30Jul10:50 amEST

You'll Like This Throwback

Although it seems like markets are changing in ways which render traditional analytical and observational methods obsolete, in reality we are seeing variations of, for example, post-1929 crash Wall Street and even monetary and fiscal responses.

Back then, we saw an explosive rally for several quarters after the Crash of '29 to dovetail with easy monetary/fiscal responses from The Fed and federal government, respectively, although that historical factoid seems to get lost in the shuffle as everything is declared to be "unprecedented" these days. It remains to be seen, of course, after a nearly-33% contraction in Q2 GDP of this year whether equity indices now swoon roughly 90% over the next two-to-three years, as happened beginning around 1930 after the initial post-crash euphoria. 

On that note, gold bullion performed relatively well as an asset during the Great Depression, during that legendary deflation. This time around, in light of gold and silver's recent rallies alongside the precious miners, it remains hard to reconcile the stubborn strength in Treasuries while the U.S. Dollar swoons. Again, gold has shown us it can perform well in both deflationary and inflationary stretches. 

Hence, viewing the miners solely on their own merits and not as a macro tourist, this morning's post-FOMC weakness is a welcome sight in light of the runaway rally the sector has crushed shorts with in recent weeks. 

On the updated GDX ETF daily chart, below, a standard "throwback" or retrace down to $39.50 should be the first line in the sand to stalk a lower risk long entry. 

One scenario I am entertaining is an oversold Dollar bounce to coincide with the miners dipping to the level and subsequently basing (shakeouts along the way) for a few weeks before gearing up for another rally into Labor Day. 

That said, it is worth seeing the forest for the trees and acknowledging that the precious complex has indeed broken out long-term, which means a bullish bias with eagerness to buy dips is likely correct until proven otherwise. 

Stock Market Recap 07/29/20 ... Stock Market Recap 07/30/20 ...


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