Hello and good day to you. Here are the few links of the week.... 
 

Gold to Equities Ratios Have Bottomed
Published Friday morning. We look at Gold/Stocks and Gold/FC ratios. 
 

Precious Metals Video Market Update
We cover Gold, GDXJ, Gold ratios and the US$ index. Produced before Wednesday.
 

Equity Weakness not Reflected in Economy
Post from the Fat Pitch Blog. The author doesn't note that the equity market often (not always) leads the economy.     


Are Rising Rates Bullish or Bearish for Gold?
Informative post from Steve Saville. 


Prudent to Check Bear Market Plan 
A very reasoned, balanced video from Ciovacco Capital. 


Note: If you come across anything worthy of being included, feel free to send it my way!





Premium Snippets 



Chart 1 shows the NYSE along with a handful of breadth indicators. 

The NYSE closed at a 2-year low and 15% off its 2015 peak. It closed at 9528 and major support isn't around until 8500. That's about 11% downside. The stock market is oversold right now and could rally for a few weeks. The breadth indicators need to fall further before we can talk about a sustained rebound. The % of stocks above the 200-dma is at 20%. At 10% or below would be extremely oversold. The % of stocks above the 50-dma is 17%. At 8% or below would be extremely oversold.

To sum it up, look for a short-term bounce but that would turn into a selling or shorting opportunity. Major resistance is at 10,000 to 10,100. The market may drop for a few more days before a bounce takes hold. 

 

While the NYSE has 11% downside to major support, we should note that other indices look worse. The Russell 2000 and global equities (ACWI) look a lot worse with potential H&SH tops that project 20% downside potential. If the S&P loses its 2014 lows then there is downside potential to 1600 which should be very strong support. The S&P could have a 25% bear market while other indices could fall 30% or 35%.

Moving on.... 

Chart 2 shows our current Top 15 Index in US$.  

Most of our favorite stocks are in this index along with some others that have performed well. We created the index to see if we could get an additional look at the market (past GDX, GDXJ). The index reached as high as 121 on Thursday before closing the week just below 115. There is strong resistance at 120 and 130. I'd love to see the index reach 130 as that would mark a 7-month high. Also if it can reach 130 with Gold not going past $1140 then I think it could hold 100 in the event of $970 Gold. 



 


Speaking of Gold, chart 3 shows Gold and the broken down CoT. The net position equates to gross longs minus gross shorts. Everything is measured as a % of open interest. Gold's net position remains very low at 4.6%. Silver's is 17% and that is one reason why Silver has not been able to sustain any strength in recent weeks. There are some sellers left there.

Recall how I harped on about the large long position in Gold (and Silver)? Well in Gold it has declined from 59% to 45%. See the yellow. If Gold has another leg lower as I suspect, I'd guess that goes below 40% and gross shorts would spike above 50%. That provides a setup for a V type bottom. Gold gets pushed down below $1000, gross longs are cut and shorts surge. Then shorts have to cover and no sellers are left so any buying pushes up the price.






In yesterday's 31 page update, TDG #447, we discussed how Gold would perform if the bottom was in, at $1045/oz. Gold's major resistance is at $1160, $1180 and $1200. Targets for this rally are $1120 and $1140. First Gold would rally above $1140 and reach $1160. Then it would rally to $1200, pullback and break above $1200. All in the next several months. If this rally fizzles out below $1140/oz, that is more evidence the bottom is not in. 

Now is a great time to subscribe as we are updating all of our company reports. Seven have been updated in the past few weeks and another handful will be updated this month. We just updated a report on one of our favorite companies. It is trading well off its highs and we took advantage of that to add shares. In the report we noted a few reasons of why the stock could continue to trade in this area or provide another opportunity around these prices. We love its long-term potential.

One thing I've learned is not to try and time everything perfectly. If something is oversold and down 30% and you are waiting for a perfect entry point at down 40% you may never get that price. Keep it simple. Do your fundamental research and buy things when they are cheap. If there is risk of a big sector correction then use your cash to hedge. I expect a lot of volatility this year in precious metals. If I try and trade in and out it will only hurt in the long run.    

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I have subscribed to many investment services over my lifetime. I can honestly say Jordan Roy-Byrne has developed not only one of the most analytically accurate, but also has hit the high water mark by making his analysis feel personalized. In addition to a detailed weekly report, he often sends additional emails with daily observations of not only the physical metals and miners, but also related metrics such as the market and currencies. His service is a great integration of history and future probability that has not only helped me make money, but also avoid losing. In fact, the only time I do lose is when I take more aggressive positions than he has recommended, or follow my gut instead of his objective reasoning. It truly is a 5 Star Service at a great price.

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