As I noted earlier this week, stocks were positioned for a violent bounce.
By quick way of review:
The number of S&P 500 companies trading above their 20-day simple moving average had reached levels associated with lows.
High yield credit/ junk bonds were at critical support. It was highly unlikely that these bonds broke lower on the first attempt. And given the fact that these bonds typically lead stocks, the odds favored a bounce hitting shortly.
The bounce is now here. And inquiring investors are curious as to where it goes.
Put simply, this is the first legitimate opportunity the bulls have to take the reins since the war in Iran began. And while the setup is decent for stocks, things look much more compelling for precious metals and precious metals miners.
War/ energy shocks are inherently inflationary. And during periods of higher inflation silver typically leads gold to the upside. With that in mind, I would note that the silver to gold ratio is on the verge of breaking out of a tight triangle formation.
This kind of setup typically precedes EXPLOSIVE moves.
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