The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, May 30, 2016.

A subscriber asks, "When will the top in stocks be?" My answer is of course 'I don't know'. Barrons answer is not yet, which should worry people as you will see below. In terms of making a case for this, my best guess based on things that matter is when speculators have had enough of shorting the market, which is in fact not yet. As mentioned last week in our sentiment study, open interest put / call ratios are still high on too may ETF's in order to expect significant downside. Enter the Fed's hawkish comments of late, and we have yet another counterintuitive short squeeze. Bottom line is you don't short stocks in this environment unless you are the only guy doing it, because the machines will find the shorts, no matter if the field narrows, and squeeze them out. That's what they are programmed to do.

And if stocks were to start falling in earnest, you can bet the Fed is so worried about Trump getting in, it would pull out all the stops to support stocks in spite of recent hawkish comments. This is just a ruse because it's working right now, again, causing a counterintuitive squeeze in stocks, not to mention, smashing of precious metal prices. This was expected however, along with the propensity of precious metal shares to remain relatively buoyant, in the neighborhood of 200 on the Gold Bugs Index (HUI) - closing basis. And again, based on the observation the GDX and DUST put / call ratios don't see radical change moving forward, any volley's in precious metal shares lower should not be lasting, even if the HUI closes below 190 (important support), especially as the month clicks over and options expiry approaches.

Back to the stock market for a minute. You will remember from here a few weeks back I thought it was possible the rally in stocks would continue until the S&P 500 (SPX) / CBOE Volatility Index (VIX) Ratio (see below) vexed the sinusoidal, again, because of all the speculators long volatility, and I am still in this camp, becoming an ever closer reality. So if you are wondering exactly when it would be a good time to short stocks / buy puts, assuming broad market ETF open interest put / call ratios are not higher, this would be it. Because while it's always possible it goes to the extreme sinusoidal rail in the monthly picture below, still, you would likely be in the ballpark. Because all this tension associated with the 'Trump thing' right now will fade eventually, which should exhaust the nervous money at some point. (i.e. halting the squeeze.)

Up into this point, don't expect the Fed to get ultra-dovish just yet, because again, the current storyline is working out so well. And they may not need to if the Brits vote 'no' on Brexit, because again, if this is indeed what occurs, the euro will rally substantially post vote, with the $ seeing a sell-off without having to do anything. So no matter how much Hillary's election prospects fade between now and whenever, the Fed will be able to continue talking 'strong economy' no matter what; again, with any luck (from their perspective), helping her out. With the mainstream media (MSM) in the States now beginning to turn on her, along with apparently unfavorable official investigations, such considerations might not matter much longer. (See Figure 1)

Figure 1

And in the if you can believe it department, in spite of open interest put / call ratios being generally low and declining, because of an improving book to bill ratio for semiconductors (who is buying these things?), and the fact we are still far away from the next options expiry, fundamental buying in this sub-sector could lift all tech related boats temporarily, which in turn would lift the entire stock market. So, whatever you do, don't be short stocks here until this gets sorted out, or the NASDAQ / NASDAQ Volatility Index Ratio hits at least one of the Fibonacci resonance related targets shown below. If the NASDAQ 100 / Dow Ratio (seen here) remains well behaved with stocks continuing higher this week, then the lower target may be the 'stopping point'. Watch the put / call ratio for the SOX (see here) as well. If goes higher the squeeze could get stupid. (See Figure 2)

Figure 2

Switching to silver now. Big declines in both silver and gold COTS this week, which is just on time to save the metals from breaking down. In terms of silver, and trading the inverse head and shoulders (H&S) pattern discussed last week, while it might be pushed below $16 briefly by dollar($) weakness, it's probably safe to jump back in the pool, because a great deal of additional speculator selling would likely have occurred into Friday's close. What's more, as you can see below, important technical signals on the monthly plot are now aligning (time lines, moving averages, stochastics, etc.), where once RSI breaks back into the channel, silver will begin to rally relentlessly - catching the unsuspecting off guard - just like what happened in the shares since January. A monthly close above the large round number at $20 would definitely be a signal you could count on. (See Figure 3)

Figure 3

So any break in silver below $16 in coming days should be viewed as a gift, if it happens. Because for longer-term investors, based on what we know above, present pricing is attractive. Big open interest (OI) drops on Comex gold have been witnessed since Tuesday, which could (should?) make the next report as dramatic as the present report (see above). This will bring OI back to levels capable of sponsoring a rally. The continued 'fly in the ointment could be the $, where it looking like it will chart an 'outside reversal month higher' here in May. (i.e. and gold an 'outside down month' - suggestive of a an extended correction.) And again, the Fed is not about to change the game because it's working so well. So expect more 'hawkish comments' this week out of Yellen. This might set the bottom however, because now internals for the shares and bullion both allow for higher prices.

Because the thing is, even if we do witness an outside months on the $ and gold, this will be the result of a manufactured story that will need to be reversed some time, because the economy is actually in real trouble of course. What's more, with the Brits unlikely to vote for Brexit, the coming month could just as easily see a similarly profound reversal in the $ back down. One thing is for sure, while it's possible for present trends in the markets to be maintained into June, every day we get closer to the Brexit vote, the odds of reversals increase - so act accordingly. As always, the single most important factor to keep an eye on is speculator betting practices via open interest put / call ratios on the key ETF's. Therein, if the ratios for GDX and DUST were start going the wrong ways (down and up respectively) due to the belief the second stage of the rally had begun, precious metal shares would start falling precipitously not long afterwards.

Good investing is possible in precious metals.