Markets Rallied last Week on Bad Economic News.

Michael Isn't Buying it but he loves gold!

Markets made an abrupt pivot this week toward the kinds of assets that cheer Wall Street and Washington. But please don’t let the surging equity indexes fool you.

Michael Oliver put out two excellent and timely pieces this week. Today, he opined on the equity markets, and on Thursday, about gold and silver and the shares of companies that produce those monetary metals.

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First, regarding stocks, this is what he had to say in his November 3 piece titled: “Glorious Fed-based Rally in ‘U.S. Stock Market.’”

“As we showed and stated in our “Pain” report from October 31st, the U.S. stock market as measured by small and medium cap indices and eight of the S&P 500’s eleven sectors look weak, anemic, and sick. It’s toiling in the lower 5 to 20% (depending on the symbol) of the past several years’ range! Meaning even price looks like $@*!, not just our momentum charts.

“But alas, the distorted, front-end weighted S&P “500” (sic) and NASDAQ 100 (even more distorted by its weightings) are rallying nicely—given the obvious halt in the Fed’s prior rate hike trend (obvious at least to astute asset managers who can put the real-world pieces together along with Financial Pope Powell’s delicate and nervous wording). T-Bonds are getting the V-bottom type action that gold produced several weeks ago, finally also recognizing in that long-end of the U.S. debt market that there are crisis problems and the Fed will and must defend that market. At any cost. And you can bet they’ve been supporting it and are now being joined by large fund managers who also see the writing on the wall, which says that monetary reversal is again at hand. Back to what the central banks always do. Only this time even more so, as events and data points will reveal in the coming months.

“Investors, and apparently analysts, forgot how the stock market behaved at prior major tops, like in late 2000/early 2001 and September/October 2007 (charts shown in recent MSA reports), when after a series of rate rises the Fed finally shifted. Those times they actually cut rates. This time even the pause is sparking stock investor hope again. But back then, if you shorted those Fed shifts you nailed the market just before its very sharp declines—declines that marked the relentless leg of the bear trend, not an arm-wrestling one. A Fed pause or cut means they realize “something” (which the Fed won’t and can’t admit) and therefore must halt! And that something isn’t fundamentally good for the stock market.”

Then on the next page, Michael took a look at two monthly momentum charts of the chest-beating S&P 500, updated through the November 3 “glorious rally.” Just to summarize page 2, Michael noted that back in February 2022 when he wrote a piece titled “Be Gone!” that the very aged bull was headed for a major decline, though he knew it was not going to be a dramatic crash but rather an arm-wrestling process. That is certainly what happened, followed by the most recent rally taking the S&P to a 4600 peak. At that point there was a structure to break, but as he shows on his second momentum chart, at present there is nothing on the upside to break. He notes that “You can’t break a trend unless there is something to break.” And so he sees the current rally of this week as a B.S. rally because, “It isn’t breaking out over any down trending structure or a flat overhead ceiling, etc. It’s just a thin-air bounce after only several months (not aged) of sharp decline. A decline that did break clear structure. This rally doesn’t even have any such structure to use as a starting gate now for the upside.

“And downside readings didn’t even get to oversold status on 3-mo. avg. momentum (i.e., the upper band dropping below the zero line). Also. the decline is not at all aged. Therefore, we distrust the rally.”

Gold’s a different story!

Here is what Michael had to say in his November 2 missive titled, “Gold, Silver and Miners.”

“We noted a few months ago that when a monthly momentum trend (price vs. the 3-mo. avg.) gets this aged, as it was in September and early October, and if it also develops clear structure overhead to exploit, then expect it to exploit that structure for upside trend shift. For gold, that occurred on the circled days, with much follow-through.

“There’s no reason to expect it to stop now, by the way. This trend shift is fresh.

What’s obvious however, is that silver and the miners, which are often lagged to gold, are still poised just below their comparably ripe trend structures, updated on the following pages.

“Here we focus on silver’s action vs. its 3-mo. avg. (see the next page for an update on silver’s 200-daymomentum).

“Silver’s action created a down trending momentum structure going back to late last year. And also, a flat ceiling at the 3-mo. Avg. going back to early September. Close a day over the 3-mo. average (above $23.27) and that’s a breakout. Tagged that level again today.

“(No proof of government or government-“related” manipulation here, but this is getting to be suspicious—the behavior over the past few months—the routine selling of the 3-mo. avg. But alas, as history has demonstrated, non-market forces never ultimately win.)”

Michael went on to explain based on his charts why a closing silver price any day next week of $23.39 will be an indicator silver is breaking out. And regarding gold shares based on GDX (Van Eck Gold Miners ETF), Michael suggested at 12:20 on Thursday when he sent out his latest report on gold and silver that a close above $29.31 on the GDX would get that index above the key zero line on his momentum chart. By the close on Friday, GDX closed at$29.31! Hooray!Perhaps the long-awaited gold bull market is just now getting underway!

In my latest issue I discussed the Bull/Bear case for oil. Views from professionals range from a low of $57 in a 2024 recession or as high as $300 if Iran is drawn into the current war in the Middle East.

I also announce coverage of a leading AI stock, that being C3-ai (AI-NYSE). With fiat money’s best days in the rear view mirror and a return to gold as money, you may wan to consider subscribing to J Taylor’s Gold, Energy & Tech Stocks.

Best Wishes,

Jay Taylor

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