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Emotional Wax On/Wax Off

That is what Trump, Bessent and now the idiot Sec-Def are creating. Emotion and volatility, economically through the tariff regime and geopolitically through sabre rattling. A few headlines we are treated to on Saturday morning:

Pentagon chief says ready to ‘fight and win’ against China

China calls out Trump for ‘abuse’ of semiconductor export controls

Trump says U.S. will double steel tariffs to 50%

It’s unprofessional of me to write, but this guy could win the award for most punchable face, 2025.

Everything about this administration seems like a cartoon to me. Or at best, a TV show. They were made for – and in some cases made by – reality TV.

I don’t like the sabre rattling because I don’t like war and because I don’t trust what’s his face as far as I can throw him. I also don’t care for this notion of war with China thrown into the mix of a macro already on emotional overload.

I mean, as a trader it’s fun. Somehow, Trump 2.0 has managed to be good for me personally so far, and good for NFTRH as our themes have pretty much remained on track. But I am an American, and I don’t trust our leaders (and it’s not just Trump 2.0), especially some of what our dearest leader has surrounded himself with. As for dear leader himself, I’d get a beer with him. He’s different than Trump 1.0, somehow. Funnier.

But as an administration, I feel like they are out of their league, professional noise makers and shit disturbers. This guy, what’s his face, especially, feels out of his league. Seriously, I can’t even remember his name as I write. But “what’s his face” suits him, anyway. The Signal security breach guy. The former Fox News anchor/TeeVee personality guy.

I realize I am displaying emotion now. So I will get off this and move on to actual analysis and stop wasting your time. This is the administration we have, and we need to work with it.

I now return to professional writer mode.

US Stock Market

Alarming news items like war with China tend to only last a short period. Long enough to shake enough people out. On Friday we had regression in US/China trade, the market pulled back, and then voila… it did not even fill the upper gap, hammered and ended the day not so bad.

Next up is China war noise. If the market drops, it could well be a buying opportunity if past is prologue with regard to inflammatory geopolitical news items.

SPX took out ‘B’ on the upside, dropped to test B’s support and bounced again, leaving a new gap. Then came the negative noise. Gaps are, by the way, emotion, almost by definition.

The bottom line on the SPX daily technical picture is that in having held the SMA 200, the bias still favors the bulls, noise or no noise.

Market Indications

The VIX woke up for a minute last week and then went back to sleep. However, the divergence that accurately guided us (in a non-timely manner) to the market correction that began in February is still in play as SPX approaches its previous highs. That is a caution on the fly. Timing could again be hazy.

High yield (junk) spreads woke up for a moment and then went back to sleep, implying calm upon the macro. But the extreme risk-on, speculative signal of Q4-Q1may not be reached again.

The Gold/Silver ratio remained calm, but is elevated. This as we await a signal (or not) in its mirror image, the Silver/Gold ratio. In short, “if the GSR breaks down WE break down” to paraphrase Sgt. Barnes with “we” being the forces of risk-off, disinflation and liquidity crises.

The US dollar showed little interest in receiving any sort of fear-based liquidity bid, although it did cling to support (not shown on this daily chart). The caveat here is that USD may be abdicating its “reserve currency” status in the current geopolitical macro backdrop and may not be a good indicator of market liquidity stress like its former partner above.

Again, we reference the 2001-2004 analog when during much of a difficult period USD declined while the Euro, Swissy and other currencies received bids. That along with currently rising HUI and Gold/Silver ratio is a rhyme with that period. The mainly flat HUI/Gold ratio is another matter, which we’ll cover in the Precious Metals segment.

Internally, the US stock market’s leadership chain’s first link, Semiconductor leadership, is still broken. However, Tech has held serve as the leader as it constructively goes sideways. A bear-biased neutral here, overall.

SPX Advance/Decline line is no problem, currently.

It remains a disinflationary macro with future liquidity concerns because all of these cyclical markets (plus global currencies, i.e. UDN) and inflation expectations are trending down vs. counter-cyclical haven, gold.

This in some respects remains counter to our plan for a potential turn of events where silver would lead gold. If silver were to turn up hard vs. gold we’d expect to see copper, possibly oil and general commodities start to outperform for a while also.

On that note, I want to get directly to the Precious Metals segment. We’ll catch up with US Market Sentiment later.

Precious Metals

HUI has popped to frothy again in relation to its fundamental underpinning, the Gold/”Inflation Expectations” ratio. In other words, the Gold/RINF ratio is negatively diverging the HUI Gold Bugs index.

A problem? Maybe. But here is where it gets interesting, because if we are exiting the 2001-2004 analog (watching the Silver/Gold ratio), even if for a short phase, we should recall that from 2004-2008 gold stocks rose about 330% against its anti-inflationary fundamentals. That was a period when silver was outperforming gold and soon, so too did commodities.

In other words, the indication above, while something I do not care for, could be an initial inkling of the “inflation trade” we’ve been on alert for. With gold miners rising against their fundamentals. But as yet, it’s just a minor divergence. It bears watching.

The TSX-V/TSX ratio has been on that theme since November, but the Silver/Gold ratio is stuck in the mud. If the SGR were to break upward and join the party, it would indicate further upside in the gold miners with deteriorating fundamentals, much like the 2004-2008 phase (which ended in a well deserved crash). In such a case, the negative divergence of Gold/RINF to HUI above would be normal and probably due to expand.

Just spitballin’ and covering all the analytical bases I can. The bottom line is that I am not going to get overly concerned about the divergence as long as I hold open the potential for an inflation trade.

The HUI/Gold ratio continues to try to base/bottom since the extreme low in February, 2024. It is still intact as an internal to the current rally. HUI/SPX made a perfect tap of previously noted support area and rebounded. Excellent work, Huey.

GDX (daily) is in bull flag breakout mode. While volume has declined during the breakout (not favorable), RSI and MACD look good. Upside gap is filled and there is still a nagging one just above 46. There are vulnerabilities, but the bulls most definitely have the ball at this time. They need to keep it by taking out the May high at 50.83 on the way to making a new high above 53.25.

HUI’s big picture monthly chart, just because I love looking at pretty pictures.

Gold (daily) remains in its bull flag downtrend channel. I don’t love RSI or MACD, but they are no longer overbought. So that’s something.

Silver continues to lurk atop its daily SMA 50. A sloppy looking chart, but a labored uptrend is still in play. A loss of the SMA 50 would get my caution up a bit. It is coming about time for silver do something, nominally and in relation to gold. The reason I say that is because I am managing a potential play that never was part of my main counter-cyclical, anti-inflationary plan.

So I am not some sort of commodity super-cycle inflationist dogma guy. I just want to know what the near-term play is, and silver holds the key. Personally, I’d just as soon have the inflation trades fail to play out as have them play out. But as usual, I wait for instructions from the market rather than try to force it.

Here is the state of the gold ratios pertinent to the near-term macro. Let’s bullet the key points:

• Gold/Silver ratio is trending up, although consolidating over the last 2 months. Its implication is disinflationary in its trend. Inflation trades don’t start for real until/unless it breaks down.
• Gold/Copper is logically following Au/Ag. The end of this consolidation should answer the question of “continuing counter-cyclical or an interim cyclical inflation trade?”
• Gold/Oil is less of a macro indicator because of oil’s subjectivity to price manipulation and global politics. But it is trending up and remains a tailwind indication for gold mining operational fundamentals.
• Gold/Stock Markets (US & Global) has done good downside work with the big relief bids in stonks since April. The ratios remain in downward consolidation, but the main trends are up. Gold needed this break because the panicked risk-off herds needed a sentiment reset, and they are getting it.
• Gold/RINF is trending up in a disinflationary trend, but is getting a little funky looking in its pattern. Again, a failure by this ratio, even if just for a correction, could indicate “inflation trade”.

Precious Metals Bottom Line

The trends remain up, gold strongly so, silver moderately so and the gold miners firmly so. The short-term correction may have ended, but there is more work to do to confirm that:

• Gold break its bull flag…
• Silver get off its SMA 50 and start upward…
• Gold stocks take out the previous high…

Beyond that, we are evaluating a potential transition from the original theme (gold miners are unique in a disinflationary, counter-cyclical macro with improving fundamentals) to an “inflation trade” theme, in the interim at least.

So it’s one or the other, and we continue to watch the Silver/Gold ratio for not only precious metals indications, but wider macro indications.

US Market Sentiment

Smart/Dumb money indications are contrary bearish.

The 7 components of the CNN Fear/Greed index are contrary bearish on balance.

The situation remains as it has been, over-bullish, unhealthy from a sentiment perspective, but not yet extreme.

Global Stock Markets

ACWX (Global)/SPY (US) ratio is still in its stair-step posture, but pulled back last week. If the 2nd lower arrow gets taken out it would not be time to be favoring global stocks over US stocks. But for 2025, as if a referendum on Trump (and his effect on the US dollar), the trend is still up.

Nominally, ACWX is still on the bull recovery.

Canadian TSX-V shows a gappy rise halted at least temporarily at a resistance point, not shown on the daily chart.

The weekly chart shows the resistance to TSX-V’s base breakout. If it takes out resistance we’ll look at least 100 points higher to the 800-850 range as the next objective.

The craziest part of this is how deeply depressed the index still would be on its big picture. Even a rally to the 2021 high, itself an epic depression from the 2007 and 2011 highs, would make our year, assuming we have exposure to da ‘V’. My current candidates (not all .V’s, but of similar ilk) are RIO.V, MAI.V, OGN.V, AE.V, TLO.TO. I would like to find another TLO before it starts to lift off, hence I added another AE.V (AMEGF) position and if the TSX-V trade continues, I’ll look for ever more speculative potential bottle rockets.

Commodities

CRB, GNX, DBC: The indexes/ETF continue NOT to play ball, with the prospect of a more pervasive commodity/resources trade. They are playing ball with the depressed Silver/Gold ratio instead of the rallying with TSX-V and its ratio to the TSX.

Copper/Copper Miners/Industrial Metals: Copper is on a very volatile uptrend. Cu Miners ETF COPX is still rallying from the depths of the April low. However, the rally has not turned the daily chart trends up. So it’s another area waiting for the Silver/Gold ratio to make a move (up or down). General industrial metals (GYX), while still in short-term rally mode, are close to turning daily trends back down. Not a good look, currently.

Uranium: Per the Daily Notes, I sold NXE and then bit the bullet and also sold CCJ. The sector is still in rally mode, but I’d like to see a steeper pullback in order to re-buy. We’ll see how that works out. To my eye, the U’s spiked very hard on media stuff about Trump favoring the sector or some such thing. Thank you Trump, front-running your jawbone has been an integral part of 2025 investment strategy.

Oil/Gas/Energy: WTI and Brent oil continue to firmly trend down. Gas is struggling not to lose its daily uptrend. I have relieved myself of all positions for now. Profits on two AR positions and moderate losses on CVX and XOM.

Platinum, Palladium, Nickel & REE: Pt spiked hard and is starting to drop. Pd spiked hard and is flagging back in a possibly bullish manner, but deeper than I’d wanted. So I relieved myself for the moment of PALL and still hold SPPP (Pt & Pd), very tentatively.

Nickel is on my mind simply because it the primary future product of currently holding, Talon Metals (highlighted last week in #864). The Nickel price is still floundering around long-term support in the 14300 to 15700 area. No signs of upturn as yet.

Rare Earths got in the news again with the US/China trade war. I had added and increased US REE producer MP on its downturn to a higher low and Aussie producer LYSDY on a pullback within a still constructive base breakout potential.

Agricultural: I am all but ignoring the Ags, but keeping a casual eye on the Ferts after taking an excellent profit on IPI, which is still elevated and at clear long-term resistance. If it busts through, it will probably do it without me. If it drops, I’ll put it ever more on watch.

Portfolio

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

Taxable Account

In order of position size. Very high cash and equiv. Speaking of which, The Treasury Note I’d had in here redeemed and spit out a nice dividend. It will now go simply to cash, which is still paying out.

As noted to this point, I am ready to get more in the game. I just want to see the right signals, per the report above and several before it.

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. If the Silver/Gold ratio plays out to the upside, I may trade long in commodity related equities.

Roth IRA (non-taxable, no contributions)

The chart shows that whatever the heck I am doing,* it is working. I am absolutely fine stopping the bus here, letting off many speculative passengers and raising cash. I am also fine with levering in further to the markets to try to make it a really good year. Talking to you, Silver/Gold ratio. I am just glad to see that long sideways trend in the rear view mirror.

* And with the political noise making me look like a genius one day and a fool the next, sometimes it is hard to explain exactly what the heck I am doing and why.

Cash and equivalents are at 79%, so no real move yet to get more “in”. As per the above, that is an option going forward, pending the conditions also noted above.

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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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.