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Summary

US Stock Market: We should know this week if the short-term breakdown in NDX was real or a head fake. SPX target is and has been 7400, but a correction could resume first. Intermediate-term bullish, long-term bearish in real terms (ref. SPX/Gold ratio below).

Global (ex-US) Stock Markets: On balance, world stocks have been rising in terms of US (SPX). Taking out the April high on the ACWX/SPY chart below will give that out-performance a real boost.

Precious Metals: Anticipating a strong rebound, but short-term correction not yet indicated to be over. Miner earnings upcoming and should be quite positive. Longer-term, we should be open to a deeper correction after a would-be strong rebound rally plays out.

Commodities: Silver/Gold ratio and TSX-V/TSX ratios have made hard pullbacks. When they bottom we can look for big bounce backs across the commodity spectrum. Especially in the strategic/critical metals areas.

Bond Market: Personally favor short-term Treasury only, with some short-term “inflation protected” in there as well. As an indicator, the bond market rebelled in 2022, breaking a decades-old continuum of declining long-term yields. That makes this a “new macro” and in this new macro gold and critical commodities and resources are valued much more than paper.

Inflation/Disinflation/Deflation: Bonds may be setting up to rally. A sharp rally could signal a liquidity/deflation scare while a mild one, Goldilocks. The big picture is inflationary per the Continuum’s 2022 rebellion and bond bear market. But in the interim our plan favors one or both of these two anti-inflationary options.

Bull or Bear?

The week ended with the bears snatching defeat from the jaws of victory. This happened in the broad markets and in the precious metals. But the battle is not over. Which is why I retained my hedges until this week.

After doing some selling earlier in the week for risk management, against those hedges I added/increased a few favored precious metals stocks (AEM, VOXR, DVS , AYASF, CDE & B) a couple Tech stocks (ZM, MSFT, PATH, ZS) and Medical Device stocks (BSX as it got shot out of the air like a clay pigeon and increased STE as it also did a belly flop on earnings).

I found myself losing some conviction on continued bear moves in the precious metals because as we’ve been noting, earnings are at hand and as we’ve also been noting, they are likely to be very good. The breakdown and snap back in Tech could not shake me out of my short because it looked like a typical “screw the shorts” move on Friday.

Sure, there was a breakdown, and QQQ closed below key resistance. But I’ve highlighted the breakdown and the previous false breakout to make the point that if this proves a false breakdown and takes out resistance while other markets flash bullish, I’ll likely get rid of the shorts because this could be a book-end false breakdown to the false breakout that came before.

Let’s look at some of those other markets. SPX ran the shorts on Friday because of course it did! There remains a distinct negative divergence by RSI. It shows two things, a non-overbought situation that could be a platform for a drive to 7400, or a guide to perhaps correct and test the rising 200 day average (orange).

So we can project an eventual run to 7400 on SPX, but we can also project a terrible bear market that is already happening. It’s just that it is happening in terms of honest money, gold. In other words, in “real” terms.

If SPX makes a new high like daddy Dow did I will not fight the market. I’ll go with it.

Meanwhile, the SOX index, the leader, declined to short-term support and the 50 day average and bounced hard. Volume on the ETF, SMH was strong enough to indicate this could be all there is to the pullback. So if Semi continues leading, it would quite un-bearish.

Here is that leadership fully intact. The interesting thing is NDX/SPX, which is hinting to fail. However, much of this is due to the software industry and the monstrous hype making the rounds about AI taking over critical functions typically provided by these Cloud, SaaS and even Security companies. I think it’s a load of hype, but longer-term market signals will ultimately tell that story.

So, the leadership chain’s middle link is failing… with an asterisk. I think it’s a buying opportunity in Tech. It’s just that I’d like that opportunity to come lower.

More Market Internals (ref. Live Indicator Charts)

The decline in Consumer Discretionary vs. Staples has been a negative indicator. It is breaking down to the degree that a correction, not a bear market, would be indicated. This is an indication that the broader correction could resume.

Similar message from Growth/Value. I think the software/AI hype is driving much of this. I also think that this ratio may be indicating that the majority of its decline is in the books and it could start rising again from a higher low.

Then there is XLV/SPY, still dwelling without giving a signal that it will break upward from the base. That means a defensive market signal is not in play yet.

Finally, the World (ex-US) continues to motor toward the April, 2025 high. A breakthrough there would imply a confirmed relative rotation out of US stocks toward a more global view.

Precious Metals/Commodity Related Internals

Gold/SPX retains its uptrend even after gold got hammered. I expect this ratio to move much higher in the coming years. Gold kicks down the door, and silver and important commodities then come through.

Here again is Gold/Oil, showing that Q4 was a stellar for the gold mining industry from the perspective its product in relation to one of its major cost inputs.

GDX/Gold (HUI/Gold) retains an uptrend as long as the early November low is not breached. An intact positive gold sector internal.

Gold/Copper continues to indicate a macro not so healthy by normal cyclical standards.

TSX-V/TSX ratio should put in a higher low to match the previous higher high to keep this tailwind indication for the wider commodity, resources and precious metals intact.

Finally, the most important internal indicator (IMO), the Gold/Silver ratio is making a ‘V’ bounce. If we’re going to get a continued short-term pullback in the precious metals and commodities, this would keep rising. The 8 area is very important because a halt there could resume the macro party. A breakthrough there and things dey be gettin’ real.

Market Sentiment

Individual investors are slowly creeping to the Bull/Bear ratio’s red line. Above there is where the trouble started prior to April’s hard market correction. This chart shows that SPX has fuel to reach the target of 7400, whether or not a correction intervenes first.

NAAIM has been fading lately. This is either the beginning of a long decline in sentiment due to a coming market correction, or as per the above, adding a positive contrarian element for a run to SPX 7400.

Market breadth has recovered and is stable. A neutral reading currently.

Put/Call ratio shows a spike in fear, defensive behavior (much like that of your letter writer). But this is a contrary indicator in favor of the bulls. Of course, if the correction did not end on Friday, there would be more upside here, which would be well in line with our theme of a broad buying opportunity upcoming.

VIX retains its bear signal as illustrated in an NFTRH+ update last week. A low VIX shows complacency, but when it starts rising along with a rising or buoyant stock market it strongly favors a negative divergence to the market. The issue being timing. That is why I really took note of the market’s weakness last week and NDX’s breakdown.

Sentiment Bottom Line

It did not become over-bullish to the point that would normally bring on a bear market. But sentiment could go well with a correction, and a further buying opportunity in multi-markets.

Precious Metals & Commodities

If the Gold/Silver ratio above is done spiking, we are likely done with the correction. But there are still a few days before the full slate of gold miner earnings start to hit. Logically, I would think that any further corrective activity would have a short window to do its damage and create more buying opportunities (than those already created).

After that, I think the combo of sometimes terrifying downside action (sentiment shakeout) in the precious metals and what I think will be solid earnings could spring the interim rally we’ve been anticipating.

That is, if said rally is not already here. As noted above, I started plucking some favored items in anticipation of a relief rally after silver’s epic crash and the sector’s much needed correction.

Friday’s volume was not compelling on GDX. If earnings were not right around the corner I would not even be thinking of buying heavily based on this chart. I’d be greedily waiting for the 82 area. Longer-term, after an interim rally, the 73 area.

I am multi-Fibbing you again, but this time the alternate Fibonacci retracement grid (orange) is taken from the very beginning of the long-term rally back at the December 2024 low of 33.18.

A 38% Fib of that major rally would coincide with a 50% Fib (blue) of the most intense rally legs (which came not coincidentally after silver took up leadership). This coincidence is in the 82-83 area. So I still hold out consideration that the 82s could get dinged in the very short-term.

Longer-term, after a relief rally we might be looking at 50% (orange) and 62% (blue) in the 73-75 range.

Gold has had a lovely correction thus far, even stabbing the 50 day moving average and its resident support shelf. Stronger support is at 4250-4350, if the correction is not done yet. Longer-term, I would keep an eye on the 200 day moving average at 3812 and rising. If we are right to anticipate an interim rally and failure, whenever gold might test the SMA 200 it would be well higher. Probably a good bit above 4000.

Had I been able to trade during the hours silver dinged 64.10 I’d have bought a bunch of PSLV. That spot is the 62% Fib retrace level of the entire rally from the April low.

But by the time I got at it the price had hammered up to the 50 day average and associated resistance. So no, not yet. I did add/increase a couple silver mining positions against the general hedge still held (JDST).

If silver puts on a volatile grind this week that level is a buy for a trade, potentially a strong one. Ultimately, silver may test its uptrending SMA 200 (49.50 and rising) and the support levels in the low 50s.

Commodities

The rotation has shifted to Energy stocks, as anticipated. I sold XLE in a bout of profit-taking in one account, but still hold it in the other.

Energy sat out much of the 2025 festivities, and now it’s having its day.

Although WTI Crude oil is merely bouncing within its downtrend. Ref. January 13 NFTRH+ update on oil, which showed it set up from seasonality and sentiment perspectives. Perhaps the Energy sector is looking ahead?

Natural Gas made a hard move off the lows, breaking out of a base…

…and per its seasonal average, bottoms around now for a run into June. It’s an average, not a directive. It can fail to play out in any given year.

As for the broad sector, GNX broke out momentarily and then recoiled back into is base. This is a bullish chart, however, that seems to be waiting for the real breakout.

I am still partial to the strategic/critical stuff, however. I have Uranium (SRUUF was added back last week) stocks like CCJ, UEC, NXE and UUUU on watch. REE stocks like MP (I finally took profits on remaining shares), LYSDY, IDR and ARAAF (ARA.TO), PGMs (SPPP) and copper (FXI, SCCO, COPX) on close watch.

I still hold multi-metal explorers MMNGF (MMG.V) and PGEZF (PGE.V) and Nickel driller TLODF (TLO.TO) and Cu/Au explorer AMEGF (AE.V).

The question I have not answered is “more short-term correction or not?” and if I had a strong opinion, I’d give it. But I am balanced in my holdings for right now in commodities, precious metals and broader stocks. So that is proof I don’t have a strong view in the very short-term.

I’m going to see how next week comes out of the gate. Then lean in to one view or the other.

US Dollar, BTC & Global Currencies

Does anyone really care about paper currencies anymore? The US currency is only not worthless because the government says so. Here is what it is worth… $38 Trillion in debt that is not being addressed, but instead added to, divided among the good citizens of the US of A. My global friends, you have your own versions of the same dynamic in many cases.

USD is little more than a market indicator to me. And what little more that it is serves as a tool. As long as people and business accept it as a medium of exchange, that is its main function along with being a place to hide if/when markets are ever allowed to experience actual liquidity crises.

USD sneaked above a resistance level and tested it during Friday’s market relief fest. Logical. Thus far it holds that resistance, trying to turn it to support. However, as usual, the real battle will be at the converged and downtrending 50 and 200 day averages. If USD and the Gold/Silver ratio move together we’ll have market conviction (up if they move down, down if they move up).

I got compelled to get rid of the Bitcoin dividend payer I was holding as I managed risk. After that it tanked badly but put on a partial reversal per the weekly candle. Making a lower low to the red arrow was bearish. However, these are the markets and operators control many of them. This may have been a hard shakeout of by the Crypto-goons of the Crypto sheeple. The rim of the previous Cup is hard support. I think it could be a buy for a spec.

Here is a group chart (daily) of the debt paper brigade.

USD is trending down. Euro is biased bullish. Canada dollar is bullish, Yen bearish (after a policy/jawbone instigated bounce) and Aussie is bullish. Interesting that the two commodity currencies (CAD & AUD) are still bullish.

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Portfolios

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

Taxable “Savings” Account

Less buttoned down this week as a few items were increased and a few added, while shorts are held to guard that buying in the short-term. 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-correction/bear/crash), the account may get more in the game.

Roth IRA (non-taxable, no contributions)

The chart is pretty cut and dry. Hold here and then start a new rise. For now, I am balanced as best as possible trying to hold that support. I’d like to drop the balance and lean into a bull view (favored) or bear one (not yet favored).

Cash is 34%, short-term Treasury is 39% and equity (including shorts) is 27%. I believe before long I will be releasing the shorts and raising equity long percentage markedly.

Cash & income-generating Treasury bonds are at levels that are right for me and my real-world situation. Your situation is different. Cash will be adjusted as needed.

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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.