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Diversity Working Thus Far

My portfolios are constructed, theoretically, for whatever the heck is going to happen in the near-term. Gold stocks, Semi, Tech, a couple broader stocks, and commodity related stocks, including and especially the critical minerals stuff. Not to mention mineral exploration, which in my opinion has a big future.

Let’s also not forget short-term Treasury (incl. inflation protected) and bear positioning in a balanced and diverse group. I took the profit in volatility (UVXY) on Friday, but still hold (3x) SPX short SPXS and (2x) Gold Miners short DUST. Oh and this intrinsically worthless garbage called cash, which is still paying some interest and acts as a natural risk manager.

Afterthought: I also added Bitcoin dividend payer BTCI on its sharp pullback on Friday. Now that’s diversity. Especially since I am no Bitcoin bull, let alone believer in it beyond a speculation.

But some cracks in the diversification play are forming. See report below.

Observations

• Software stocks that stand to benefit or at least not be impaired by AI are rebounding as anticipated, while much of the broader markets correct.
• No sooner had I mentioned the Materials sector was bulling (and added CBT as a potential trend changer) then the sector topped and dropped. So did Industrials. So did Financials. These are cyclical sectors that traditionally do better when the economy is firm and interest rates are also firm or rising.
• The implication is that rising yields – according to the media, the result of inflation fears due to spiking oil prices (that’s bullshit) – will eventually top and again reverse downward.
• With Tech relatively firm over the last couple weeks in relation to the Dow and SPX, a similar message could be in play: interim disinflationary macro to resume.
• With the potential for disinflation to temporarily slide toward a deflation scare and larger market correction.
• The bullet point above would theoretically be the TRIGGER for coming inflationary/dovish/stimulative policy.
• In the current moment, it is notable that despite the growing angst due to war, the broad Healthcare sector is not out-performing. At least not yet. Indeed, Medical Devices have gotten hammered and Biotech is hinting to roll over (along with many other sectors).

• The implication is that the correction is broadening to more sectors, but no definitive risk-off sign yet. Even as Software gets what may be a temporary reprieve. Maybe that bounce will be a last man standing?
• Even the Defense & Aerospace industry has pulled back since the war started (still firmly in an uptrend).
• Junk bonds are under pressure vs. Investment Grade bonds, which is a sign that speculation is waning and risk-off sentiment is increasing.

• I think an open mind with respect to what is in play is in order. Hence, the regimen of balance and diversity until the short-term picture clears. However, if too many of the “diverse” items held start to crack, it’s hello stronger correction or cyclical bear market.
• I’ll continue to view the war as a negative to the bear case because it is so obvious that everyone sees it and reacts to it. However, if we go back to the COVID era, the 2022 correction era, or even the 2025 tariff-induced mini crash, we see that if the bear gets a bit in its mouth, the herds will sell hard despite any contrarian angle we may see.
• In other words, “patience” is THE word. As usual. Other words are “balance” and “perspective”.
• SPX is on the verge of cracking. If it does crack, play the downside as you may. I probably will. I am going to stick with the view that the buy side will be an even bigger opportunity when this damn administration gerrymanders the macro through monetary and fiscal means.

Live charts are always available for your reference.

Final thought: The MSM is on the job behind a pay wall, asking subscribers to actually pay for the answer to the great mystery behind this headline. The public rarely if ever gets an accurate or timely cue from the MSM. It gets its eyeballs harvested. We need to never worry. We need to capitalize. For that, we need to follow market signals.

US Stock Market

The VIX divergence did indeed precede a market correction (such as it is thus far). SPX is barely rolling over, yet the VIX has spiked hard. This factored into my decision to sell UVXY. *

VIX spiked and yet SPX is rotating its way to a thus far lame roll-over. VIX will probably have to do something like it did a year ago to break this pig down. I was not willing to take that gamble with a profit already in hand on volatility.

* Understand that I am the guy who usually sells the VIX too soon, sells my puts on silver [a tad] too soon, etc. If SPX cracks we could see a spike such as the one from a year ago.

SPX is Cyclical, Tech, Healthcare, Energy, Semi, Industrial, Financial, etc. You get the picture. When the market is rotating, SPX is rotating. It is certainly possible that it is rotating in preparation for a pervasive decline in most sectors.

What I don’t like about pushing all my chips into that view is that the US has gone way off of its anti-NeoCon message of “America first”, with literal TV show characters running things.

That is an editorial comment, which I try to keep to a minimum. But the damn war drums are not helping reasonable analysis. For example, the public being treated to stupid headlines (and I assume, reacting to them).

Of note, CNBC has since changed the headline of this article to “10-year Treasury yield lower after weak jobs report, but decline in check as oil continues surge”. It’s pretty dastardly that they can just pump out a clickbait headline and, you know, just change it later. They wrote “inflation fear from higher oil” and they should have to eat that statement.

Anyway, Trump and his made for TV cast are bringing death and destruction to the Middle East * and the Straight of Hormuz is a major flashpoint. Oil prices are spiking. Period. It is not inflation. It is driven by a man’s decision to, in my opinion, Wag The Dog to turn attention away from certain matters here at home after being guided in that direction by another man who’s been beating this war drum for decades.

In my opinion, it is best to tune out market analysts posing as amateur war correspondents ** and factoring these events into macro analysis. It is, in my opinion, very important to watch and adapt to market signals while understanding that the headlines of the moment tend to be flashpoints rather than longer-term fundamentals.

* It remains to be seen how liberated the Iranian people will feel when it’s all said and done.

** I realize I have assumed that pose in some remarks above. Please feel free to ignore.

Macro View

The view is and has been interim disinflation. Ironically, spiking oil prices and elevating interest rates can work to that end. Inflation rates have been easing since 2022. Americans will pay more for gas and whatever costs from Tariffs flow into the economy. If interest rates continue to rise, that would be a knock-on cost. However, I think the bump in yields is temporary.

The question remains, will disinflation morph to a deflation scare before the next inflation problem really takes hold?

As yields decline to varying degrees (1-10 year) or moderate (30yr) the 10yr-2yr yield curve in the bottom panel has also moderated.

Dialing in closer, the Yield Curve steepening that had been driven by mild disinflation (and downtrending nominal yields) has flattened out again. This is actually the area that gentle disinflation lives. There is no deflationary nor inflationary steepening happening.

However, the 2yr yield has gone up-periscope (orange arrow) to look around above its downtrend line. It’s not a big deal as yet, but we should keep an eye on anything and everything that is viable.

Since the big picture view is inflationary, we’ll keep an eye on the nominal yields and watch the curve as usual for signs of disinflation (current), inflation (steepening with rising nominal yields), deflation (steepening with declining nominal yields) or our old friend Goldilocks (flattening, likely with moderate or declining yields).

As yet, we are disinflating. Goldilocks would make the scene if the curve breaks down, and deflation or its evil twin inflation would erupt if the curve steepens. Again, with the decider being the direction of nominal yields.

My guess is that the wagging dog of war may trigger a COVID-like deflationary scare, in answer to which our panicking heroes in government will unleash holy hell. Inflationary hell.

After that pleasant thought, let’s move on.

Market Sentiment

The amalgamated CNN Fear/Greed index is fearful. Within the index, we know that the VIX is spiking. Put/Call ratios have also started to ramp and Junk bond demand has cracked. Market breadth and the McClellan Summation index have also turned down after having remained buoyant.

Legs are getting kicked out from under the market’s table. Speaking personally, I don’t want to let the solid up day on Friday (during which certain stocks I hold did very well) give a false sense of bullishness. Indeed, after selling volatility, I increased my SPXS (SPX short) position.

Ma & Pa (AAII) are about Even Steven where bulls and bears are concerned. However, the market correction started a couple weeks after they registered a 1 year high in bullish sentiment in January, 2026. That was not a massive extreme, but it was enough to launch a correction. This can be viewed as a bearish alignment because AAII are nowhere near the 62% bears of April, 2025.

A similar story with investment managers. NAAIM has turned down, but not anywhere near to the degree that we could call “contrarian opportunity”.

Sentiment bottom Line

Sentiment is sliding bearish, but nowhere near to the degree where you could call an end to the correction. Reference here last April when things got so extreme to the bearish side we just had to get bullish, based on little else other than the unsustainable sentiment profile.

Market sentiment is currently an ally of the bears, not the bulls.

Precious Metals

The Gold/Silver ratio bottomed and bounced. That, if accompanied by a bounce in the USD, was expected to bring a sector correction. It has done that.

However, importantly, if the precious metals are weak, the stock market is weaker. Gold is still quite elevated vs. SPX despite the fact that SPX has not even rolled over yet. This after gold got whacked after a super strong 2025.

It’s quite a negative picture for the stock market, regardless of what happens to the precious metals, nominally.

And in that regard, the nominal correction resumed last week after the miners (but not the metals) made higher highs. Reference Thursday’s entry in last week’s notes.

A double top with notable RSI negative divergence is indicated. If GDX wants to really mess with the correction view (again), something could erupt (we are at war, after all) to drive it up to fill last week’s big gap down. Personally, I’d rather just get the downside over with.

The view is for a lower low to the previous low (92.28) at minor support. 84 looks like a good objective. As does the 200 day moving average, currently 73.82 and rising nicely. The SMA 200 could conceivably meet the 50% pullback zone (84-ish) of the grey Fib grid, and/or the 38% (85) zone of the orange grid. If a flash crash were to happen, well, the SMA 200 is already nearing the orange grid’s 50% pullback level.

Bottom line: let’s keep an eye out for 84.

But in a final note, I want to make a point that several individual miners look buyable, currently. Especially smaller ones that don’t necessarily follow the indexes/ETFs. Personally, I want to manage on a case by case basis. All the while keeping the likes of DUST, JDST and/or puts on the table for protection.

Also, there is a war going on. A geopolitically charged one, globally. The Oil/Gold ratio is spiking and if that continues it would impair gold mining fundamentals for the upcoming Q1 reporting season this spring. But on the bigger picture, the spike could end at any time as the Oil/Gold ratio remains in a long-term downtrend. If Q1 reporting is impaired it will likely be temporary and a buying opportunity in the miners.

Internally, we want to see the GDX/Gold and HUI/Gold ratios maintain this posture at a higher low. A breakdown in the ratios would signal a more extended correction, as was originally expected.

I’ve included the GDX/COPX ratio to boot. As with Gold/SPX above, this shows the cyclical world weakening as counter-cyclical gold miners have risen vs. cyclical copper miners in the current environment.

Gold hung tough at clear short-term support. It’s not broken down until it’s broken down. Eh? It has already tested its 50 day average (blue) once, after all. Overbought has been reset on the daily chart, but the weekly and monthly are still very overbought. FYI.

Silver continues to be a wild card. It broke upward from the black dotted Symmetrical Triangle we noted previously, rallied hard, dropped hard and well, it’s silver doing silver things. As with the gold miners and gold, I don’t want to set a bearish view in stone here. The crash and 62% retrace of the entire rally from the April, 2025 low of 28.34 was epic. It was also fuel.

Thus far, it was fuel for the current volatile rebound. It is conceivable that it could be fuel for a new bull market leg. Old Turkey: “It’s a bull market, you know”. Even if it is forming a bear flag (black rising wedge) a ram job to the top of the wedge would not be comfortable for bears.

Precious Metals Bottom Line

It’s a bull market, you know.

However, while the sector’s internals and macro fundamentals are intact (except for the spiking Oil/Gold ratio), a stellar 2025 bull run has earned a correction. This could turn out to be short and violent, as has already happened to silver. Or more extended, grinding up bulls and bears alike.

Personally, my plan is to hold favored items but also eyeball those that got away, like AGI and SKE, among others. I’ll do this with hedging protection as long as that is viable, and assuming the “more extended” correction view, so as to be prepared.

On March 3rd we had an NFTRH+ update briefly outlining the case for exploration and royalty stocks. Neither of these materially need energy to conduct their businesses. It’s theoretical because if the bugs get the selling bit in their mouths again, they may not discriminate between energy consuming miners and these items as they puke the bit.

Regardless, I am still holding both exploration and royalty for that and other reasons.

TSX-V, Mineral Exploration & Commodities

Folks, I am running short on time. After 1.5 years of apartment living (after selling our home) we are looking at homes once again. I sure do not want to buy this market, but I also don’t want to be paying a landlord what is a very high rent for too long. My wife is already out on the trail and demands I meet her there. So…

Let’s step it up. The portfolios below will show the moderate holdings in REE and uranium. They will also show the exploration stocks that I still hold, market correction or not. As was shown by the big move in Cu/Au hole driller AE.V last week, a good hole can easily supersede whatever is going on in the markets around it. So as with favored gold stocks, I plan to hold and protect as best as possible by shorting other areas.

On another note, the diversity plan worked well as Potash play IPI rammed upward.

As with the precious metals view, I believe the war is a wild card for all coveted resources. I believe the war is not going to go as well as we are led to believe by the administration. The global “commodity grab” play could resume sooner than expected (i.e. not after an interim deflation scare).

Global Snapshot

Unfortunately, I do not have time for much input on the global stock market picture. However, it is notable that as the Iran war erupted and the US dollar bounced, the ACWX (global)/SPY (US) ratio dropped hard. That’s logical, given the anti-USD flavor of global stock markets relative to US markets.

Macro

Hence, I want to make sure I am keeping my eye on the ball. The ball is not the current market correction, the ongoing wars or some chart’s insistence that the precious metals must have a correction.

The ball is the increasingly angst-ridden inflationary macro. When I look at how much headroom a market like the TSX-V potentially has and an indicator like the HUI/Gold ratio potentials has, both on the long-term big picture, I think about Old Turkey.

“It’s a bull market, you know… so, don’t get too cute!” I imagine him saying.

Steady as she goes, week to week, seeking to be strong when buying opportunities arise after managing risk prior to such opportunities. But all with the big picture, top-down macro in mind.

I think we are generally bearish short-term, and whole hog inflation trades longer-term.

Portfolios

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

As always, risk will be managed aggressively if/as needed.

Taxable “Savings” Account

There are more paper losses starting to show up in both portfolios. I am aware and ready to manage risk. Actually, I’m already managing risk. But ready to really dig into that.

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 has hung in there, avoiding a breakdown. However, that could be a double top. I will do all I can to not let that play out the way double tops usually do. Regardless, bull or bear, my main focus is risk management right now, not tying to make a chart go up.

Cash is 24%, short-term Treasury is 39% and equity 37%. Stock holdings are likely to be reduced this week. My defensive positions in BioPharma and Medical Device are suspect and bearish respectively. Also, the Software recovery/bounce play may have a very limited shelf life.

I am not going to hold non-core items while trying to hedge them. I’d instead just get rid of them. Core holdings tend to be mainly what I still hold of precious metals stocks, including exploration and royalty and also the lottery ticket hole drillers of multi-metals. Precious metals and commodities in general are favored over bull stonks, at least until we resolve the market correction view.

Shorting is legal, and I may want to do more of it.

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.