Current Situation
Last week we had 7 NFTRH+ updates, ranging from degrading U.S. market internals to the status and implications of the Silver/Gold and TSX-V/TSX ratios. You can review them here:
Silver/Gold and TSX-V/TSX are indications of tailwinds for many markets – especially commodity/resources/precious metals – when rising, and the opposite when declining.
While the Silver/Gold ratio (SGR) held its 50 day moving average and hammered (bounced) from there on Friday, the double-top scenario is still in play. It has qualified for a minor pullback to end the correction. But the preferred outcome is a deeper decline before planning for a would-be year-end party across many markets.
TSX-V/TSX has pulled back hard to an area that could halt the decline. But there is further to go if it is going to ding the preferred 200 day moving average area. As noted in an update, TSX-V/TSX could well bottom before the SGR, as it bottomed and turned up in January while the SGR did not do so until April. So we will keep an eye on TSX-V/TSX as an early “indicator to the indicator”. Eh?
Check out how the favored support level also coincides with a 62% Fibonacci retrace level and puts a hard test on the (orange) daily SMA 200 to boot.
The ratio is getting close to an area that would signal…
…if there is to be a party this season. If so, we’d then watch for the Silver/Gold ratio to follow. However, if past is prologue, there could be a significant lag between the two.
As for the U.S. stock market’s internals, we covered those in depth in last week’s updates as well. The stock market got the benefit of some egghead opening his yap to end the week positive…
…but that stuff usually has efficacy for a day or two.
However, the view is that while the internals are eroding (and the VIX is diverging) this could be the sentiment trigger being cocked to spring a year-end rally. Or to use the slingshot metaphor, the harder it is drawn back, the higher the projectile will fly.
However, let’s also realize that it’s an over-valued pig, supported by passive inflows, thinning out to the mega cap stocks everybody knows. In other words, at some point a real bear market is going to ensue and put the pain to a hell of a lot of people, and the advisers robotically shoving them into “the market”.
Bottom Line
Watching for TSX-V/TSX to bottom first, signaling a coming low in Silver/Gold, signaling a year-end rally benefiting the anti-USD trades in commodities, resources, precious metals and many global markets and U.S. sectors.
Watching to see if currently degrading U.S. market internals are the tension in the slingshot of a coming rally or the bear market signalers they will turn out to be if things do not start to swing risk-on soon.
The year-end rally scenario is still favored. But it is expected to spring from lower levels, and there is an alternative (a bear market), and it should be respected until such time as the party may begin.
Getting to the TA of It – Precious Metals
A review of nominal daily charts. As you will see, the potential for downside across markets is appreciable.
Da ‘V’ has done good work so far. We are looking for a gap fill at 829 and a test of the 811 area, which has lateral support. Beyond that, a test of the rising SMA 200 is also quite possible.
Gold appears to be in an A-B-C bull market correction. If so, we could project ‘C’ to the 62% Fib retrace (of the most recent rally) level at 3700, or in an extreme, to a test of the uptrending SMA 200 and clear “table top” (in Hammer-speak) support, and a gap fill.
I don’t know what on earth could drive gold that low in the near-term, but mentally prepared is a good way to be. As a side note, “drive gold that low”?? 3400? Are you kidding me? Where the actual metal (an instrument of monetary value) is concerned, that is only a problem for the public FOMOs who lined up at bullion shops for fear of missing out on the big “trade”.
There are a couple correction options in play:
- We get a fairly quick seasonal ‘C’ down prior to a hard rally or even bull market continuation, or
- An extended grind up and down, lasting several months eventually sees gold meet its rising 200 day moving average.
Either way, it appears that 3400 is the low end of our scope. Not bad, I say. If the correction drags on for months and the SMA 200 rises to 3700 or so, the correction will have made a 62% Fib, avoiding a test of strong support at 3400. Either way, viewing the picture short-term or longer-term, gold is in correction right now.
Silver has double topped, as we’ve noted. In testing and holding short-term support at the rising SMA 50, I want to say that “silver had better hold here or it’s gonna get real ugly” (and not just for silver). If gold looks that vulnerable short-term, and silver looks worse, as the guy in the Bad Chicken (Seinfeld) episode said, “that’s not gonna be good for anybody” in the short run.
A 62% Fib of the entire rally from the April low would fill a gap and test clear lateral support in the 38-39 area. It was not too long ago that silver bugs would have cheered for 38. Now it is an extreme, yet normal, downside potential if the the current pullback resumes, or a longer-term correction grinds on.
As with gold, we are looking at two different time potentials. A hard crash to test the SMA 200 now would be more bullish sooner. But the alternative is that silver could grind out (up and down) a multi-month correction before one day dinging the 200 day average, which is currently at the 62% Fib, but down the road could rise to higher Fib levels (41 or 44).
I often learn as I am producing analysis. Like now. With the distractions of my medical treatments over the last 8 weeks I have not been as focused on a daily basis as I’d like. While we have been tracking a short-term bearish scenario (already playing out), I have not focused too heavily on downside objectives for the metals and miners in combination with the time frame options for such declines.
Gold stocks, they of the massive rally to and significantly through the target (HUI 500 +/-) we operated to for years, are in a much needed correction. ‘5’ up has been completed with a very overbought monthly RSI, similar to the 2003 top that preceded the 2004-2005 highly volatile (and trade-able) correction that ultimately went sideways prior to a resumption of the bull (and its bubble phase, rising amid degrading fundamentals). That is an analog for the “multi-month grind” correction scenario.
“Trade-able”… that means both ways. Is a trade-able downside move in progress for GDX (below) and the gold stock sector? Quite possibly. We – with the able assistance of Hammer – have been looking as low as the “table top” in the low/mid 50s.
“Looking as low as” does not mean predicting. That’s an important distinction. It is entirely possible that GDX rallies sooner but as with gold and silver, could then extend a multi-month correction to eventually ding the low/mid 50s. As with gold and silver, we also consider the possibility of a faster A-B-C bull market correction (not marked on the chart) in progress now, with ‘B’ put in on 11/12 at the 79.97 high. In that case, ‘C’ down would be in progress now.
I bumped up my short position (JDST) last week and may do so again. I may also take more profits on long positions, although I am quite hesitant to remove items like AEM, NGD, EQX, etc. (I did unload BTG after reading some crap about Al qaeda involvement in Mali). If you know me, you know I have little tolerance for global political risk, real or potential. BTG is back on watch with no sense of urgency.
This daily chart shows a near 50% retrace of the rally leg from August already in the books. But with the price dwelling below the 50 day average (blue), and in conjunction with the silver downside possibilities noted above, the “table top” support in the mid/low 50s, a 62% retrace of the entire 2025 rally and the rising SMA 200 (orange) could be a magnet if things get off the hook, short-term.
If a brighter short-term scenario unfolds, GDX is at short-term support now and could make a test of the high. That could come within the longer corrective view. A gut wrenching near-term drop to the low/mid 50s would be more bullish sooner.
Bottom Line, Precious Metals
Gold is in a bull market in the new macro. That does not mean it will not take a hard correction of the 2025 hype and excess after these people got involved >>>
I don’t know about anyone else, but as a long-term holder I can do gold 3400 standing on my head. It is monetary value.
Silver is a technical concern. I am a TA and the TA says that it’s got potential downside, after its double top, to 38-39. In that potential, it would lead gold going the other way, as it did to the upside since April. It’s all part of the plan.
Whenever the Silver/Gold ratio bottoms for real, it would be a primary indicator for the next inflation trade in precious metals, commodities and certain markets.
Gold stocks led the whole party in gold, silver and stocks. We are watching GDX mid/low 50s as a potentially epic buying opportunity.
All of the above is subject to timing. Hard declines sooner rather than later, to ultimate downside objectives, would be more bullish sooner. Otherwise, there is the potential to bounce/rally if the markets get the seasonal bid. But that would more likely come within the context of an extended correction.
Stock Markets
And so we have our over-bloated pig for which we hold open the prospect of a year-end rally. If the 2025 leaders (gold stocks, silver and gold, in that order) do bearish, what of our thinning, internally challenged (ref. last week’s NFTRH+ updates) stock market?
I think it was notable that the market tried to do the usual greedy celebration of Nvidia’s results before immediately reversing (and shaking me out of my SPXS position, which I’ve re-taken along with Tech short, TECS).
Support in the 6450 (+/-) area should be telling about the market’s near-term prospects. However, drawing a Fib grid of the entire rally from the April low, a mere 38% retrace of that rally would bring SPX down to the pattern top in the 6100 area, piercing/testing the SMA 200 (6162) in the process.
Let’s also apply a Fib grid to USD, going in the other direction. A mere 38% upside retrace would bring USD to 101.50 and a test of resistance. USD is “anti” so many asset markets. I would think that if some of the worst projections above were to play out, we could see Uncle Buck at the 50% Fib retrace level around 103.
USD is of course important to the future of global stocks as well. The ACWX (Global, ex-US)/SPY (SPX) ratio has not surprisingly eased again as USD has firmed.
The message is that if the U.S. buckles under a strong USD, the balance of the world will do so as well, at least as badly, if not worse. ACWX bounced and failed at the SMA 50 and cracked support, now resistance. On Friday it bounced but remains below resistance.
ACWX 200 day average is 60, and 61 looks doable. Its pattern top is 56, and if SPX tests its pattern top, expect the world to tests its pattern top.
Bottom Line, Stock Markets
Watch the Silver/Gold ratio, which is a trigger to the precious metals and commodities (up or down) and by extension, watch the precious metals with respect to the worst potentials noted above. If the PMs lead the situation to the downside, it’s a good bet stocks will follow.
This is given weight by the market’s internals, with Staples bouncing vs. Discretionary, Value bouncing vs. Growth and Healthcare rallying hard vs. SPY/SPX.
Commodities
Let’s go back to the ETF to view yet another failure to take out the pattern. DBC could easily continue to pull back to the now-uptrending SMA 200 at 22.07. But if the more extreme projections in markets above were to play out, you would think DBC would lose its post-April uptrend and at least test support in the 21-21.50 area.
Why might the commodity ETF/indexes not drop as badly as stocks? Crude Oil is a significant driver and it has been trending down all through the upside in precious metals and stocks.
But in consideration of the historical analog that sees crude oil following gold by around 2 years, we can consider the commodity complex to be somewhat of a wildcard in the near-term. Perhaps it does not need to drop as far as other markets because it has gone nowhere to this point.
We should also watch the Gold/CRB ratio in 2026 for a potential trend change because the expectation is that a new inflation trade will manifest after whatever liquidity crisis (and Fed/Government response) may be ahead.
As you can see by the CRB/Gold ratio, there is no such trend change in progress as yet.
Bottom Line, Commodities
Commodities as a whole, dragged by Energy commodities (NatGas has also lagged), have not participated in the broad rallies that were led by the precious metals complex. The exception has been specialty, strategic and/or critical minerals (REE, PGMs, u3o8, Cu, etc.).
In 2026, after the next Fed/Government inflationary panic, our next big long trade could be in the commodity complex as a whole as CRB/Oil have gone nowhere and critical minerals have corrected hard, eliminating much of the excess.
Taxable Account
In order of position size. Amid large cash & equivalent positions are a few precious metals miners/royalties I did not want to sell. They are overseen by bear ETF, JDST. Also, short the Euro, which is a way of being bullish USD. Stock market positions have been rotated to favor Healthcare and shorts on SPX and NDX have been added as well.
Waiting for a low and ‘correction over’ signals (favored) or a continuation to a bear market. Positions will be adjusted accordingly.
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
Short NVDA and COPX with my usual limited patience outright shorting stocks.
Roth IRA (non-taxable, no contributions)
The chart has ambled to the uptrend line. You may know that I don’t over-prioritize trend lines in TA, but I don’t want to see this one broken. Time now to hold, or depending on how well short hedges work, adjust further until we get a clear idea of what is in play for year-end.
Cash and equivalents are at 79%, but that includes hyper-cash EUO and shorts against gold stocks and Tech stocks. As per above, the Healthcare rotation is still in play and I find myself catching the Bitcoin falling knife (BITO), which will only be held insofar as it maintains a higher low to the April low (and it’s getting close).
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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