US Equities

The invisible hand continues to press down on the stock market. The 05/06 swing low has been retested twice on diminishing volume. This suggests that the downside force is decaying. Decaying downside force tends to precede short-term trend reversals. The 5/20 and 5/14 overhead gap would provide resistance to any short-term rally.

S&P 500 ETF (SPY) with exchange volume:


NetHL%(E), a measure of internal market strength, continues to show a positive divergence relative to price. In other words, as price has retested the lows, NetHL% has traced out a slightly higher low. This also suggests that the short-term downside force is decaying.

S&P 500 Breadth:


While the short-term downside force is weakening, it is hardly an endorsement for buying equities. Equities can easily defy consensus opinion by trading higher into cyclical high due later this summer, but they are unlikely to outperform gold for long. The swing low in the S&P 500 to gold ratio has been breached to the downside. It's only a matter of time before 2009 lows are broken.

The sweet spot for capital flows will continue to be gold & silver and high-quality gold & silver equity plays.

S&P 500 to Gold Ratio: