Market Meltdown
After a Friday of utter carnage in the metal market, what does the crystal ball show for the future?
Days like today are sometimes tough to watch. You’d never know it looking at the modest declines in the indexes, but there were some absolute massacres in the stock market today. When we look past the VIX getting pummeled into submission yet again and consider market breadth, it’s obvious we have issues. The Russell 2000 IWM 0.00%↑, which was down more 1% today, stopped participating in this rally 3 weeks ago and is now flat on the year:
Elsewhere today, we had an absolute nerfing in both the metals market and the cryptocurrency market:
Gold: down 3.5%
Silver: down 6.8%
Bitcoin: down 2.1%
Altcoins: down anywhere from 5-10%
Crypto and Metal Mining Stonks: down anywhere from 5-15%
These are not small moves and not small markets. Time to panic!?
I say no. What if I told you none of these charts are actually broken?
On the weekly, this is a very expected pullback in Silver after such a large rally this year.
On the daily, we’re not even at the 50 DMA yet. Meaning this uptrend is well intact.
Shifting again to weekly; the Junior Miner ETF SILJ 0.00%↑ is still above a 4 year trendline breakout.
First Majestic AG 0.00%↑ is admittedly looking a bit less convincing as we’re very close to giving up the 200 DMA, but the tell from this session today in my view is silver miners only moderately underperformed the metal itself. Usually there’s more leverage than that. Next week may be very telling with this one. Obviously, I want to see some resiliency here next week but I did buy this dip today in AG and also in the Sprott Silver Fund PSLV 0.00%↑.
I’m a bit less convinced on Gold. I see a bearish RSI divergence and a key MA about $150 lower from current levels. This is admittedly probably tinfoil hat Mike taking over the keyboard, but I think any further decline is going to be short-lived for one critical reason; nobody actually believes the US is going to get it’s financial house in order and that’s why global central banks keep buying Gold:
The central banks added another 290 tonnes last quarter. If we take the view that foreigners are taking profit and selling Gold, then US bonds shouldn’t have puked their guts out today, but they did:
Remember my long the 2 year bond call earlier this week? I’m not nervous….
Thankfully, we have a market to watch over the weekend and I think it’s going to be really interesting seeing what Bitcoin does over the next two days:
This is not a chart that I think is showing a whole lot of concern about dollar strength or treasuries getting walloped. Remember, I’m wrong a lot. Trading is hard. And when everyone expects the same thing to happen it might be wise to position for the opposite.
I hope you guys have a great weekend!
Disclaimer: I’m not an investment advisor. I’m long crypto, metals, miners, and a whole bunch of other things that took a bath today.