On Tuesday, the stock market rallied and gold took a hit in the morning on headlines of cease-fire negotiations between representatives of Russia and Ukraine. It’s going to take weeks, if not months, for such talks to lead to a real cease-fire, but they are a positive development and stock market bulls used them as a reason to buy. In reality, the news didn’t matter much for the stock market as it has been rallying for three weeks now and is likely to rally more in a counter-trend move to what began around Thanksgiving of last year, when the Russell 2000 and ARKK ETF broke down, and then bonds broke, and then the Nasdaq after New Years.
Gold and mining stocks showed strength by taking back their Tuesday morning losses, with most big cap gold and silver stocks finishing the day in the green. This again is positive confirmation that the metals rally is real as I explained in the video I did earlier this week about the GDX/GLD ratio. If you missed it you can find that video here.
As for the stock market, the top gainers for Tuesday on the Nasdaq were LCID, ZM, and DOCU. All three of these stocks I consider to be junk stocks and all are among the holdings of the ARKK ETF. There was widespread buying in popular “meme” type stocks. Take look for example at Robinhood.
HOOD stock had a big rally day on beefy volume.
The ARKK ETF itself cleared its recent short-term resistance high of March.
In theory, the ARKK ETF could rally up to its next resistance level in the $80$-82.50 area, and it would still be way below its 150 and 200-day moving averages deep in a bear market. A move to $82.50 would take back 1/3 of its losses since its peak of June 2020.
The Russell 2000 also cleared its February and June high on Tuesday.
I think we are now at a point in this rally where the S&P 500 and DOW are likely to lag the action in the fad speculative stocks for a few weeks.
The thing is that the masses are really only interested in playing these type of stocks now, as I showed in my post yesterday. When they see HOOD go up 24% in a day they see the party light on and want to gamble it up.
However, for something you can buy and believe in, the recent dip in gold and silver provides a good entry point to get in if you missed the rally that launched in January and February.
For example, one could buy silver here and put a stop loss point right under its 200-day moving average below $23.50 and not even risk ten percent!
SLV is the most popular ETF for people who want to buy silver. I actually own PSLV, though, as it holds physical silver instead of derivatives.
By the way, REIT stocks went up a lot on Tuesday too.
I have owned the RWR ETF as a core position in my retirement account for almost two years now.
I don’t think this stock market rally is going to last forever and I fully expect a complete retest of the lows will be in the works for the US stock market averages with fad plays going into another collapse when this rally ends. That said, I’m not a bear who thinks we are heading for a repeat of the 2008 stock market crash. This cycle we are in now is more like a combination of the stagflation 1970’s and the 2000 tech bubble top. That’s one reason why I’m bullish on real estate – real estate was among the best things one could invest in during the inflationary 1970’s – and we should see any dips in gold, silver, and commodities as buying opportunities.