Lump Of Coal

The major markets got a lot more uncomfortable since the last issue, and that's saying something. It's not a bear market on Wall Street but it keeps heading that way.

I'm less concerned about continued drawdowns on Wall St than I am about a crash. Crashes take everything down with them while more measured declines–even big ones–allow for some rotation to sectors that look "cheap". The gold sector still has cheap in spades. We may be setting up for another early 2016 scenario where gold stocks–explorers included–hugely outperform other sectors of the market.

I'm hoping for that outcome but not counting on it yet. Gold's got to get above $1300 first. And we hope that hedge funds in NY and all those passive retail and index funds don't need to do so much selling in the back half of December to square the books that the wheels come off everything. I don't really expect that, but there may be enough selling to keep the current S&P downtrend going for a while longer.

I expect very little news for the remainder of the year. I'm going to start on a yearend issue as soon as this is sent. I'll deal with base metals and other resource sectors in that issue.

In the meantime, I wish you all the happiest of holidays for you and your families and for a happy (and profitable) 2019!

Eric Coffin
December 21, 2018

Dude, where's my Santa Rally?

Nowhere to be seen, so far. Ok, technically, Santa rallies come after Christmas, so there is still a chance we get one. It will take one hell of a rally to materially change the market situation pictured in the chart below, though.

I'm still not convinced large market and passive index investors will have anything to look forward to in their stockings this year other than lumps of coal. Plenty of bulls are calling for a V shaped bounce, but there isn't an obvious fundamental catalyst for one yet.

You can see from the SPX chart below that we have now put in a series of lower highs and lower lows. Even more ominously, the index has now fallen below the February low. NY markets have now joined virtually all other major bourses in being down year to date.

It's pretty difficult to put any sort of positive spin on the chart below. The only "good" thing I see at the moment is that sentiment is truly awful in NY. It might be awful enough to generate an oversold bounce.

I would not count on a bounce on the S&P being anything other than the "dead cat" variety until something changes for the better on the macro side.

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