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Summary

A brief summary of the work done in this week’s report and in the updates and reports leading up to this point. Please read the detailed report for the complete picture. There are many granular details that cannot be summarized so briefly.

Precious Metals (bull market)

Anticipating one final decline to a good low. That could be an epic buying opportunity. Indications point down and the time window appears shortening. Capitulation needed, and question remains of interim bounce first.

US Stock Market (bull market)

SPX, having benefitted from internal rotation while the likes of SOX and NDX have developed bearish situations, finally made a little crack last week. If this correction is worth its salt it should eventually affect most sectors and drop SPX.

Global Stocks (bull market)

Barely hanging on to upside trend change relative to US. If the USD has more upside, global under-performance to US should have more downside. When USD tops, more global exposure would be a sound strategy.

L/T US Treasury Bonds (bear market)

Bonds are hinting bullish again. Just a hint. But if that plays out it would be 100% in line with our view of a disinflationary phase. Anticipating a bounce or rallly, not a new bull market.

Commodities/Resources (bull market)

Not time yet to position with any conviction, in my opinion, as the Fed plays hawk and market liquidity is constrained. But with FOMC on the horizon, if they weaken and USD weakens, we could see commodity and resources stocks rally hard.

US Dollar (still a technical bull market from 2008), but…

Mega long-term bear market (see new analysis)

US Dollar (this “summary” serves as an extended USD report segment)

USD is still in an intermediate rally within what we have been calling a long-term technical bull market. As such, we flip to shorter cyclical bull joining that “long-term” bull. This is technically speaking. As we divine what Warsh and Bessent may be cooking up (USD bearish as per 2003-2007 or through genius manipulation not yet apparent, USD bullish?).

Please see below for a new view of a MEGA bear market in USD.

With national debt approaching $40T and plans to hide the cheese (promote stimulus through inflation and wasteful spending) one place or another, it should eventually come out in the wash of a bearish USD once they run out magic tricks (reference last week’s look inside the Fed and Treasury).

The American people are being robbed, but this cannot be done without somehow keeping USD aloft. For example, were USD to break down into a major bear market, we would overtly go full Banana Republic. This is what Trump 1 blustered about and loudly pushed for. Trump 2 is restrained (IMO) by two evil geniuses and he’s letting the adults do the macro manipulation.

You can’t hide the cheese forever. But for now a strong US dollar could be related to two different items:

1: Market Correction, Liquidation and/or Crash

There is nothing like a strong market correction to shut the everyman up about inflation. There is nothing like a market crash to make the people STFU and worry about anything but the good old days of inflation (which has of course been the driver of bullish asset markets for decades).

I have little doubt that Warsh and Bessent are engineers, really putting deep thought into how to rig this mess to look “just right”…

…but in the likely event Goldilocks gets chased from da haus, they will take a market liquidation. Just get rid of those damn inflation signals while Trump and his hand puppets figure out how to extricate from the war and we’ll have a clean slate where inflation fears are concerned.

This scenario, a market liquidation scenario, would drive liquidity into USD (de-dollarizers be damned) and into Gold relative to Silver (while both metals likely decline a bit more, nominally). This is the Macro Liquidity Apocalypse scenario and it would shove frightened casino patrons into Uncle Buck’s waiting arms.

2: Flying Pigs to the Rescue

Commercial banks are going to be set free to lend money into the economy under more lenient conditions. And they are going to do it honorably this time. Honest! <sarcasm>

There will be an eventual blow up some months or probably years down the road. Some excessive scam that will be played to further pillage America, making a few incredibly rich(er) and leaving the bill with the tax payer.

But that is a story for another day. A story that I think could have legs, or I guess, wings, is the commercial banking and finance sectors being used as a macro tool. It goes like this:

Official Fed or political policymaker: “Now that you are unchained, try to be responsible but get that damn money out into the economy while we hold the Fed Funds rate, thus giving the dollar an apparent fundamental underpinning.

Banker: You betcha! We’re going to police ourselves and ensure no funny business.

Official Fed or political policymaker: Whatever, just get it done.

This theoretically leaves the Fed to moderately buy Treasury bonds as it sees fit, while continuing its MBS roll-off campaign. Meanwhile, the cheese is getting spread across the economy, but is hidden from Fed balance sheet watchers. To boot, the banks are making increasing profits through increasing loan activity! It’s a ‘can’t lose’ scenario… in the near-term.

It Gets More Complicated, However

For the 2003-2007 blueprint (gold, silver, commodities, China/Asia/EM/Inflation trades) to work you need a weak or bearish US dollar. If the little market correction we have now were to get bad enough, after USD receives the risk-off liquidity it would be very vulnerable. Again, this is not technicals, it is potential macro fundamentals.

A market liquidation would give the Fed full license to cut the Funds Rate and knee-cap the dollar. Then you just watch the bull market led by gold, taken over by silver and commodities and resources catch on for the next wave of their bull markets.

The above is like full box of spaghetti, cooked al dente, thrown against the wall to see if it sticks. In other words, I am creating scenarios for us to consider but I am not running the markets. So I don’t actually know what is going on. I have experience and tools. That has resulted in the above. As things fine tune in the coming weeks, we will fine tune the narrative and firm up a less confusing blueprint.

Meanwhile, let’s leave the segment with a couple charts. The daily chart of USD took out resistance and is pulling back to test that breakout. If it fails we’re right back to USD cyclical bear, long-term bull. If it holds the upside target is 103+. That would be enough upside to wreck many markets and flip the Fed overtly dovish.

In other words, USD could bring on its own demise simply by rising amid market liquidity destruction, as the Fed would now have cover to cut the Funds Rate.

One the big picture, it gets interesting. Yes, USD is in an orderly bull market from the March, 2008 low (in essence, the last gasp of the 2003-2007 inflation trades). That is the driver as long as it persists. But the most recent high is a lower high to the 2001 high. That keeps the possibility of what is actually a monstrously long bear market in play from the 1980s.

What is a bear market? Lower highs and lower lows. Here we have intact lower highs/lows since the 1970s! USD is actually in a mega long bear market unless it makes a higher high to 2001.

I could envision USD rising to the top of the uptrend channel, making a new cycle high, scaring the crap out of everybody, but ultimately making a lower high to 2001 (below 120), and then bye bye Uncle Buck. Hello next inflation trade.

As to that inflation trade, let’s now combine two things for a conclusion.

(1) Inflation to be promoted by commercial banking (per 2003-2007 when the USD went hard bearish amid the credit bubble) + (2) Fed policy dovish, neutral or firm (it may no longer matter, as policy was hawkish from 2004-2007) = components of the 2003-2007 blueprint in play, especially a bearish US dollar if/as the mega long-term bear market resumes.

Again, this chart shows 2003-2007 featuring a strong Fed (Fed Funds rate hikes), a mega weak US dollar (coming off its first lower high of the mega bear trend) and a flattening yield curve. During this time the commercial banking industry was operating with lax standards and lending to everything with a pulse.

We at least have the potential of lite version of that. An echo version.

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Stock Market

But first, there is a the matter of the current correction at hand. This is happening under disinflationary, not inflationary pressure. Inflation is yesterday’s war. It’s just that the public does not know it yet. If NDX cracks here, the first hints will start to seep into the public mind.

I would not be surprised if the markets bounce on Monday to mess with those of us short due to this chart. The neckline is not broken and Friday was Op/Ex, after all. But this looks quite bearish for a test of the rising SMA 200.

NDX’s leader, the SOX is even a bit worse. All it needs is a lower low to the May 19th low of 10,895 and it would very likely go to the SMA 200 or support below it.

Meanwhile, the diversified SPX continues to try to rotate its way out of trouble. Much of the rotation has been into the areas where I hold ‘defensives’, so per NFTRH+ on Thursday, I took a short on SPX with that in mind.

If this pig is going to correct, now is the time. The one caveat I have is that Friday was Op/Ex and so I don’t trust it. But it is time for a correction and a correction of sorts is already in progress. Let’s see if it get worse (tradeable downside) and then prepare to buy because I strongly doubt this is the beginning of a bear market. Not with those Satanic geniuses at the controls.

Global Picture

I am still not ready to buy global stocks (although I came this close to buying back ASML, which is the most premier Semi Equipment stock on the planet in my opinion). Not until the USD is finished with its rally. Again it is no surprise that as USD has rallied in 2026…

…the ACWX/SPY ratio has declined for most of that USD rally phase.

When the next bear phase begins in USD, and especially if it reloads the mega long-term bear market, the world is going to be a rewarding place to invest, indeed. Probably much better than the US, which is not a superpower so much as becoming a dangerous clown show.

But for now, we’ll play the cards that Warsh, Bessent and company are dealing.

And So it Begins

Elizabeth Warren Blasts Kevin Warsh

Federal Reserve Chairman Kevin Warsh faced intense grilling Wednesday from Democratic Sen. Elizabeth Warren, who demanded to know whether he had questioned a colleague about reports that she attended a meeting with bankers last month that may have violated Fed rules, fueling a heated exchange about ethics.

The senator asked Warsh repeatedly during his second day of monetary policy testimony on Capitol Hill if he had asked Fed Vice Chair for Supervision Michelle Bowman whether she had attended the meeting.

Well, there you have it. Warren on Warsh about Bowman’s meeting with bankers. She’s the same Bowman who we noted made the speech about rolling back Dodd-Frank and lowering banking standards.

“Did you ask?” Warren asked Warsh several times. “The tone that you are setting is one that seems to invite corruption.”

Oh, it will invite corruption alright, Elizabeth. But first there is likely to be an extended period of good behavior among the pigs. Warsh is taking his slings and arrows, but I am firming up with the idea that he and that well-programmed cyborg at Treasury are going set the pigs free. It may actually be the only way to kick the can down the road on this cycle.

I have little doubt Warsh/Bowman/Bessent will get their way.

Market Sentiment

• High Yield spreads ticked up a bit with Friday’s nervousness, but remain depressed and indicative of risk still ‘on’.
• VIX took a 12% spike on Friday, which could be the start of a big market corrective move, but could be a little burst that will be tamped back down on Monday or Tuesday. VIX is very twitchy short-term.

If the stock market continues to correct, it will do so with a condition that has warned us that it “should” correct based on 5 of the last 6 corrections (2025 did not feature this condition). The condition being the CPCE’s weekly EMA 20 crossing above the EMA 50. The indicator itself is too spiky to be of much value. The smoothing of the moving averages? Much value.

NAAIM (investment managers) were quite bullish at 95% on the 15th. So Friday’s smack down made good contrary sense.

AAII (Ma & Pa) was also peppy and due for a smack. They finished the week on the front porch with Ma nagging Pa about their investments, and Pa snapping at her to get the fried chicken and biscuits going, while he saw to his bottle of moonshine, staring blankly out into the rolling meadows. Tough week.

Sentiment Bottom Line

It’s been a general condition of over-bullish since April. Last week may have been enough to trigger the more or less routine correction we are anticipating.

Precious Metals

Over the past few months we have noted that the terrible spikes down in BPGDM were NOT a reason to buy for anything but quick trades. That because referring back to the concept of moving averages smoothing out the analysis of jumpy indicators, our goal is to see the 200 day moving average (green) make a higher low to the previous low in early 2024. Let other bugs get all riled up about BPGDM at zero. It was not the correct indication to use.

The SMA 200 is now firmly trending down toward our goal with the spiky index dragging it like an anchor. This is beautiful! It would be tough to call where exactly the SMA 200 will bottom, but just the fact that it is already pointing hard down is very positive.

This is a bull market (higher highs and lows in the SMA 200 since 2016). We are in the process of cleaning out the cling-ons. Don’t personalize it.

There is no immediate relief from the HUI/Gold (GDX/GLD) ratio, which has rolled over.

Here sits HUI, trying to hold the bottom of the wedge while sitting on a minor support level.

Now, this is also very clear long-term support on the monthly chart. No brainer, eh?

Well, the problem with a “no brainer” view at the moment is that neither GDX, nor GDXJ, nor any of the large, well known miners have shown volume even hinting at capitulation. Short of that I am going to keep my greed (to buy) in check and think about the most satisfying thing in markets (speaking personally); buying from panicked sellers. Especially if they listened to perma-promoters inventing reasons why they should have remained bullish.

I know it bleeds through, so I won’t pretend. There some entities out there, supposed competitors even, who I absolutely despise for giving the newsletter and market analysis industry a soiled name through their eyeball harvesting, promotional bullshit that is not real analysis. Especially since through constant promotion, they tend to be the ones who ‘reel ’em in’. The herds look for easy answers and folks, in these markets there are none.

Screed aside, we are here to win and be less emotional, through up cycles and down. So let’s take a look at gold, which sits at a minor support level after sporting positive RSI divergence at the previous low.

Look, there literally is no technical support if gold does not use that divergence and bounce/rally here. Otherwise it would be capable of dive-bombing support at 3400 before the all-clear is signaled.

Here it is healthy to remember that actual physical gold is not about price in a casino. In its current bearishness it is reflecting macro fundamentals that see real yields elevated, a yield curve that has flattened Goldilocks style all year and well, frankly, two evil geniuses designing a pre-election macro that is “just right”.

So gold’s value is marked down. When the Wizard gets his curtain pulled back gold’s price will indicate something quite different. But its value as long-term stability is intact today, as it was over 5000 and as it was under 2000. That’s gold.

Silver’s Death Cross actually improves the odds of a short-term bounce before the final low (same goes for gold above). Alternately, if the bounce does not come before a final low I could envision a scary spike down – probably an in-day thing – then a capitulation and snap back.

Such a decline would have no obligation to stop at clear support, or even the blue arrow for that matter. We can at least dream about an epic and shear panicked capitulation decline that presents a buying opportunity to hold well into or through next year. Not a prediction, but it is a wish. SLV’s volume show no hint of capitulation at all.

Finally, let’s take a gander at the GDX A/D line for good measure. Of course it’s going to look bad after all this bearishness. The sector is on a hell of a correction and down-cycle within its bull market. This chart offers no bullish divergence as yet. Just bearish confirmation.

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Commodities

Once again, we short shrift commodities because they will most likely follow gold and then silver. With a disinflationary backdrop and a whiff of Goldilocks, the time is still not right.

That said, I picked up CCJ, as the Uranium sector could be heading for a ‘V’ low, as opposed to a grind. I am poking at the sector because one of these down spikes may be the actual low. “Poking”, not committing.

Beyond this disinflationary phase I expect a world full of viable commodity and resources stocks to present great opportunities. But as long as these two are at the controls, we as would-be precious metals and commodity investors need to protect ourselves.

Closing

The number one goal right now is to erase inflation signals. They are, through some of the ways we’ve analyzed over the last week-plus, seeing about these priorities at a sensitive time. It does no good to rail against those in power because, well, they are in power and they will squash you like a bug if you operate on principle.

The time will come and keeping with the Wizard of Oz theme, “I’ll get you my pretty”… but first I will be intact in order to be able to do so.

Oh, and there happens to be an FOMC meeting upcoming in 1.5 weeks.

Here’s a mental exercise. What if the broad market cracks, the precious metals find a capitulation bottom and things start falling and breaking out there? What if?…

Do you suppose Warsh is going to talk tough if that happens? Me neither. There could be the makings of lows in many markets over the next week+ and would it not be oh so logical for the Fed to come to the rescue amid these tanking inflation signals (and those signals would indeed tank if the markets crack hard and Treasury bonds rise in a risk-off bid).

I am not predicting a rate cut at this time. But a few well chosen words, maybe. Again, if this scenario (among other possibilities) plays out. In my opinion, Warsh does not need to flip overtly dovish if he’s got the commercial banks ready to go, per plan.

A look at the short through long-term Treasury bond funds looking constructive to rally amid disinflation. The shorter the term, the better they look. But TLT broke down from its bullish pattern and it and/or the long bond should be watched to see if they also catch on bullish. That would be a Goldilocks signal (disinflation) or perhaps something worse, a gateway to a disin/de-flationary risk-off summer market correction.

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Portfolios

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

“Savings” Account

Holding some fairly diverse mainstream items with protection in the form of SPX and NDX leveraged shorts. High cash/equiv levels of 82%.

The “Savings” account will vary in its positioning. At times when I am confident of bullish markets it will hold positions, while remaining primarily a cash/equivalents account. At times I am not, it will not substantially hold much beyond cash/equivalents.

Trading Account

No positions. Trying to be very patient for major market changes. As one example, if silver were to crash well into the 40s, I might buy SLV calls much as I bought puts when it was spiking unsustainably in January.

Roth IRA (non-taxable, no contributions)

The YTD chart is on the wobble. But the 3yr chart asks me to have some patience. We are far along in a severe precious metals correction (time-wise) and the stock market is rolling over in some of its aspects. My goal is to defend support but not worry too much about the poor performance of the last few weeks, and instead focus on forward buys setting up.

Cash/equiv is 79% with leveraged shorts on SPX and NDX to theoretically protect some of these positions. Holdings tend be diverse, but with more speculative stuff than the “savings” account.

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.