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I started an entry in the in-day notes, but realized it was going to go on long enough and in enough detail that an NFTRH+ update would be more appropriate. Please remember that risk/reward has little to do with price activity in the short-term and certainly not with the technicals. That said…

Precious metals have rightly gotten clobbered. Right back to a favorable risk/reward compared to the broad stock market, which is today celebrating the Semiconductor bubble again (on Micron cheer). A side note here: Semi is a serious sector in a serious bull market. But it’s the valuations and price-chasing momentum that make it a bubble, or at least manic. I’ll use the gold analogy again. Semi is pretty much what gold and especially silver were in January.

So Risk/Reward is distinctly back with the precious metals vs. the stock market. And that is on plan with the Gold/SPX (GLD/SPY) ratio, which is now testing our target at the shaded box.

Also, the GDX/GLD ratio is still refusing to tank. This could mean that the sector is sold out. It could also mean it has refused to capitulate. But with a correction that has lasted several months, I think it is at least as likely that sellers are getting exhausted.

As noted earlier in the in-day notes, I added a gold stock (AGI) and a silver stock (ABBRF). I don’t want to get caught being too miserly on buying the sector.

As for the stock market, the Semis can do what they want. I’m not playing. I sold my dearest positions (ASML & ALAB) and will let that party play out. Much like silver in January, there have got to be some mighty unhealthy players in there. I took puts on SLV for that reason. I may think about shorting Semi. Or I may just keep cash and own sectors that I think are lower risk.

Back to the precious metals, I have a watch list and what’s great about this correction is that it has taken down all sorts of quality items. I want to be able to position in the finest items like the two mentioned above. Like RGLD, which I also hold. Items like AEM, CDE, EQX, ELE, TFPM, VOXR, HL, etc. But some of the charts look downright ugly, so I am being patient.

But risk/reward, if the precious metals are still in the bull market I think they are, is very much back in favor of the precious metals. By extension, if all goes logically this summer, they could bottom and lead a wider patch of commodity related stocks. As you know, my preferences are Uranium, Rare Earths, Copper, Battery Materials, etc.

What is happening now is, in my opinion, the Fed/Treasury getting the macro straight. Meaning they are cleaning up the inflation-phobes from the landscape in preparation for the next inflation. It sucks, but it is what it is. Here is a live (as of 3:20 US ET) picture of that clean-up, the flattening yield curve.

A word of caution. This could still represent an inconveniently uncomfortable (for gold/commodity bugs) phase of Goldilocks, especially with the party still going on, led by Semi. So let’s keep perspective on that. But what better backdrop for the Gold/SPX ratio to finally find a bottom.

Much more to come as the story (and IMO, what a story!) unfolds.