With major markets rebounding strongly today, this is truly amazing – one for the history books.
The New Order
By Bill Fleckenstein President Of Fleckenstein Capital
February 12 (King World News) – Motion continued to be the new order, as opposed to the total lack of volatility to which we had become accustomed. At one point the S&P futures were up 1.5%, then in about 15 minutes they sold off to basically unchanged.
Since there is going to be so much motion prospectively — and so little of it will be meaningful — I am going to skip over a lot of it because I don’t think it will necessarily tell us anything. The real question is, what is the path lower going to look like? I could come up with many different scenarios, but there is no clear “winner.” (Obviously, it is only my opinion that we are headed lower, though I feel quite confident about that, even if I can’t get a good handle on the path.)…
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And let us not forget that the reason why it’s hard to figure out how market action may evolve is because we are in an environment we’ve never seen before. (Just as we’d never seen QE, we never saw QT before, either.) However, the combination of QT and the brittle structure I have described many times makes me continue to believe that the path lower will contain many trapdoors, so we need to watch for when the real fireworks may start.
In any case, with a half an hour to go, when I had to leave, the market was about 2% higher on the day. Away from stocks, green paper was slightly weaker, fixed income was lower, the metals saw a bounce, led by silver, which gained 1.5% to 0.75% for gold, and the miners staged a decent rally.
Started At the Bottom, Now They’re Here
Last Friday, with a couple of minutes to go, after I’d finished writing the Rap, the GDX staged a monster reversal to rally from being down 2% to 3% back to flat. When I looked at the prints, it looked like it could have been some sort of error or monkey business, so I wanted to see how it traded today in order to determine if that reversal “on paper” was real.
Given that the GDX traded higher today, I think there is a very high probability that Friday’s pukefest was the end of the slaughter that the miners have seen relative to gold. Hopefully, from here they will move in the same direction as gold (as opposed to counter to it), only at a faster rate.
Included below are two questions and answers from the Q&A’s with Bill Fleckenstein.
One For The History Books
Question: Bill, this is getting quite ridiculous… I think while this market has been one for the history books on the upside, the gold miners have to be one for the history books in terms of most hated stocks ever.
Gold is just 3.7% off a recently set 52-week high. Meanwhile, GDX just hit a new 52-week low.
Last 12 months:
GLD +6.4%
GDX -15%
GDXJ -26%
Answer from Fleck: “I couldn’t agree more. I wish I could explain it, but I can’t.”
Truly Amazing
Question: Seems truly amazing that, year-to-date,
S&P is down ~4.5%, gold is UP ~1%, and GDX is DOWN 9%!
Has there ever been a sector more hated than miners?
Answer from Fleck: “While gold is up 1% and doing better than stocks. No, not in my opinion.”
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