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Well what do you know? Most US stock
sectors are becoming unhealthy from a sentiment perspective (above), as the
commercial hedgers have gone quite bearish (below). Here is the
graph from NFTRH 218:
…and a short-term sentiment timing
graphic:
Sentiment Bottom Line
Note that Jason’s comments are in
contrast to the current NFTRH view that markets could remain strong into
spring and then go bearish. A valid question is how long can markets continue
higher while being sponsored by dumb, performance-chasing money? The answer
is often “longer than you might expect”. But we should respect
the idea that US markets are in a poor risk vs. reward stance now.
Referring back to the top graphic on
page 21, there seems to be one lonely sector – one red headed stepchild
– that is out of sorts with the whole process of a degrading risk vs.
reward setup. While it is painful in the short-term, it is certainly a
positive with respect to the fact that there are phases when the precious
metals go contrary to the broad markets.
Hulbert’s latest data available to
Sentimetrader shows a -6.3% for gold newsletter
writers. Anecdotally, a friend advises that Lance Lewis has stated that
Hulbert’s HGNSI was actually down to -12.5% on January 3. The Sentimentrader data is delayed. This would mean that gold
newsletter sentiment is as bad as it was during the summer when prices were
100 bucks lower. That is a bullish divergence, contrarian-wise.
The bottom line is that the sentiment
data backs up NFTRH’s stance of a bullish risk vs. reward on the
precious metals (again, this does not mean lower prices cannot come about in
the short-term), a bearish risk vs. reward on the broad markets and for sure
a bullish risk vs. reward view of the precious metals in relation to
the broad markets.
Wrap Up
Please remember that a perma precious metals bull did not write that last
paragraph above. Yes, the PM’s are in a secular bull market and I am
big picture bullish. But when the shorter-term risk is high in the precious
metals NFTRH has consistently noted it. When risk vs. reward is good in the
broad markets we note it. If at any point it looks like I may be serving up
dogma, please contact me and let me know about it.
I try very hard to keep personal views
as a rational monetary system and market watcher subordinated to what I see
actually happening in the markets on a week-to-week, month-to-month basis.
But I have eyes, and as such I see inflation being promoted once again. The
work done to date pretty much comes down to the Adjusted Money Supply as
being the final leg to be kicked out from under the table that holds Ben
Bernanke’s carefully arranged place settings. Rising money supply would
bring on the next inflationary phase and most probably the next leg up in the
precious metals bull.
But there is another scenario that most
gold and commodity promoters will not mention. What if rising Treasury yields
stop the economy dead in its tracks and actually trigger a real deflation, as
money simply seizes up and stops moving? What if the money supply does not
rise? What if, just maybe the weakness in the precious metals is a forecast
to this condition?
This question is not meant to scare
people because I expect the opposite. We are only 1 week into 2013 after all,
with Operation Twist barely in the rear view mirror. But various indicators
in today’s report say it is important for the precious metals to begin
to out perform other markets soon in line with
favorable sentiment and risk vs. reward profiles.
We will continue to manage the process
in-week with interim updates.
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