As you know, I’ve been keeping a close eye on the combo of the Silver/Gold ratio (SGR) and the TSX-V/TSX ratio in order to gauge the “SGR trades”, those areas indicated to receive these two indicator ratios as tailwinds. Nothing much has changed since Sunday’s report, but…
Nothing has improved either. While the intermediate rallies in these ratios remain intact, they are suspect at the same time.
Silver/Gold ratio has held below the resistance point and is making a heavy candle today.
TSX-V/TSX looks heavy on its 50 day moving average. It would not bust its uptrend unless it takes a drop below the June 24th low. But I for one do not want to ride anywhere near there with SGR trades in hand.
This could all reverse tomorrow, but with the USD at a decision point about whether or not to resume a counter-trend bounce/rally, I am not in a risk taking mood. If these two do continue to fade it would be negative for commodities in general, and insofar as the silver bugs may be leading gold bugs emotionally, it could also pressure gold stocks. That remains to be seen.
It also remains to be seen whether these two indicators would pressure broader markets if they continue to correct. A rising SGR and TSX-V/TSX is a broad tailwind, after all.
Given that my interim view is disinflationary – and these indicators are indicative of the opposite when rising – I am on alert. As you know, I’ve already released several SGR trades and frankly, if it weren’t for my obsession with not paying taxes, I’d have already sold the likes of MP.
But just take the above as perspective for however you’d like to manage your own situation. We were early to the SGR trades (in fact, we invented the damn thing). I don’t want to stay too late. Indeed, aside from gold stocks, I’m already materially out of them (for now).
[edit] Per the daily notes I did some profit taking, including a taxable one on partial MP (initial investment removed, now free shares). LYSDY too, non-taxable and I was wondering “why am I still holding this overbought 60% profiteer?” Still hold it in taxable, but the IRA did what it is supposed to do, which is claim tax free profit when appropriate.
