Tag: Notes From The Rabbit Hole (NFTRH)

The Gold Stock Correction And What Lays Ahead

Posted on by Gary Tanashian

What’s In-Play Now

It has been about 2 months since the gold stock sector, as represented by the HUI index, topped out. The ensuing correction has been a whipsaw affair of ups and downs, but smoothing that volatility out we find an ongoing correction in time and price that has not been too difficult to manage.

The pattern that some would call a “complex H&S” (TA-speak for a freakish pattern with too many shoulders) held a key lower high on the recent bounce to the daily chart’s SMA 50 (blue line). The neckline has been tested (and held) twice since it was created in September and the negative RSI divergence that began last summer has been guiding Huey downward.

hui

It’s all normal and by the chart above you can see the targets, which have been 195 (minor support) and better support at the convergence of a lot of markers, including major breakout support and a gap at 180, the rising SMA 200 (183), a 62% Fib retrace (182) and finally, the pattern’s measurement at around 172. That’s a lot of technical traffic pointing to the 170s-180s for the correction’s ultimate goal, which is to wash out the excess.

And excess there sure was, as we noted well ahead of time in NFTRH using this chart showing how far HUI got ahead of what I consider the most important macro fundamental indicator for the sector, gold vs. stocks and in particular gold vs. the US S&P 500. Continue reading "The Gold Stock Correction And What Lays Ahead" →

Inflation In The Offing?

Posted on by Gary Tanashian

Let’s take a look at some indicators that can come together to let us know when the next inflationary bout is in the offing.

The spread between 10yr and 2yr yields (the most commonly watched yield spread/curve) is still steepening on the short-term. Live chart available here.

yield curve inflation expectationsWhat’s more, it is doing this against a short-term bounce in yields (my TBT positions appreciate that) and that would be an inflationary indication. Not a trend, an early indication.

Indeed, the Continuum is once again climbing above the key 2.2% level.*

inflation expectations

TIP/TLT and TIP/IEF, commonly thought of as inflation expectations gauges, are bouncing but not yet on a trend change to inflationary. Daily chart… Continue reading "Inflation In The Offing?" →

Silver/Gold Ratios Is A Guide As Inflation Signals Fade Again

Posted on by Gary Tanashian

The interplay between gold and silver is a critical component to understanding what is out ahead; to understanding whether long-term Treasury yields will rise and if they rise, whether it will be due to inflationary pressures. It is a critical component to understanding whether cyclical commodities and other aspects of a greater inflation/reflation trade will finally break existing downtrends. See…

The Continuum is Still in the Deflation Camp (9.24.19)

Pictures of a Reflationary Bounce-a-Thon (9.11.19)

The first and more recent post noted that the 30yr yield needs to climb above 2.2% to even think of hinting toward a temporary inflation trade. The chart from that post shows that while the Continuum is of a long, deflationary structure the periodic pings upward to the (monthly EMA 100) limiter often represent times of cyclical inflationary bursts. This morning the 30-year yield stands at 2.15%.

long-term treasury yields

As for the older post linked above, it was personally a little difficult not to buy in (other than for a couple of ‘bounce’ trades) to the prospect of the global inflation that Central Banks are trying to summon. But that post and others have routinely shown intact downtrends in the inflatables. So it was a case of ‘break the trends and we’ll talk inflation trade’. Here are the daily charts of the CRB index and a key headline commodity. Continue reading "Silver/Gold Ratios Is A Guide As Inflation Signals Fade Again" →

Semiconductor Sector; A Market & Economic Leader

Posted on by Gary Tanashian

The signals have persisted since the May lows in the Semiconductor sector and in the broad markets. Nominal Semiconductor (esp. Semi Equipment) stocks and the sector’s market leadership have remained intact into our window for a projected cycle bottom, which was the 2nd half of 2019.

This post shines a favorable light on the Semiconductor sector while at the same time acknowledging that may have little to do with the broad market’s fortunes as Q3’s reporting begins next month. In other words, while we have been projecting new highs for the S&P 500 on the very short-term, there are fundamental and technical reasons to believe the stock market could be significantly disturbed in Q4. But the Semi sector is an economic early bird. Let’s remember that.

Reference first…

Nearly $50 Billion in Fabs to Start Construction in 2020

By the end of the year, 15 new fab projects with a total investment of US$38 billion will have started construction and 18 more fab projects will kick off construction in 2020. Of the 18, 10 fab projects with a total investment value of more than US$35 billion carry a high probability. The other eight, with a total investment value of more than US$14 billion, are weighted with a low probability of materializing.

See also… Continue reading "Semiconductor Sector; A Market & Economic Leader" →

Market Management 101: Balance

Posted on by Gary Tanashian

I cannot profess to tell others how to effectively manage their accounts because I am a lowly participant who is learning all the time. The truth is that 2019’s learning is much different than 2018’s learning was, which was different than 2016, 2011, 2008/2009 and other pivotal market phases. So I’d say that the biggest lesson to learn has been the concept of marrying adaptability with discipline.

Cookie-cutter advisors and brokers have it easier. They’re the majority of market professionals and they’ve learned and set in stone the way of allocating into markets; 60/40 stocks to bonds or some such variant. But for something more effective than ‘cookie-cutter’, you need to keep learning, adapting and holding discipline as long as your signals remain valid.

As for the current situation and speaking personally, it usually does not work out like this, especially when anticipating a corrective phase in the precious metals. The way it usually works is that I underestimate the intensity of a correction that I am pretty sure is coming and either I don’t sell quite enough, don’t hedge correctly (timing-wise) or don’t balance the portfolios optimally, even if the balancing seemed logical at the time it was undertaken. Often that is because the last market situation is not going to be like the next one. Automatic, cookie-cutter thinking need not apply. Adaptability.

Well somehow today, with gold and silver stocks way off their highs (and GDX & GDXJ painting bogus looking engulfing candles) I am right at my personal portfolio’s value highs for the year despite 2019’s best trade having topped out a couple weeks ago. That is due to some combination of… Continue reading "Market Management 101: Balance" →