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Review Notes From the Rabbit Hole
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Bull Stonks
With a heavy focus on macro indications and the implications for gold stocks, I feel like I give short shrift to what I call “bull stocks”, i.e. the vehicles I use when I think the broad stock market is going to rally. I give these items less attention because I think there is a bear market out ahead for a broad stock market that has been propped by the policy bubble for decades now. I am a gold bug, after all.
That said, in a certain environment, like today’s fully anticipated, joyous, utterly euphoric market ‘V’ recovery on trade talks that were in the bag the whole time, quality (if over-valued) stocks pushed too far down on trade fears, will spring back the other way on relief of those fears. A market sentiment snap back adjustment is almost a matter of market physics.
We’ll revisit some of these bull stocks in a moment.
SPX eliminated the “5 waves down” and “A-B-C bear market rally” scenarios in favor of the “A-B-C bull market correction” option. Humorously enough, this has been one whopper of an f/u to anyone who reacted to the “BEAR CROSS!” of the SMA 50 below the 200. Per usual.
However, while the cross could turn back up and be repaired as they often are, the implication of the cross still exists. It’s just that the knee-jerk reactionaries (people shorting because of a TA novelty/buzz phrase like a bear or bull cross) must be cleaned out first.
The implication of the A-B-C is new highs to come. All well and bullish? Well, this rally began as a tinder box of over-bearish sentiment. Evolving trade news lit the match. Now folks, it’s a sentiment thing and a physics thing. I expect a bear market and economic deceleration. Even if it makes new highs SPX, is still in a posture to top. A top may come from a higher high, however, and I am not going to call acute bearish until I see acute bearish.
As for the very short-term, SPX has left some gaps and it would be reasonable to think that it could drop for a test of the SMA 200 and gap fill in the 5690 area.
In relation to gold, SPX has topped. So let’s keep perspective, dear bull stonkers.
However, the stock market is still on its relief rally, and volatility is all gone. A poor timer, but a condition of a real top would be a very depressed VIX.
However, as long as NDX is leading and the SOX ratios are bouncing, I will nimbly speculate long.
Gold Bug Disclaimer: I am a bug. I am a long-term holder and valuer of gold. I believe in a more honest system that is not “in the bag” and ginned up so that financial assets must always be kept bullish. I believe in natural economic cycles that have not been allowed to play out to their nature by the will of meddlesome, bubble-making policymakers at both the Fed and both aisles of government. However… I also believe in the reality of the market in front of me at any given time. I abhor gold bug tunnel vision and bias.
Some of these items have run beyond optimal buy levels, but DOCU might not have gone too far. I added it after releasing something sexier. Maybe it was NET, which kept on going up after it was sold. The break to a higher high after retaking the uptrending moving averages is a positive signal, perhaps to test the highs, broader market willing.
ZS is one I’ve long had an interest in, as you know. I left an old measurement on the chart because, gulp, it has been registered (gap not shown on this chart). I’ll hold for now, potentially into earnings, depending on what the market is doing (note the words above: “nimbly speculate long”).
RDDT still looks okay to me after taking out resistance and slithering (flagging) down the SMA 50. I may even add a second position.
I looked at NVDA and ALAB for AI-hype bounce back. Not sure how much hype is out there, but ALAB got destroyed beyond reason. This is at least my second time back in it after it crashed (and filled the gaps). If the bulls get nutty enough, I think the upper gap can get filled at 114.
Holding GOOGL as it makes an important test of resistance and the SMA 200. It is coiling in a pattern. If it breaks through we’d look as high as the upper gap for a target.
CVNA is at a new high for its bull cycle, but not an all-time high. That was 376 back in 2021. I just happened to sell a car through this service and was thrilled with the service. It’s not often these days you get titillated by the performance of a service provider. So geek looked at chart, bought, took partial profit and is still holding the rest.
Finally, one of the more reasonably valued medical device companies, MDT. It is at the junction of the moving averages that are about to “Death Cross”, ha ha ha. I expect a rally and may even add a second position.
Just some discussion about some of the stocks that I don’t often discuss.
US Stock Market Sentiment
Boy oh boy, do we have a party developing. Smart money indicators fading, Dumb ones gulping up stonks.
Risk is now untenable for stocks, opposite for bonds.
“Greed is good” said the impeccably sleazy Gordon Gekko. And he is right. Greed IS good as long as its momentum is in play and as long as you understand that it is a condition for the next market top. Not a timer. But the next important market top will feature extreme greed and extreme dumb money sentiment. The process is well on the way…
NAAIM were in a moderately over-bullish stance on 5.14.
AAII were even more moderate. They are trending more bullish, but not to an extreme. Ma & Pa tend to be more sticky than the other sentiment groups.
US Stock Market & Sentiment Bottom Line
Bullish. SPX has elected the ‘A-B-C bull market correction’ path, which implies a new high to come. As long as the leadership chain, broken in its trends as it is, shows Semiconductors leading Tech and Broad in the short-term and as long as Tech leads Broad in the short-term, speculators can spec on a bullish market at rising risk.
Speculators can also short if they know what they are doing. For me, cash is better right now. I want to short a real bear market. The thing earlier this year was a correction, much like the 2020 and 2022 situations.
The risk comes in the form of sentiment, rapidly evolving into an extremely over-bullish situation.
The risk also comes from our indicators, which before all the 2025 Trump/Tariffs/Trade noise, were signaling bad things throughout the Biden Admin’s attempted jerry-rig of the economy (keeping markets aloft) into Trump’s “America great again” jingle, and on through to today.
Key Macro Indicators
Let’s review this chart for its thesis that something similar to 2007 could be playing out near the end of a bull market. Recall that back then an “inflation trade” in commodities was on its last legs as the Fed was implied to start easing as the T-bill yield declined, but the 2yr yield bounced. The Fed was forced to remain tight and when it did loosen, it did so compulsively as a bear market ensued.
Trump on Powell: “he’s always late.” Well, he’s late for a reason. He is a data-dependent, eggheaded automaton as I perceive all Fed people to be. They look at lagging indications. They are reactionary, not intuitive. They were late in 2007. They were late (per my non-stop haranguing at this website) in finally taking up the inflation fight in 2022. They will likely be late again on this cycle.
Today we are playing a similar (to 2007), but more extended cat and mouse game with these yields. If the 2yr yield bounces here it would put the Fed off of any chance of a rate cut in June. Indeed, CME Group has recently gone from a favored cut in June, to 92% not favoring a cut. A 63% majority of CME traders also expect July to be a “hold”. Ref: CME Group. CME tends to be reactionary as well. They are not gurus of the future. Just wind socks of the present.
Regardless, this chart is and has been building a whopper of a divergence between the 2yr and the Fed proxy T-bill. An interim inflation trade could keep markets going for a while, but 2007 transitioned to 2008 and then, disaster.
There is also the matter of steepening yield curves, which would see macro liquidation if rising deflationary, or select positive areas and many impaired areas if rising inflationary. YC can steepen under either condition, with the nominal direction of yields being the qualifier.
Steepening phases can include both inflationary and deflationary inputs at different times (e.g. the 2020-2021 steepener started deflationary and finished inflationary, and the 2007-2009 steepener started inflationary and finished deflationary). Pretty wild.
Remember when the media were making such a big deal about an inverted yield curve? How their lazy analysis predicted an oncoming recession? How I said “silly media, the recession comes after the inversion bottoms, the curve turns up and becomes un-inverted.”
The 10-2 curve is un-inverted and the economic bust signal remains intact. But with nominal yields rising, the signaling is currently inflationary.
But as you can see, our sensitive indicators, like the VIX above, and High Yield (junk) spread are burrowing southward with today’s market relief. This, contrary-wise, indicates risk is rising again.
Indicators Bottom Line (and abbreviated Commodities segment)
Not much has changed. We went through 2024 with the Biden admin propping the macro to try to get reelected. That failed. Most of that year recession/bear market indications were in play. After Trump put his stamp on the macro in a loud and bombastic way, that noise is filtering through and we are left with the same degrading macro we had before Trump.
The tank job in markets and the sentiment relief rally may have delayed the situation, but short of a negation of negative indicators, we are still looking for economic contraction in 2025. A now valid question, however, is will the contraction have a stagflationary or deflationary flavor… or both at varying times?
If the Silver/Gold ratio bottoms and reverses, and starts to drag commodity related items higher, it would be inflationary to stagflationary. I am leaning toward that coming first, and market liquidation coming second, possibly after a tradable upside rally in the inflation stuff.
So we’ll leave it with one final indicator. An important one for today. We are on watch because the Silver/Gold ratio tends to quickly spike in the other direction after falling hard enough. It may or may not have fallen hard enough yet. But it is Indicator #1 for gauging the prospect of a wider inflation trade featuring commodities and related stocks. So far, no go.
The above was discussed in more detail in a public post on Friday.
The bottom line of the article was that a tradable rally may “MAY” ensue. But that even after the precious metals correction so far, gold’s relative trends to these cyclical items are up. Hence, the trend toward a counter-cyclical macro is still in play.
NOTE: Also see TSX-V chart below in Global segment.
Precious Metals
Gold (monthly chart) is too bullish! Yes, it blew through target and needed the correction it is getting.
Its log scale monthly view stopped where this chart thinks it should have stopped, right at the upper tine of the Andrews Fork. I did not just add this novelty to make a point for today. The fork has been on this chart for years to show an upper extreme potential. Gold’s correction? Earned. Gold? Bullish.
Silver monthly continues to hold above the 26-28 support area. That’s good. The daily chart is sloppy, has a bit of a rolling look and is below its SMA 50. As yet, with respect to its ability to lead gold and spring an inflation trade, silver is lamely lurking, at best. But importantly, this chart shows it is lurking above clear support.
HUI/Gold ratio continues to hang in there on this correction. This favors a bullish outcome to the correction.
HUI/SPX ratio is doing what it was supposed to do on a stock market relief (sentiment) rally. Indeed, it is starting to look like gold stocks are nearing a buy relative to broad stocks.
Counter-cyclical Gold miners signaled a new macro in comparison with cyclical Copper miners. A 4 year base was broken and is being tested. The ratio can decline all the way to noted support and the counter-cyclical play would not be broken.
Gold Miners Bullish Percent Index has now finally done some good downside work. Recall that in a rising trend (note the up-sloping monthly EMA 20) the BPGDM does not need to fall to previous extreme levels. We might look for the 35 area (+/-) to limit the downside.
Many bugs are rooting hard for a silver rally, including vs. gold. The gold miners would likely participate well. But such a rally would be against the best fundamentals, which admittedly in the age of inflationary bubble policy, is like trying to find a unicorn. A unicorn like the Great Depression.
In the above scenario, the miners would not be unique. However, in the scenario that has been and still is, they are unique. They are uniquely in tandem with the Gold/Silver ratio, not the other way around.
This means the miners are aligned with disinflation and deflationary macro risk. That is what an impulsively rising Gold/Silver ratio would reflect. Again, this chart represents something that I think a majority of gold bugs either do not see or do not want to see. It’s easier (where eyeball harvesting is concerned) to tout “inflation” than it is some elusive unicorn from the 1930s.
Let’s close with a look at some gold stocks that I hold. Some of which are presenting buying opportunities. It’s of little use showing charts during a furious rally. It’s of much use when scouting downside buying opportunity.
AEM would ideally make a higher low to the April 7 low of 94.77. A strong correction could test the rising 200 day average, regardless of whether it is above or below the April 7 low.
If you think the correction is ending now, this is a classic buying opp. for KGC at the SMA 50. I do not see much evidence that the correction will not bite deeper, however. Perhaps a wannabe KGC bull takes a bit here and prepares to buy more at around 11.
NGD looks like it has a magnet set for the SMA 50. I might start a 2nd position there. A deeper sector correction could see NGD presenting an opportunity to buy clear support at 3 to 3.20.
NEM is testing clear support and could easily test the SMA 200 at 47.
RGLD buy here at the SMA 50 or lower at clear support? I am holding, but not yet adding unless it test the 154-155 area.
RIOFF (RIO.V) got too far extended. Looking for a tap of the rising SMA 50 at least.
SKE is the stock I look at least in my portfolio. I never know what it is doing because I just don’t look. That is because I made a decision that it’s a hold. I love the chart. Firmly but not spectacularly trending up. A buy opportunity could be at a gap fill around 10 with the SMA 200 rising toward it.
KNTNF/KNT.TO needs a tap of its SMA 50, at least. A larger sector correction, if applicable, could see it decline to the 7.50 area, where I would strongly consider adding more.
Precious Metals Bottom Line
Nothing has changed. The PMs, and especially gold, are in a healthy correction that was earned by going one way (north) while everything else went south. They earned this when happy relief spread throughout the land and the southerly stuff bottomed and turned up.
If the Silver/Gold ratio turns up and inflation trades start to whip up then the gold stock sector will probably bull as well. However, if past (2004-2008) is prologue, it would be against degrading fundamentals due to inflation.
However, the bottomest line is the first sentence above. As yet… “nothing has changed”. Thus far it is a normal correction within a beneficial macro.
USD & Global Stock Markets
With the USD still in a viable bounce posture, I added back the Euro short (EUO) as an indirect hedge against a further bounce by Uncle Buck (the gold short, GLL, is an even more indirect hedge). Unless USD loses the support at 100.25, I am inclined to hold one or both shorts.
The bounce in the dollar has not affected nominal ACWX (world, ex-US).
But it has kept pressure on its relative standing vs. the US SPX/SPY. The series of higher highs and lows is intact, however.
The Canadian TSX-V hit its next target of 680. The pullback from that resistance (not shown on this daily chart) is normal. Now da ‘V’ needs to hold the 650 (+/-) area to keep things comfortably normal for its own components as well as any prospective near-term “inflation trade”.
Portfolio
Gold is long-term risk management & monetary value/stability in a balanced portfolio.
Taxable Account
In order of position size. Cash/equiv is quite high, as usual. The notes below pertaining to the IRA pretty much apply here as well.
Trading Account
No positions. This is where I’d like to nimbly short individual equities when I start to feel the broad rally is concluding. I don’t see much opportunity currently for big trades from the long side.
Roth IRA (non-taxable, no contributions)
The chart is still in new highs territory, but I don’t love the little hook it’s putting on, as if it wants to test the breakout. Man stares at chart and all…
Cash and equivalents are 80% with a couple shorts for ballast. Not much to say other than I have removed second positions in a couple gold stocks (one is enough in a correction) and hold some bull stocks pending the market’s hope rally. Also, closely evaluating the potential for an “inflation trade”. Will keep an eye on things like the Silver/Gold ratio, TSX-V and the V’s relationship to TSX for indications.
Cash & income-generating 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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