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The Return of the 3 Snowmen!

So here is the story. Long-time subscribers may remember that based on a breakout to all-time highs in 2010 by the HUI Gold Bugs Index, I measured a pattern target of 888, 3 snowmen standing side by side.

After making up a catchy name for the target I obviously had to own it when it failed to play out (Huey topped at 638.59 in 2011). For years after that I’d periodically bring it up as a way to say “I was wrong” and “TA is art, not science, and about probabilities, not predictions”, among other things.

I had since forgotten about it until NFTRH 888 came about. Let’s use this as a cue for a trip down memory lane, up to the present. Note that the blue text indicates where I sidetracked myself and went editorial (and conspiratorial).

• A fine fundamental bull market began in 2001.
• As the proper fundamentals began to erode through inflation, HUI made a year-long consolidation (2004-2005) of volatile and tradable ups and downs (see 11/6 NFTRH+ update for reasons I think something similar could be in play after the recent ‘5’ leg finished up last month).
• October 2025’s point 5 capped a hysterical but fundamentally sound up phase similar to 2001-2003.
• The big bull phase that followed the 2004-2005 consolidation began a bubble phase in gold mining as people actually bought gold stocks because of inflation. Wrong fundamentally, for all the reasons I’ve harped over the years and will not bog us down with today.
• Then came Huey’s “crown of thorns”, an H&S top that preceded a righteous crash to clear the pipes.
• I’ll remind you here that I don’t see such a thing happening in the current case because the sector is healthy, fundamentally and it was tragically unhealthy in 2008.
• NFTRH was born on 9.28.08 and we immediately set about managing that crash. With funda considerations like the Gold/SPX, Gold/Oil and Gold/Commodities ratios exploding to the upside even as the metal declined and the miners utterly crashed, it was a no-brainer buying opportunity. I caught falling knives greedily at support at 250, had my fingers severed, grew new ones and caught more at 150. That was the low, and the recovery was epic. To new highs, baby!
• From there I measured an eventual 888 off the crash/recovery pattern.
• But Captain Evil had other ideas. Bernanke rigged the macro with Operation Twist to hide inflation from the public, and then inflated the system through the back door like nobody’s business. Through Op/Twist’s “sanitizing” effects on inflation and the yield curve, the resulting curve flattener indicated an economic and market boom cycle.
• I hate him for that. Free markets? Give me a break. We are so far down the rabbit hole, and much of it is due to that man’s policies and blueprints for the future. A boom was schemed into existence and it still remains to be seen what these and other policy distortions will one day do to the system. For every action is there not an equal and opposite [eventual] reaction?
• I am getting editorial, but so be it. I witnessed it and I believe it. Natural laws of economy, finance and free markets are long since relegated to the dustbin of history.
• That is the legacy of the Vampire, the Federal Reserve system. Or the “creature”, if you will. Sucking the blood from the system of what should be natural capitalism, but no longer is.
• And we wonder why there is a growing ruckus about socialism in this country, after decades of policy expressly designed to enrich the already rich (asset owner class) and impair the working class and already poor through a system of Inflation onDemand?
• Don’t like what the market is doing? Simply buy bonds and print money, or sell bonds and withdraw money. It’s remote management of a system that should handle all of that naturally through the pressure and release of natural economic cycles, with money backed by gold (stable value) instead of backed by debt (err, a massive and unstable debit).
• Anyway, the 3 Snowmen were melted down by the policy of the time, which became visually expressed by Mr. Fat Head on the chart below; a simply massive H&S topping pattern that gave its final warning in Q4, 2012 to “GTF out of the pool, there’s a toxic turd [Bernanke] in there!”
• I was left having write about, joke about and confess about 888, owning it, feeling bad about it, but never being daunted by it. I used it as a prime example to anyone reading me that “I have been and will again be wrong.” I think I even posted a video of a favorite song of mine, I Was Wrong by Sisters Of Mercy.
• During this brutal bear to the January, 2016 low I watched the gold promotion machine continue hump its bullish narrative, suck in new marks, I mean new subscribers/clients while I had to report “bear market” for years.
• That 2016 low began a terribly volatile, bull market that likely just had its first dynamic phase end last month.
• And here we are, left to deal with a correction of some kind, which you will note I have not assigned any sort of cute nickname to. Maybe that is because it’s got options and I have not fully defined it yet. Or maybe I’ve just played out the nickname game (for HUI, at least). Crown of Thorns, Mr. Fat Head, 3 Snowmen… managing markets is fun for me. But let’s maintain a level of seriousness too, eh? ;-)

Precious Metals

Please refer to the update linked above for reference on the sector. That update contained pretty much everything I’d have included here as far as forward options go.

Now, what do I think is going to happen?

I got rid of the silver short (ZSL) for minor damage (but held the miner shorts DUST & JDST) because silver was a short spec. I don’t own a lot of silver personally, and I don’t hold much in the way of silver stocks (I do hold a few Silver/Gold stocks).

GDX daily shows a near 50% retrace (right grid) of the rally leg that began in August. It also shows the eventual potential for pullback on an ongoing corrective consolidation (ref. HUI 2004-2007 above) using a Fib grid from the December 2024 low. That target would be the combo of support, the 200 day average and the 62% Fib level on the left grid in the 53 to 55 range.

That would be the no-brainer buy zone, assuming all other things would be equal. At worst, for a very tradable rally within a structure like the 2004-2005 corrective consolidation noted for HUI above.

If the correction were to end here and now, I’d only project a bounce to perhaps test the highs.

Meanwhile, silver remained postured such that it could bounce sooner rather than later. That would be the potential as it sits atop the black dotted neckline we noted in the video and written updates.

Gold is also postured that it could bounce. Again, my preference for all of this stuff is deeper now for more gain on a trade later. But we’ll deal with the market we get.

Internals

Internally, and macro-fundamentally on the big picture, the gold stock situation is sound as the HUI/Gold ratio holds its fledgling trend, gold may be ending its pullback in SPX terms, Gold/Oil is very accelerated (good for mining industry) and Gold vs. cyclical Copper is a-okay.

On the shorter-term views, HUI/Gold has not landed to a preferred spot for a clear signal, but SIL/Silver has. Considering that silver often leads the sector, this is viable as a signal for the end of the initial phase of the precious metals correction.

Here we see HUI/Gold ratio with a little more room to settle back to the base breakout area, and the same vs. SPX. Gold/SPX may or may not have finished its correction in stock market terms. The ratio is trying to hold the 50 day average.

Gold stocks are right in line with an important fundamental view, gold’s performance vs. amalgamated inflation signals. When gold turns back up vs. inflation so too should the miners.

Bottom Line

Sector is still in correction. We have parameters as to whether it is going to end at more extreme lower levels in the coming weeks (more bullish for a highly tradable rally), or shallower and promptly (for a bounce, test of highs or bull resumption, with “bull resumption” the least favored scenario).

Within the ‘drop to GDX 55’ scenario, a quick one sooner rather than later would likely be a trade to test of the highs. A grinding phase that eventually drives GDX to 55 months from now, would have longer-term bullish implications.

The week ended with the miners, silver and gold all in little potential ‘W’ bounce patterns, but would need follow-through as the miners have not taken back the SMA 50.

Stock Markets

I believe the U.S. stock market is most likely declining to a buy opportunity for a year-end party. Last week we noted: “SPX is on a normal pullback, post-FOMC. It’s probably going to fill a couple downside gaps created by dumb FOMO’ing money, pre-FOMC.”

It filled a couple gaps and is testing the 50 day moving average. So far it’s all normal and trending bullish. SPX could also put on a real correction and test the uptrending 200 day average and clear support at the pattern top. But this pig could easily hold here and take a new leg up.

Patrons have jerked to “extreme” fear while SPX has only made a normal drop to test its intermediate uptrend marker. As noted, I find some of this index’s inputs to be a little unfocused, but that was the case with Senitmentrader’s Smart/Dumb money a well.

On November 5th NAAIM ticked downward to a still elevated 90% bullish. It’s very likely they ticked downward further during the end of week decline. NAAIM is not any sort of extreme over-bearish (contrary bullish) indicator.

AAII continues to mush around in sentiment no-man’s land, in the middle. We keep them on hand for a day when they may jerk to extreme bullish and signal the rally’s or bull’s end.

The leadership chain bent but is far from broken. Bullish market leadership is intact in the U.S.

Meanwhile, despite recent market bearishness, Team DE-fence has not been able to grab the ball from the bulls. Not yet, despite a constructive pattern in XLV/SPY. Other such measures, like the XLP/XLY ratio bounced a little but are firmly trending down.

Party season appears there for the taking if the bulls want to take it. However, I would continue to respect the VIX divergence in play vs. the stock market. It’s almost as if such divergences quietly build pressure over the months they are in play and then suddenly, they matter!

Everybody’s been calling market crash lately. Perhaps when they stop touting the 1929 author and Michael Burry in the damn media, this will matter.

Meanwhile, I am sure the “DE-fence!!” guy pictured above is hopped up on wings, dogs, nachos and a keg. Party time! What could go wrong. Eh?

Editorial Comment, USD & Global

Today we have a shut down government, no payrolls data, but a couple of non-governmental sub-releases having to do with employment contradicting each other. By my eye, the economy sucks. But the bubbly stock market begs to differ.

Asset owners, are feeling just fine. The people I see huddled under blankets on Waltham common, having moved from whatever shelter they previously had, are doing not fine at all (we’re going to bring them some warm clothing & food). I think there are a lot more people note quite homeless, but on the brink.

It’s two economies, one comprising the haves (not just the elite rich, but any boomer who sat his ass in a home for the last inflated decades and collected a pension) and the other, the have-nots (not just the poor, but increasingly the middle falling through the trap door of Federal Reserve inflationary policies).

As the Fed talks a little tough out of the Fed Funds Rate side of its mouth, it hints at flipping from QT to QE out of its rear orifice. This in preparation for coming inflationary operations, I have little doubt.

We continue to be in the Wonderland economy that created this mess to begin with. Remotely managed by a central planning authority. Yeah, the U.S. is a pure capitalist nation. Ha ha ha. Back on message…

Almost eerily, USD halted right where it was supposed to halt in its bounce. This was another reason I took off the silver short after eliminating the Euro short right at the touch of the SMA 200.

Aside from how the Fed will pretend to support, or more likely find a way to withdraw support for the US dollar (they can manipulate bonds and print money out its rear orifice even while keeping the Funds Rate steady), USD will inform global stocks relative to U.S. stocks.

After a sag when USD bounced to test its SMA 200, the ACWX/SPY ratio popped again as USD faded from its test (while still in progress, it’s thus far a failure).

Nominal ACWX took a pullback much like SPX/SPY, doing the minimum it should do and touching the daily SMA 50.

Should a year-end rally manifest, and should it be anti-USD in flavor, I’ll also look to add back some global stock positions. I have used BABA and ASML previously. Currently hold a spec in SE.

Discussion of Positions, Including Commodity/Resources Stocks

I had noted that #888 would be abbreviated due to travel. Well, it’s not so abbreviated. How often have I threatened to give you such a break and then hit you with a lot of information nonetheless? Often, I think. But here we’ll make good effort to wrap ‘er up.

I saw MP, LYSDY and IDR way down with the words of Scott Bessent still in mind. There is no way a handshake with China to temporarily roll back Rare Earth restrictions is going to stop the U.S. from seeking mineral/energy independence. And even if the handshake works out for a while, there is not way this administration is going to believe promises as such from China. In other words, U.S. efforts to self-sustain in the critical minerals area should continue apace. The three stocks noted above dive bombed on hype. I added a second position in one and bought back the other two.

I also have an eye on increasing the likes of precious/industrial/critical mineral explorers MMG.V, PGE.V, TLO.TO and AE.V, and adding back BTT.V (hard to buy due to low volume) and DBG.V when I feel that the TSX-V may be bottoming.

Watching the PGMs (SPPP, PALL, PPLT), Uranium (CCJ added for its chart per Friday’s in-day notes) usual suspects, UUUU (u3o8 & REE play), NXE, UEC, etc.

Favored gold stocks were held, which is why I hedge them. Other stocks I shoot first and ask questions later. But gold stocks are in a favorable macro, as core holds NGD and EQX showed at earnings. BTG, had issues, but I’m holding it as core as well.

Aside from what is shown in the portfolio below, I have DC on watch for a possible tap of its SMA 200 (3.60). Same for WDOFF (WDO.TO) at 12.82, AGI at 27.41. SKE, AYA.V, etc. are also on watch.

In the broader market, the healthcare items I recently rotated into are still held. Medical Device: STE was added to existing MDT (increased on its recent decline), held its SMA 200 and zoomed upward after earnings. Just like I planned it. :-)

BioPharma stuff (GILD, BIIB, REGN) is also held.

A note here that per the XLV/SPY chart above, a would-be internal rotation toward healthcare is still “would-be” at this time.

Which brings me to the sexy stuff. I took the final profits on the long-held ALAB positions. However, since I lean that there could be one more big greed fest into year-end for the U.S. stock market, a stock like this is prime on my watch list as it declines.

Others are RDDT, MRVL, ANET, NET and other past performers are on watch for party season, if they drop enough in the interim. Such things would be added to still-held AAPL and ZS.

Finally, I am still holding energy stocks CVX and XOM as long as the sector continues to look constructive. If XLE breaks out in a move above the 94-95 zone, I’d add more positions, assuming year-end party season or at least a functional bull market.

Portfolio

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

Taxable Account

In order of position size.

The taxable account carries high cash levels as long as cash and equivalents are paying out. This is considered a savings account of sorts, rather than a speculation or even investment vehicle. The goal is to speculate around the periphery. In another market phase (e.g. post-crash), the account may get much more in the game.

Trading Account

No positions.

Roth IRA (non-taxable, no contributions)

The chart looks like it is in bullish consolidation. We shall see about that. It is waiting for the year-end party scenario. One more leg up from this normal consolidation. I had previously stated I had no desire to see it meet its trend line, but as the weeks go buy the trend line is rising toward the consolidation area. I’m taking it week-to-week to see if this will be a platform for one more expression of greed in 2025.

For now cash/equiv is a hefty 82%. If things go the year-end party way, that will be reduced, and if the precious metals join the fun for a trade, so much the better. The hedge would be dropped and positions added there too.

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 In-Week Notes under the NFTRH Premium menu at nftrh.com for market talk and occasional trading info, if interested. 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.