MOMOs and FOMOs are about to drive the markets to extremes in over-bullish sentiment after we noted increasingly over-bullish sentiment readings in #862. I’m sure not going to fight it and I may even trade it.
We know that a lot of posturing went into the US/China trade “war”. This bull trigger is, in my conspiratorial mind, similar to when the Fed just happened to cut rates in the run-up to the election. It didn’t do Biden any good. Will this do Trump good? We’ll see. Ah, politics.
My Euro and gold shorts will come in handy today, although I released DUST at the wrong time, per usual.
Gold is getting hammered and USD is busting upward from its pattern. But cyclical commodities and related equities are higher along with the celebration in stocks. Copper stocks, Energy stocks, etc.
This news was the vulnerability of gold and that is playing out this morning. It was in the bag and waiting for the right moment. Well, the right moment is about to propel stock market sentiment to extreme readings. But there is something else going on here.
USD up, gold down. Gold stocks down. Silver down, but…
Silver/Gold ratio up…
The Silver/Gold ratio (SGR) is doing what the USD is doing. One of them is front running the other (reading the future). It just might be the SGR, looking for USD failure and a larger commodity/resource trade.
The US dollar is still locked in a bear phase despite the big jump today. It is testing the downtrending SMA 50. You could look at it as Trump decided to take a run at the shorts in the US dollar (or run the bulls in gold). Of course that is not likely, but it is the result of strategies that were no doubt designed for maximum effect.
Bottom Line
It was time for some GOOD news! Problem being, sentiment. Another being recessionary indicators in play since well back in 2024. As good as it gets? We’ll find out soon.
As noted in #862 if a commodities-based out-performance rally erupts, stocks may not reenter a hard bear phase. They may go the 1970s route and simply go nowhere.
USD and SGR. Watch them. If the SGR actually rallies, it could rally hard and lead a bull phase in cyclical commodities and resources.
Let’s watch for signs of this happening. As yet, it’s just a knee-jerk on news. But if the news proves fundamentally predictive, the market could also be looking ahead to a broader inflation trade.
