One thing I have learned about most of the stock market bulls is that all they care about is the Nasdaq. They’ll ignore everything else, but as long as the Nasdaq is doing ok they do not worry about anything. So, in 2021 when the internals of the market went into a sharp decline, they ignored it. When the real estate market went down in 2006 and 2007 they ignored it too. And now there are signs of a sharp economic slowdown coming and they are also ignoring it.
Banks crashed a month ago and they do not care.
They think it means nothing to them, because the Nasdaq has been ok.
But, now the data shows that, in the last two weeks of March, credit conditions tightened up so fast that the amount of money being lent out by banks slumped at the sharpest rate in history. “Commercial bank lending dropped nearly $105 billion in the two weeks ended March 29, the most in Federal Reserve data back to 1973. The more than $45 billion decrease in the latest week was primarily due to a a drop in loans by small banks. The pullback in total lending in the last half of March was broad and included fewer real estate loans, as well as commercial and industrial loans,” reports Bloomberg.
Of course, this news will take time to have a measurable impact on the economy when it comes to jobs and GDP growth, but it is a sign of a sharp sudden slowdown to come. Bulls don’t care, because they are fixated on playing a “Fed pivot” rally and will continue to buy until that move ends.
What this means, though, is that this is a rally that one has to understanding is a trading rally and not an investing rally.
To invest you have to play moves that are part of rallies in deeper longer term upward trends.
That means looking outside the Nasdaq and at things, such as gold and silver, that are poised to benefit from the underlying macro environment.
My favorite indicator when it comes to them is the GDX/GLD ratio. This is a simple relative strength ratio that compares the price action in big cap mining stocks to the price of gold. It’s important, because the action in big cap mining stocks tends to lead gold prices. When this ratio goes down, it’s typically a sign of a coming top or decline in the price of gold, but when it goes up it means you are in a true confirmed bull move for gold.
And that is what is happening.
Gold and silver are simple things to buy and hold in a portfolio now, with ETF’s such as GLD, SLV or PHYS and PSLV. Gold is less volatile than the US stock market and has been outperforming it now for over 15 months.
Mining stocks are now soaring the way that big tech stocks used to do.
Take a look at AU, which I own, for instance.
And look at HMY.
Both of these stocks have already more than doubled since October.
Barrick isn’t as up as much, so one has an entry point on it, with a stop loss around $18.00, where it’s 50-day moving average is.
I own Barrick Gold too.
For more on gold and mining stocks check out these articles:
Gold Stocks Soaring Again – Adam Hamilton
Gold to $4000 in 2025 – Jordan Roy-Byrne
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-Mike
