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Price action over the prior week
Last weekend, I summarized my overall perspective in the metals complex as follows:
So, while my bigger perspective in the complex remains bullish, we may need a few more weeks of patience before this potential rocket gets ignited.
Anecdotal and other sentiment indications
For those of you who read my article posted yesterday, I am curious how many of you were so certain you were “smart money?” But, as the title of this article states, most investors have huge egos and you may be surprised as to why I say that.
As I have said so often, there is no holy grail in the market. Rather, one must approach markets based upon probabilities because there are no certainties in the market. Moreover, one must realize that markets are non-near creatures, and you must have an analysis methodology which applies to such an environment.
Yet, most investors will review the same linear, backward looking market statistics over and over, and then scratch their heads when the market does not comport to their perspectives based upon such linear paradigms. Here is an example from a comment to one of my articles last week:
“The stock market seems absurdly overpriced to me. Margin debt is very high. P/E ratios are very high. . . it is quite clear that the stock market has decoupled from reality”
Well, one has to ask “whose reality?” It seems that if people do not understand something, they either call it a name, make fun of it, or simply discard it as completely foolish or “decoupled from reality.” And, yes, I have faced this quite often in the comments section from those who do not understand Elliott Wave analysis.
This past weekend, I read another article wherein the author noted his perception of a “ridiculous disconnect. In short: stocks are out of control. . . Long story short, Friday plunged us even further into the equity disconnect twilight zone. . . . Of course, the valuations don’t make any sense either . . . It is quite literally out of control.”
But, if the market is not making sense based upon the prism through which one analyzes the market, maybe it’s time to consider that the prism does not work in understanding the market? I mean, isn’t that what this person is saying? He views the market as being in a “ridiculous disconnect,” in the “twilight zone,” not making any sense, and “literally out of control.” Yet, there is no consideration for the failing of the methodology or paradigm being used to come to those “reasoned conclusions,” which then resigns him to name calling.
Price is truth in the market. As Jesse Livermore would say, “A prudent speculator never argues with the tape. Markets are never wrong, opinions often are.”
Now, if you believe the market has “decoupled from reality,” then I can assure you that it is your ego talking, and not your analysis. What you are saying is that because YOU don’t understand what the market is doing, then it must be crazy. However, an astute investor would be searching for what does make sense in the market, especially when the commonly followed paradigm does not.
So, no, you are not going to identify a market top based upon margin debt, P/E ratios, or any of the other commonly followed matrices. And, no, you are not going to identify turns in gold based upon market news or a Trump tweet. That is because these are not controlling the market.
Will you resign yourself to calling the market names when it moves opposite your expectations? Or, will you attempt to identify what has been tracking the market rather well? And, that is why these articles are entitled “Sentiment Speaks.” Are you willing to put your ego aside and listen when sentiment is clearly speaking?
Price pattern sentiment indications and upcoming expectations
At this point in time, I cannot say my expectations in the complex has changed. My primary expectation is still to see downside consolidation in the overall complex. The only thing that would change my mind at this point is a strong move in GDX through the 24.65 level, and/or GLD breaking strongly over its April high. Barring those occurrences, I still expect the next week or two to see pullbacks in the overall complex.
Lastly, it seems that Seeking Alpha has changed the way they tag articles. So, while my articles used to be sent out as an email to those that follow the metals complex, they are now only being sent out to those that have chosen to “follow” me. So, if you would like notification as to when my articles are published, please hit the button at the top to “follow” me. Thank you.
Disclosure: I am/we are long PHYSICAL METALS AND VARIOUS MINING STOCKS.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I have short term hedges on my long positions.