"There Are Lots Of Good Reasons The Market Should Crash" | New Harbor Financial

Financial Select Sector SPDR Fund

• Mike Preston · New Harbor Financial GroupBullish

  Bank ETF XLF has a strong base breakout and relative strength; New Harbor is adding bank exposure.

  Mike points to a large base on the XLF bank ETF. Despite a bearish engulfing bar the prior week, price is back at the base breakout level and showing strong relative strength. He expects it to inch back up in the coming days, and banks are among the sectors New Harbor is looking to add to as part of its signal-driven re-entry.

  “believe it or not, banks are looking pretty good here. Banks, this is XLF... Look at this big base... we're right back to where that base breakout is, and we're showing strong relative strength.”at 6:50

Royal Gold

• Mike Preston · New Harbor Financial GroupBullish

  Royal Gold is breaking out and challenging January highs while gold and silver lag, showing strong relative strength.

  He describes Royal Gold, the second-largest streaming company, as one of the leading gold stocks showing huge relative performance. The chart shows a nice base followed by a breakout above a recent high, and the stock is now challenging its January highs. This strength is happening while gold and silver remain depressed, which he sees as a good sign for gold miners and streamers.

  “Look at that nice base and then boom, we broke out of a recent high and so we're we're challenging the January highs on royal gold all while gold and silver are down in the doldrum.”at 45:54

Bitcoin

Across the shows: 25 speakers in other episodes, 24 bullish and 8 bearish calls, past 30 days

• Mike Preston · New Harbor Financial GroupBullish

  Bitcoin is bullish tactically if it reclaims $84,000 and could reach $150,000 within a year.

  On a point-and-figure chart, Bitcoin is near $73,000 and has gone nowhere for about five years. He points to an inverse head-and-shoulders base that broke out to $125,000, though the 2021 double top has since been erased, and $60,000 has held as the bottom so far. He wants iBit to get back above $47, roughly $84,000 for Bitcoin, before acting tactically. If it does not fake out again, he thinks a run to the top over the next year is possible, perhaps $150,000, especially if gold and silver hit their targets. He calls it bullish but more volatile and not for everyone. His firm does not hold Bitcoin now.

  “And then from there, if it's not another fake out like this one, then I think we can make a run for the top over the next year. And maybe go to a 150 k or something like that.”at 58:46

US stock market outlook

• Mike Preston · New Harbor Financial Group

  Small caps show good relative strength; New Harbor plans to add small-cap exposure soon.

  Mike says the chart for small caps looks good and they are showing good relative strength. It is one of the firm's stronger symbols, and the signal system is turning positive, so they are probably going to add small caps.

  “we're probably gonna add something like one of our stronger symbols. Small caps. The chart looks good and they're showing good relative strength”at 6:41

• Mike Preston · New Harbor Financial Group

  Last Thursday's selloff is 70-80% likely a rogue wave; system signals point to higher prices.

  The Nasdaq broke below its 200-day moving average and AI stocks, including an AI ETF, were hit hard. But the S&P recovered almost the whole day's loss and the Dow and NYSE breadth indicators have given buy signals. Only the Nasdaq has not yet, though it is likely to reverse up. Mike sees the selloff as emotional and likely to load negative energy that pushes the market higher. He is not trading aggressively and expects to add equity soon.

  “I'm gonna say that it's 70 or 80% likely at this point that that was a rogue wave that's kind of loading the energy, loading the chamber, so to speak, of negativity to potentially push us higher.”at 6:50

• Mike Preston · New Harbor Financial Group

  Market is severely overvalued near the end of a big move and may be topping, so no aggressive buying.

  Mike says the market is severely overvalued and at the tail end of a big move, and is likely trying to find a top if it has not already. He allows for a possible blow-off top and further parabolic rise first. Either way, the firm will not get aggressive, because they know where they are in the cycle. They will raise equity exposure only from 37.5% to perhaps the forties, or as high as 50%.

  “Bear in mind that we are in a severely overvalued market that is at the tail end of a big move and the bigger picture is that this market is likely trying to find a top if it hasn't already”at 10:18

• John Llodra · New Harbor Financial Group

  Dashboard biases the market to drift or melt higher through year-end despite midterm-year averages.

  New Harbor's dashboard, which reads breadth and buy-signal indicators, biases them to expect the market to drift or melt up through the end of the year. They put little weight on averages such as post-midterm-year seasonality, because averages hide wide dispersion and can be bucked in ways that hurt clients. They follow what the market is signalling rather than what history says on average.

  “We do have a bias that the market probably drifts, if not melts up higher through the end of the year based upon where our dashboard is today.”at 16:32

• John Llodra · New Harbor Financial Group

  Tech is not dead after sharp rotation out of it; expect relief rally, so be cautious adding.

  Information technology fell from up 31% year-to-date a month earlier to about 9.5%, a sharp reversal, and energy and staples rotated sharply too. New Harbor has been underweight tech for reasons they have discussed before. They say tech is not dead, so investors who are heavily in it may find a better exit in the coming days or weeks as a relief rally forms, while newcomers should be cautious entering. Their system is deliberately slower than these moves, to avoid being whipsawed.

  “So we don't think the tech sector is dead. We think if you're be cautious entering some of these sectors if you're not already invested.”at 18:07

• John Llodra · New Harbor Financial Group

  Valuations are extreme; a disruptive, downward-biased US market next year is materially likely.

  New Harbor says valuations are incredibly extreme and that the market should crash at some point, and they do not think current levels are sustainable for long. Valuations are one reason among many. Sparks they flag include a large European bank selling a big portfolio of private credit loans in a panic, and tech, the sector that has drifted the market higher. If tech rallies to resistance and breadth falters underneath the surface, a cascade could follow. Late-stage topping processes, as in the tech and housing busts, feature swift sell-offs and face-ripping rallies that trap investors. Their indicator panel is meant to help them scale back risk and re-enter later.

  “I think there's a very material likelihood we get a very disruptive, very volatile, very downward biased stock market next year for a lot of reasons. Valuations are just one.”at 25:51

Gold & precious metals

• John Llodra · New Harbor Financial Group

  Heavy US debt will be inflated away, so precious metals are a longer-term hedge despite short-term bumps.

  Citing Ray Dalio's study of empires, John says that when a reserve-currency power reaches the point where it cannot service its debt, it does not default but inflates the debt away. He agrees with the debt-devaluation logic behind gold's appeal. Short-term technicals in gold are ugly, but the longer-term backdrop makes precious metals an important hedge, even if the path is bumpy. His firm holds gold through its portfolio.

  “You get to a point where you can't service that debt, and you don't default on it. You figure out a way to inflate it away. And that's exactly why we think longer term precious metals are going to be an important hedge, even if they're a bumpy one on shorter term timeframes.”at 52:31

• Mike Preston · New Harbor Financial Group

  Gold's island reversal is bullish; he targets $6,000-plus gold within a couple of years if levels hold.

  On the GLD daily chart, gold gapped down for three days, traded sideways, took out the July lows, then gapped up, forming an island reversal that he calls bullish as long as the low holds. Near term, a hot CPI print raised rate-hike expectations and lifted the dollar, which pressured gold. He says gold needs to get above $4,400-4,500 to confirm the bottom, and a short squeeze could add several hundred dollars quickly. If gold and silver reach his targets, with gold at $6,000-plus, he expects a meaningful move higher over the next couple of years. His firm holds about an 11.5% position in gold, silver bullion and miners.

  “If gold and silver work out to our targets, which would be something like, you know, 6,000 plus gold, a new high on silver, one fifty plus, in the next couple of years”at 58:53

AI chips & semiconductors

• John Llodra · New Harbor Financial Group

  Semiconductor sentiment is washed out, with only about 12% of stocks on buy signals; a sharp rally is likely.

  Only about 12% of semiconductor-sector stocks were on point-and-figure bullish-percent buy signals as of the prior day. At the extremes, that is a contrarian indicator: such washed-out sentiment typically comes before a very sharp short-term rally. Semiconductors were strong that day, and the bullish-percent chart had just reversed up, though one day is not a trend.

  “And at the extremes, it can be a very contrarian indicator. So I look at here, for example, semiconductors. Only about 12% of stocks in the semiconductor sector were... on bullish percent buy signals.”at 17:34

US rates & the Fed

• John Llodra · New Harbor Financial Group

  The hot CPI is not a big shock; the market already priced in a December quarter-point hike.

  The CPI report was a shock to many watchers, and a Fed governor's comment had also raised expectations. But CME Fed-funds probabilities show the market had generally priced at least one quarter-point hike at the December meeting. Since then, the chance of holding steady has gone to zero and the chance of a 50-basis-point hike has risen. John sees that as notable but not a huge shock, and not necessarily disruptive. Expectations for early-2027 hikes have also risen.

  “I don't think it's a huge shock to the market because the market generally has been pricing in at least one rate hike, a quarter point rate hike at the December meeting.”at 22:55

US Treasuries & yields

• John Llodra · New Harbor Financial Group

  Fed hikes that quell inflation could let long-term yields fall rather than rise.

  The Fed controls short rates, while long rates matter more for the economy and corporate refinancing. John argues there is a plausible line of logic: if the Fed raises short rates enough to remove worries about sticky inflation, the long end can rally and yields can fall. He says a point could come where this happens, possibly close to now, depending on how stern the Fed is about raising short rates. Oil is a wild card for inflation.

  “there is a plausible line of logic that if the Fed raises short term rates enough to take away meaningful worries about sticky inflation, that the long end of the curve can actually rally in terms of rates coming down”at 23:28

US dollar

• Mike Preston · New Harbor Financial Group

  The dollar is breaking out and will likely reach 108-110, above Brent Johnson's caution level.

  The dollar has broken out of a cup-and-handle base around 103, and the weekly chart is threatening a larger breakout if it moves to about 103.50. He disagrees with Brent Johnson's view that 108-110 is a danger level and thinks the dollar will get there anyway. A stronger-than-expected CPI print raised rate-hike expectations, pulling money into the dollar. He calls this a short-term headwind for gold, which could still rise despite a stronger dollar.

  “I'm not so sure. I think we're gonna go to one zero eight or one ten.”at 43:06