February 18, 2020
By Mish Schneider
Before we talk about silver and the metals, here is a line from the weekend Daily:
In Transportation IYT, Friday’s bearish candle and breakdown back into a caution phase gives us two very reliable patterns to watch.
IWM must hold 167 and IYT must get back over and close above 195.51.
The Russell 2000 or IWM did hold 167. With Friday’s low 167.34, it even managed to hold that level.
Transportation IYT could not clear back over the 50-DMA or 195.61. However, IYT closed green.
So, even with all the continuing news from China, the belief that the market won’t quit persists.
However, since stagflation is a word I kick around a lot, the move in the metals and the bonds got me thinking…
The top chart is the silver SLV, the ETF.
The bottom chart is the ratio between silver and gold.
Today, gold saw levels it has not seen since 2013.
Gold miners finally took out the trading range of the last 10 trading days.
Silver crossed the shorter-term moving average (red) that suggests the possibility it will start to play some serious catch up to gold.
The silver chart on top, also represents the breakout after a similar period as the miners had of consolidation.
What does the action in equities and the metals imply?
Interestingly, the metals have help from the low bond yields.
Yet they are ignoring the strong dollar.
In a stagflationary environment, the dollar would weaken, as would stocks, while gold, silver, miners and some soft commodities would strengthen.
Remember sugar as the secret weapon to determine if inflation is coming?
Well, that has moved up a lot, so today the metals move is yet another cautionary tale to equities bulls.
Furthermore, as stagflation is barely mentioned in the financial media, should that sentiment change, bonds, typically safe when stocks turn down, will not look good.
On July 12-13, 2020, I will be speaking/teaching at the Modern Traders Summit in Philadelphia. Only 5 speakers, which means attendees will get a lot of attention, I hope to meet many of you there.
Russell 2000 (IWM) 166.87 the 10-DMA held.
Dow (DIA) Closed right on its pivotal support
Nasdaq (QQQ) Talk of La La Land-new all-time high today. 231.67 support to hold
KRE (Regional Banks) 56.12 resistance and 54.05 major support
SMH (Semiconductors) Gapped lower but held support at 148.00
IYT (Transportation) Confirmed caution phase. 195.61 to clear or the bulls should be careful
IBB (Biotechnology) 123.48 the number to clear
XRT (Retail) Looks better on the weekly chart so has to clear 45.24 on the daily one
Volatility Index (VXX) 14.20 is the first area of interest