Look out Below!

Look Out Below!

The week ending September 6 was obviously a very significant risk off week. As you would expect, money flowed to the T-Bond, although the other safe haven—gold—was down a bit. That’s not surprising because when the margin clerk calls as she surely did this past week, investors have to sell what they are able to sell—something that still has a bid, and that is almost always gold. It is during times like these that the yellow metal moves from weak hands to strong hands. The fact that gold was down a mere 0.41 basis points despite major declines in equities is a testimony to its strength. So weakness in gold at the start of a paper market meltdown is expected. But that actually sets the table for the next major move higher if this is truly the start of a long overdue correction in an insanely overvalued NASDAQ.

You never know for sure, but I believe the decline of last week may indeed be “The Real McCoy?” My confidence in making that statement is bolstered by a piece put out on September 4 by Michael Oliver (Momentum Structural Analysis at OliverMSA.com.) Michael alerted his subscribers to the structural vulnerability of the NASDAQ based on the NASDAQ 100 Index. In that piece Michael identified a key number for the NASDAQ 100 Index, which if reached at the weekly close any time this month would remove support for the NASDAQ. Specifically, that magic number was 18,686.

So what happened in the first weekly close of this month? The NASDAQ 100 closed at 18,421! Here is what Michael told his subscribers on Wednesday September 4, just two days earlier.

“We also said (in the weekend 360⁰ Weekend Report) we’d check to see if there might be other momentum trend structures that could hasten the breakage of quarterly momentum factors by driving the markets down too deep this quarter.

“We’ve found just such trigger levels via monthly momentum (price vs. the 3-mo. avg. rather than price vs. the 3-qtr. avg.). Here’s NDX’s situation. There are very dangerous and perhaps precipitous triggers just below. The weekly closing readings since late 2022 create an uptrend structure that was used at last month’s lowest weekly close, that trend line connecting two other reaction low weekly closes (three arrows). And that low weekly close last month also aligned precisely with the low momentum weekly close in April (circles define that horizontal, and, no, price wasn’t at all at the same level, but momentum was). Close a week this month at 18,686 (1.4% below Sep. 3d close) and you can say goodbye to both those coincident structural trend levels shown on monthly momentum. Assume negative action will immediately follow and probably with noise and dimension. Such breakage could in turn then easily then engage the quarterly momentum triggers we defined in the weekend report.”

For the S&P 500 Michael also set a chart structural breakage level of 5432 for any weekly close in September. The S&P 500 closed on Friday Sept. 6 at 5408.42! So both major indexes by Michael’s account are suggesting the markets may be looking over the abyss.

Michael continued: “Given the ripeness and age of the monthly momentum trend structures, we strongly suspect that even just trading down to those trigger levels should be considered a first alarm bell for the U.S. stock market. Closing a week below is major negative.”

So, what in Michael’s opinion does that mean for gold and silver miners of those metals?

Here is what he said about that: “As we said in the weekend report, don’t expect the seeming daily synchronization we’ve seen lately between the monetary metals and the stock market to persist. We suspect that once these momentum triggers are hit in the stock market, gold and silver will instead be approaching their overhead next/secondary trigger levels, a few of which we noted in the weekend report. And as much of a surprise that a stock market vacuum-type drop might be (assuming our monthly numbers are triggered), just as much surprise will likely occur if monetary metals advance despite that drop—something that will ambush most analysts and investors.”

In other words, it looks like we may now be set on the launch pad for a magnificent “moon shot” for gold silver and the miners.

Best wishes,

Jay Taylor