17Dec10:35 amEST

Act Accordingly: This is a Secular Shift, Not a Cyclical One

Pending today's close, precious metals and miners are on the cusp (pending today's close) of a weekly chart bullish reversal at prior, major support. 

On the GDX (ETF for mostly larger cap precious miners) weekly chart, below, we can see the bullish "hammer" (arrow) being formed right here gold bugs needed it--At the scene of support dating back several months, quarters, even years. 

For a while now, gold bugs have been the little kid carrying the violin case on the playground--Mocked and bruised with no reprieve in sight. However, just as we are seeing with various other commodity stocks, like agribusiness plays, there is a newfound appetite for them. 

Furthermore, the "If Inflation so hot then why has gold been a joke?" vibe many like to throw around with respect to both gold weakness and strength in Treasuries overlooks market history--There have been many, many instances where various obvious themes/trades took their sweet old time to develop.

Case in point: Go look up old speeches of President Reagan in the early-1980s before the August 1982 bottom in stocks where he is literally bemoaning whether Fed Chair Volcker's tightening regime would ever work the way he wanted it to, in terms of fighting inflation and helping the economy. 

So, what gives?

You will notice that consumer staples, utilities, and the like also drastically outperformed this week. The knee-jerk reaction is to chalk it up as another pandemic rotation, soon to be finished just as quickly as it started.

As we have discussed before, however, I believe this rotation is only now just beginning--Out of all things growth (wildly over-expensive, mostly tech/Nasdaq/small caps) and into all things value (cheap valuations, dividends, defensive, and various commodities as inflation hedges). With this in mind, you will note that gold miners now have some of the strongest balance sheets they have had in decades, if not forever in some cases. 

What growth tech bulls continue to overlook is their beloved former winners can sink 80-90% off their all-time highs (and some already have) and still be expensive! Furthermore, the wind at their back from the last decade of Fed policy is ending, like it or not, as inflation remains hot, sticky, and will certainly be a hot button issue for next year's midterm elections. 

Put another way: The easiest bias to have right now, if you turn on financial news television or gauge Twitter, is that the growth stock correction is a healthy, buyable one--I reject that view and go the other way. This is a secular, or multi-year shift, not a cyclical one. 

Act accordingly. 

Stock Market Recap 12/16/21 ... Christmas Week Selloff: But ...

 
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