perceived risk points. As you know, the NFTRH plan anticipates a phase where the miners may rise in relation to gold, as opposed to legions of bugs now trained to perma-believe gold stocks will never again positively leverage the price of gold. I have laid out the theory and supporting rationale for that in previous reports, updates and a public post or two. Let’s not rehash at this time.
GDX (daily) shows the poke to a new high, which is a bullish sign for rally continuation, but within that also an overbought situation with a negative RSI divergence. We discussed pullback potentials in Friday’s NFTRH+ update.
One thing I find interesting is that GDX is far closer to its equivalent of HUI’s 500 target than Huey is.
This is the result of a massive out-performance by GDX over HUI over the last year. This likely being the product of component mix and alterations on VanEck’s part.
As you can see, HUI is 42% away from target while GDX above, is only 7% from its equivalent level.
GDX is rebalanced by VanEck every quarter while I have to believe the HUI index is more of a set group of holdings. I am going to continue managing the short-term by GDX which, if HUI is to make its target of 500, I would expect to blow through its all-time high of 58.93 on its bigger picture. But the HUI chart is so elegant and I’ve been using it to plot the longer-term bull market since 2016 and will continue to do that. We will also continue to view HUI on shorter-term charts as well.
Technically and beyond any short-term volatility, things look on track on track for the HUI target of 500 (+/-) and GDX to new highs.
As for gold, its monthly chart advises “Cup target in”, “overbought” and flat out bullish. It has been a long long journey since we anticipated and managed the break through the bull gateway at 1378 so many years ago, managed gold’s “first mover” status out of the Pandemic, the overbought right side of the Cup, and the years of consolidation that followed.
It is important to realize that we are in a shit storm of hype right now. Not necessarily hype about gold. I actually think that is at a lower volume than I’d have expected at a price with a 3-handle on it. But in general, and with Trump throwing spanners and monkey wrenches around all over the place, there is way too much hyper-active energy in the media, markets and Main Streets.
Gold is overbought, at target and the price is subject to volatility. We just have to deal with it. A holder of physical gold can rest easy with her heavy insurance policy. Gold will go up. Gold will go down. And it will matter little. But the associated speculations like silver and gold stocks can get tossed about, sometimes viciously, and take breathtaking rallies that you don’t want to be sitting out of (which is why I try to nimbly hedge rather than trading for short-term profits).
Speaking of silver, the daily chart argues that it – and therefore the PM complex – could be readying for more upside near-term, if this pullback ends at or above a normal area like the rising SMA 50 or SMA 200. Silver has already gotten some rust knocked off of it and when viewed in a vacuum, is shiny and bullish. The pullback that began last week is healthy.
The moving averages are nicely trending up and if the price drops to test them as well as support in the 31 area, that could be a solid buy. If there is more pullback in store, we’d like to see the price hold a higher low to the February 28 low (30.82). It is conceivable that silver could hold the EMA 20, which it is testing right now. But lower is very doable, technically, in the short-term.
Gold Stocks
I’d like to look at a few individual gold stocks, most of which I hold, using daily charts. Obviously, not all gold stocks are aligned similarly to GDX or HUI. Some are leading, some are lagging. These are provided for some perspective on one guy’s holdings, which I think are among the higher quality end of the sector (with a few speculations). I’ll just post them and make a few observations.
As a preamble, I have a few associates who provide some good due diligence and as a SeekingAlpha contributor I also have access to SA’s premium stock analysis (including the likes of Taylor Dart, who I think is solid). As a TA and macro guy, I do not have the time to dig too deeply into any single stock, fundamentally. I am no mining stock analyst. I am a mining sector analyst. So these sources are of much help in my decision making, marrying company fundamentals with charts.
AEM has been a big winner and as part of the quality end of the large miner sphere, I am loathe to sell remaining shares. There is an RSI negative divergence at the recent high, which may or may not have triggered a decent pullback to support at 99.50 at least. AEM is purely trending up by the SMA 50 and SMA 200. A core position.
AGI is one of those stocks that you sell thinking you’re smart and watch rise to new highs without you if you are not nimble. Too much mental gymnastics for me. I did take a big profit once, was lucky enough to buy back on a decline, and have since been holding this quality gold miner operating mostly in preferred locations (Turkey development aside). The stock is pulling too far above its 50 day average. But that is what bullish stocks do. I would not add, but I’m not selling. Hence, hedging as noted earlier. A core holding.
KGC is another large miner doing quite well. A longer-term chart would show KGC nowhere near all-time highs like the two above. But it is a comeback story, evidently cleaning up operations and internal business. It also was the buyer of my former hold, Great Bear Resources, a prime exploration property in Ontario. There’s that negative RSI divergence again. Supports are shown. Borderline core holding.
NEM is another large miner (merged with Goldcorp some time ago) that I think is cleaning itself up and turning around. The last quarterly results were good. The chart is not great, but that is how turnarounds go. They are not great until one day, they are great. Negative RSI divergence, resistance up above and support as noted. Borderline core holding.
Gold+ royalty RGLD has been dealing with a blue sky breakout attempt since February. That is ongoing, as it closed above that line on Friday. A bullish chart regardless of whether or not it succeeds this time, with trends solidly sloping upward. Royal Gold does, by the way, own the remainder of Great Bear’s former enterprise, the royalty it created back in those heady exploration days. So through KGC and RGLD, I have Great Bear still. Core holding.
Check out this bullish pattern in WDOFF (WDO.TO). We reviewed this several weeks ago and in the meantime, with a little volatility, WDO has taken out the neckline of the pattern. It’s not overbought and it may have some catching up to do. This had been a star of a previous phase, suffered some operational issues and under-performed the sector, and is now another catch-up play in the making. I have followed Joe F’s solid DD over the years. Not core, but I would like it to grow into that.
NGD has been held for long stretches during its comeback as what I view to be a “turnaround” case. As a non-core item it has been traded for excellent profits. But it was bought back in early March (yeah, while I was in deep physical and mental recovery from surgery) at the 50 day average and then it popped nicely, to a new recovery high. I like that. I need to look deeper into Rainy River and its other operations because it has low political risk and good growth prospects. The stock is testing support right now. It can easily pull back to the uptrending SMA 50. I’d strongly consider adding at that level. Borderline core now.
BTG was impaired by new mining laws enforced by the Mali government, but has since come to an agreement moving forward. An agreement on how much the government will dig into BTG’s pocket. But it is clarity, at least. My interest in BTG has been more for the former Sabina Gold & Silver, which it bought out a few years back. I believe that development is moving along well.
The black dotted lines are a wedge that is better viewed on a weekly chart. We noted it a couple years ago and it broke the wedge, failed back into it and in 2025 has broken it again and launched upward. It’s overbought, but I am holding at this time, and would consider adding at support around 2.85. Not core.
KNTNF (KNT.TO) is the Papua New Guinea miner that is executing well fundamentally and technically, has exceeded target #1 and nearly ticked target #2. Those targets were projected off of previous patterns and I am going to deemphasize them now. The stock ticked an all-time high and pulled back from it. On a weekly chart there is a pattern that could bode well higher. The trigger would be taking out and holding last week’s high. It, like several others, is getting overbought in the short-term. After I bought this stock, I noticed that Jordan Roy Byrne is positive on it (currently in “accumulate” mode). That helps, because he’s keeping an eye on it in a way I cannot. Borderline core.
CXBMF (CXB.TO) is combined with EQX to form New Equinox Gold. I had no execution concerns with Calibre, but some country-risk concerns. I had no country concerns with EQX, but some execution concerns. The hope is that the deal is beneficial as a whole. But that is far from proven at this point. The chart is bullish in a “meh” sort of way. But I probably won’t tolerate much downside as it is not core.
OGNRF (OGN.V) has been held for a long time and though I have peeled some profits off of it, it has kept growing back to full position size. This one is compliments of the deep DD done by Rich K. It is a younger royalty and is core until such time as an event like a buyout or some other situation changes that. Technically, it is in a long and volatile consolidation after a long uptrend from 2022. The 50 and 200 day moving averages are up though the price keeps jabbing them, up and down. It should hold .98 to remain technically okay. A breakdown would be below the December low. Above 1.15 it could be on its bullish way again.
GAU was traded once and is on watch. The stock is trying to form a bottom/base after a decline from richly valued status. This could be the area to buy, at support and the (blue) SMA 50. It would not be core.
RIOFF (RIO.V) has been marching northward since it received its permits and later, funding commitments. It is a mine developer with very good prospects according to multiple sources. The price has come back to around the levels it was at when a permit-shock incident tanked the stock back in 2022. So it is back to those levels with permits in hand and funding. In other words, it’s in much better standing now than it was at the same price in 2022. Oh, and gold is just little bit higher, eh? RSI negative divergence. Borderline core.
SKE is one I bought, took a profit on, looked deeper into it, bought back on a decline, and now hold as a pretty darn close to core position. I don’t look at it. It has made scary declines and thrilling spikes. But having decided to just hold it mutes those thrills and spills. I think it’s a buyout candidate. SKE is firmly trending upon its 50 day average. It appears that it might take a hard sector pullback to get it to test the SMA 200.
MAG was added for silver exposure after I took a profit on SLV (which I am looking to add back). It was added on this pullback to the SMA 50. The moving average trends are solidly up and pullbacks to uptrending moving averages are classic buy points, generally. That would still apply if it continues down to the SMA 200. Earnings on March 26, and it will be interesting to see how the rise in silver price has played into MAG’s operation. Not core.
The scuttlebutt I hear is that the pad permit should be coming (woulda shoulda coulda). That MAIFF (MAI.V) is a value. That it’s going to really take off, as did RIO.V, when pad permits come in. The current reality is that it is going a volatile sideways as players take it and dump it, some probably hoping to catch it just right upon permit receipt. While I like and respect President Doug Ramshaw, this is not core because political risk is still in play. The issue with stocks like this is that one press release could launch the stock to levels that might make you wish you’d taken a shot earlier. Whatever. Holding it for now.
Here is a pure spec with financing risk built in as well. It is only at the PEA stage and I only hold it because the TSX-V is aiming bullish (same applies to MAI.V above). If it stops climbing the SMA 50, I’ll stop holding it.
Last but not least, little American Eagle (AMEGF/AE.V), which was once a future star and then did a poor job of expectations management and got tanked again. That is the thing with these hole drillers. One “meh” hole plus an excitable investor base = tankage. Showing the TSX-V listed chart, which is clearer than the OTC I hold. I would like to think it can bottom here and TSX-V willing, make a run. But again, “hole driller”… the next hole could sky it or tank it. Holding as a spec as is a subscriber/geologist who originally guided me well on Great Bear.
Global Stock Markets
ACWX (Global, ex-US) continues to trend up and is bullish, although RSI and MACD appear to be guiding downward in the near-term (support and the SMA 50 around 55). Aside from that, I want to once again highlight why I largely dismiss trend lines. ACWX broke its trend line and probably got trendline dorks’ panties in a bunch. But it really would have been the lower low at 49 that would have been the bear signal.
Asia (ex-US) may present a buying opportunity on a continued pullback to the two uptrending moving averages. Broader market willing, of course.
TSX-V got back above 627, and as such is looking to 680 as long as that holds. It goes without saying that a failure by this index would probably see me clearing out most of my related miner specs.
I have really got to step up the pace now. Doing all those gold miners ate into my time and I am really tired of looking at charts! :-(
Commodities
Commodities are largely as we left them, anyway. CRB is gently trending up and GNX and DBC are going sideways.
Crude oil is trending down, and not because the Trump admin is putting out propaganda that it is driving prices down. NatGas is pulling back within its 7 month uptrend. I took the profit on one AR position, while holding the other. The Energy sector (XLE) put on another spike within its volatile sideways situation, but has not yet broken the year-long sideways consolidation.
Copper is bulling like it wants to rebuild Ukraine or add on to a reflating China. Yet the copper miners continue to wallow. I hold SCCO to track the situation and am open to adding more. But not yet.
In the Rare Earths patch, MP is dealing with a significant level of resistance, which I had anticipated at 26. Holding, given this macro and this global geopolitical environment. Also, Aussie producer LYSDY.
Uranium got bombed. I added the sector (URNM) and a favored spec, NXE. Moving on…
Palladium and Platinum continue to flounder, potentially basing, like perma-style. On watch though.
I have no interest in the Ags.
USD & Gold/Silver Ratio
Of course the Gold/Silver ratio has bounced back above its implied support. Because why would we ever want to have a definitive signal by which to navigate? So the GSR is still sideways with a slight bullish bias.
Now, as to Uncle Buck, the basis to call support at 103 is fairly flimsy. There are not a lot of lateral touch points other than the big one in 2020. That was a spike and immediate reversal, preceding the inflation problem cooked up by Fed and government at the time.
However, the shaded bearish pattern does measure to 103. That’s not nothing. USD has thus far held 103.
We should continue to keep an eye on these two would-be destroyers of market liquidity. If USD finds support and follow-on bids and the GSR breaks upward, there could be a tough time across asset markets, including the precious metals, initially at least.
Portfolio
Gold is long-term risk management & monetary value/stability in a balanced portfolio.
Taxable Account
In order of position size. Here are the stock market suspects I hold and some short hedges against them. Also, preferred gold miners and for the moment at least, a hedge against them as well. Cash/equiv. is extremely high.
Trading Account
No positions, and I will probably drop this note because I don’t think it belongs in NFTRH. If/when we get NFTRH++ off the ground, maybe there will be a place for it or something like it.
Roth IRA (non-taxable, no contributions)
The chart dumbs itself down for us. This sideways-going situation must hold lateral support as noted. I am happy to have it near its highs, given the broad market’s correction and the gold miners barely higher than their October highs.
There are spanners and monkeys in the works and I don’t know yet if I am going to seek profits from the bull side, the bear side or stability from the cash side. Well, that last thing will always be in play to a large degree. If we go confirmed bear market, there will be ample place for cash and short-term Treasuries. If the bull resumes any time soon, it will carry much risk in my opinion. For me, bullish or bearish positioning would be speculative trades only. Gold stocks are generally a different animal for the new macro, assuming it continues to dis-inflate and fade counter-cyclical.
For now, steady as she goes. Some investment, some speculation and a lotta cash/equiv.
Cash and equivalents are 77%. However, this includes four short positions. So effectively, with those shock absorbers it is like higher levels of cash. The issue is that these shorts do not pay dividends like cash/equiv. So for now I want to be nimble with them. No short hero until the setups indicate so. Even then, no short hero; just a short speculator.
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.
