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March 31, 2025
 
     
  Stock Bulls Manage A Quarter-End Markup ...Barely  
     
 

The Chinese equity market fell half a percent again overnight. The offshore dollar/yuan fell a freckle. Gold in yuan rose over a percent to a new all-timer, as it did in every other major foreign currency too.

Elsewhere in Asia, Hong Kong fell over a percent. Japanese equities fell 4 percent. JGB yields plunged 6 bps to 1.48%. The dol/yen began the day lower but then recovered to end up a hair.

European equity markets were off over a percent this morning and are finally beginning to join the US markets in breaking down. German 10yr yields initially plunged but then recovered to end up 1 bp to 2.74%. The eur/dol fell a touch.

Over in the US, the equity futures were off over a percent ahead of the open and trading at new lows for the bear market. The dollar was a little weaker vs. other paper. Gold was up nearly 40 bucks to a new all-timer, and yields were lower.

The S&Ps gapped down to the March low and then immediately plunged and took it out. That plunge marked the low for the day. What followed appeared to be the typical quarter-end markup, and the S&Ps would basically march higher all day until they eventually turned positive and went out near the highs with a gain of just over half a percent.

The VIX notably closed up 3 percent despite the higher close in the SPY.

Volume was chunky. Breadth was barely positive on the NYSE and nearly 2 to 1 negative on the NASDAQ. New lows swamped new highs on the NYSE (276 to 51), and new lows swamped new highs on the NASDAQ (696 to 61).

Stocks Were Mixed:

Stocks were mixed in no particular pattern in what was your typical quarter-end shuffle that has no real rhyme or reason to it.

The XHB homebuilding ETF rose a percent, and BLDR rose a touch.

Positions: I left my shorts unchanged in SPY, QQQ, MDY, IWM, ARKK, XHB, and BLDR. I'm hoping for a little more upside tomorrow on the 1st of the month before I buy SPY puts.

Commodities Were Higher:

Brent crude jumped over 3 percent to a new high for the move since its recent low after Trump threatened secondary tariffs on anyone buying Venezuela oil and potentially Russian oil if Putin doesn't play nice soon. Natural gas rose a percent. The oil stocks were higher, with the oil and gas ETFs all adding a percent or less, but they notably made lower highs relative to last week unlike crude. The uranium equities were lower, with the URNM losing a touch.

Copper fell a percent to another new low for the move since its recent high. Other base metals were lower too, with the DBB base metals ETF losing half a percent. The copper stocks were sold again, with the COPX losing 2 percent. The steel stocks were lower too, with the SLX losing half a percent. The XME metals and mining ETF lost over a percent.

Palladium rose 2 percent, and platinum rose over a percent.

Silver fell a touch.

The SLV/GLD ratio plunged over a percent to a new 2-year low.

The CCI equal-weighted commodity index ETF (GCC) rose half a percent and still looks to be potentially putting in a right shoulder of a H&S top. The energy-heavy DBC commodity ETF rose over a percent. The Bloomberg Commodity Index (DJP) rose a percent too.

Gold Popped To Another New All-Timer:

Spot gold popped to a new high on the open overnight to just shy of $3100, and after a brief check back to $3080 after the round number of $3100 seemed to trigger a little selling, the metal began to grind its way higher and would continue to firm until it hit a high of $3127.

After slipping into a sideways chop just off that high, the metal then opened in the US at roughly $3127 and would plunge back to $3100 to mark the low for the US session.

From that low, the metal quickly rebounded back up to its overnight high, where a small pullback occurred down to $3114. The metal then spent the remainder of the session working back up to the highs to eventually go out near the best levels of the day for a gain of over a percent to a new all-time high of $3124.

Note that if the most recent consolidation that gold broke out of last week was indeed a "pennant," it measures to $3150 spot.

Gold Stocks Plunged But Recovered:

The GDX opened higher inside of Friday's range and immediately collapsed to below the 5 dma and the 10 dma and tagged the uptrend since Feb 28th low to mark the low of the day. From there, the GDX would rebound, and much like the S&Ps, it would spend the rest of the session working higher to eventually go out back up near the open with a gain of almost a percent. Once again, the GDX closed above the 5 dma, so the bulls remain in charge despite almost breaking and running today.

The GDX/GLD ratio plunged and recovered but still ended down half a percent.

The silver stocks were heavier than the gold names. The SIL fell a touch. The SILJ fell a percent, and the GDXJ rose over half a percent.

Real yields were lower, and nominal yields were lower too. The yield curve flattened again per the 2/10 spread. The dollar was firmer vs. other paper, but once again that didn't appear to matter much to gold, which popped in all the major currencies once again.

Turns out that my initial thought about the bulls likely ramming gold higher into quarter-end was correct. With that said, gold is now even more extended in what still looks like a "wave 5 of 5," and we could see the rally flameout and give way to a correction at any time, which is what I believe the tepid action in silver and the gold stocks are suggesting as well.

On the other hand, gold shows no real sign of turning over yet and could still spike to who knows what number before it eventually turns over. You will see below that I covered my gold short for precisely that reason. The longer gold goes straight up like this though, the more damage it is going to do when it does finally turn over. Markets that go parabolic don't typically end well. Slow and steady wins the race.

Tomorrow we'll get the ISM as well as JOLTS, but I honestly don't think economic data means much to gold at this point. It appears to be trading on purely momentum, and momentum buyers only care about where momentum ends.

My gold model remained on a Trifecta SELL for a second session, and any downside tomorrow would confirm the signal. The degree of downside would then need to be monitored to see if this is just another mild pullback or something a little nastier ("nastier" is still where I am leaning).

Positions: I added to GDXD late in the day and covered my short in the gold futures for fear of a spike overnight. I also bought some GDX 43 puts for Friday.

The Dollar Was Firmer:

The dollar was a little firmer vs. other paper. The dollar index rose a touch. This pig may not make it to the 200 dma before it rolls again.

Bitcoin bounced a touch. Again, BTC is back to trading like a liquidity widget, which means it's just a spoo (I remain long IBIT; I don't trade it). MSTR, COIN, RIOT and other BTC derivatives were all lower again.

Treasury Yields Were Lower:

Treasury yields fell 4 bps in the long end, which left the 10yr yield at 4.21%.

The 2/10 spread flattened a little again. As the curve steepens after being inverted for an extended period of time, we typically start to see things go awry in the equity market ahead of a recession. That will bring on rate cuts eventually, which is what gold wants, but not yet.

Yields in the Fed sensitive 2yr fell 2 bps to 3.91%. Junk debt bounced, with the HYG adding a touch. LQD, which is the investment grade corp bond ETF, rose a touch.

To Sum Things Up:

I don't think it's any surprise that we saw a quarter-end bounce in stocks today, but I also think it's important to note that all the major indices made new bear market lows today too.

With all eyes on Wed's tariff announcements, which is going to be announced at a Rose Garden ceremony (i.e. - sometime in the afternoon), I have no idea what the kneejerk move is going to be to the tariff news, but the key is that the tariffs by themselves aren't what is driving stocks lower. So, if we do see some sort of wild bounce on the news, it's going to be a sale. By the same token, tariff news could also be the excuse for even more selling. I don't have a real firm opinion one way or the other at the moment other than I believe stocks are going lower.

As for gold, it continues to be in what looks a lot like a blowoff, and it's not out of the question that it could continue to spike into "Liberation Day" given how many people appear to be buying it as a "tariff hedge."

If stocks break to new lows in the coming days though, I suspect we're going to start to see some liquidity issues (note foreign markets are finally cracking now too). If that's the case, then stocks are going to take the precious metals lower with them this time, and the gold stocks will lead the way into the toilet. Friday was out first small taste of the GDX and silver being weighed on by equities even as gold made a new high, but that's what it looks like. Be careful out there...

REMAIN FLEXIBLE

 
     
     
 
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Disclaimer: Lance Lewis periodically publishes columns expressing his personal views regarding particular securities, securities market conditions, and personal and institutional investing in general, as well as related subjects.

Mr. Lewis is the president of Lewis Capital, which is a registered investment advisory firm in Dallas, Texas. The firm regularly buys, sells, or holds securities that are the subject of Mr. Lewis’ columns, or options with respect to those securities, and regularly holds positions in such securities or options as of the date those columns are published. The views and opinions expressed in Mr. Lewis' columns are not intended to constitute a description of the securities bought, sold, or held by the firm in its capacity as an advisor. The views and opinions expressed in Mr. Lewis' columns are also not an indication of any intention to buy, sell, or hold any security on behalf of the advisor’s clients, and investment decisions made on behalf of clients may change at any time and for any reason. Mr. Lewis' columns are not intended to constitute investment advice or a recommendation to buy, sell, or hold any security.

 
   
     
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