A year ago almost to the day we began tracking a ‘Macrocosmic’ theme that would eventually see gold bottom and rise vs. stocks and bonds in 2016, joining its bullish status vs. commodities, which had been in place since 2014.
Nominal gold bottomed in December 2015 before silver, commodities and stocks as a counter cyclical environment birthed a new precious metals bull market. We updated the progress here, here and here in 2016.
But markets, being the product of immeasurable moving parts, are always in motion and you cannot get too hung up on any one theme, ideology or habit. When the Semiconductor sector began burping up its positive signals for the economy and for stocks, we listened intently and I for one, put my capital where my mouth was and noted as much each week in NFTRH.
NFTRH 404 deviated from the usual format of widespread, in-depth coverage of US and global markets, precious metals and commodities in order to focus on two main themes. One was a view of building short-term risks in the gold market [possibly pending new rally highs] and the other of a developing bullish phase in the US stock market. We reproduce part of that segment here…
Subscriber ‘LN’ presented a view of the impending ‘breadth thrust’ signal and we both came to the same conclusion; that this is ending action in the stock market. It is at once very bullish and very bearish, depending on time frames. Below is additional information per ‘LN’, who is a financial adviser and thus, not a casual observer. I would also note that both ‘LN’ and I have similar caveats about analogs from the past projecting to the future (they often do not do it well). But for reference (emphasis mine)… Continue reading "More on the 'Breadth Thrust' and Market Internals"→
“If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would. You see?”–Alice in Wonderland
Silver out performs gold as both rise with Treasury bonds, which are in turn rising with stocks, as Junk bonds hit new recovery highs while USD remains firm as inflation expectations are out of the picture. This is highly atypical, maybe even unprecedented.
Some, deeply dug into their particular disciplines and biases, might say it is dysfunctional, as this backdrop simply does not make sense using conventional methods of analysis. Why again did I name this service Notes From the Rabbit Hole?
When the S&P 500 was robo rising month after month, year after year as it did from 2011 to 2015, you did not need the market report with the funny name because all was linear and as it should be. The same actually, could be said for gold. It was linear and as it should be in its relentless downtrend. Casino patrons simply ride the trends!
But today things are making sense simply because we don’t have a need to make them make sense as linear thinkers would do; we go with the indicators and charts. Continue reading "Wonderland"→
Yes, it’s another inflation post going up even as inflation expectations are in the dumper and casino patrons just cannot get enough of Treasury and Government bonds yielding 0%, near 0% and below 0%.
Feel free to tune out the lunatic inflation theories you’ve found at nftrh.com over the last few weeks. But if by chance you do want to look, here’s a visual path we have taken to arrive at the barn door, behind which are all those inflated chickens, roosting and waiting. All sorts of animals will get out of the barn if macro signals activate.
Gold led silver ever since the last inflationary blow off and blow out in early 2011. The gold-silver ratio rose through global deflation, US Goldilocks, good times and bad. There was no inflation problem, anywhere. Then early this year silver jerked leadership away from gold and now for the second time the ratio of gold to silver has broken below the moving average that has defined its trend (it did so in 2012 as well).
Why is this significant? Well, try on 2010 for size (see chart below). I for one happily managed the gold-silver ratio up spike in 2008, buying gold miners as they crashed. As gold (monetary, risk ‘off’) topped vs. silver (commodity/monetary, relatively risk ‘on’) we expanded the bullish view to commodities as well. But then came the bottoming pattern that was not a bottoming pattern. To this day I believe that the macro was preparing for a next leg up and some serious new destruction before Ben Bernanke, the “Hero”, sprung into action and ruined the beautiful Inverted H&S pattern that long-time NFTRH subscribers will remember me making a big deal about at the time. Continue reading "A Path Toward Inflation"→
“As far as the Fed and its puny rate hikes are concerned, that is irrelevant. This market is flipping them the bird. Markets can rise a long way before a rate hike regime finally kills them. It feels like inflation folks.”
This prompted a question from an NFTRH subscriber about what markets would benefit, and in what differing ways would they benefit if an inflationary phase comes to dominate? That is a far reaching question and a difficult one as well, because inflation’s effects have a way of being unpredictable (how many would have answered ‘US stock market’ in the spring of 2011 to the question “where will the post-crisis inflation to date manifest on this cycle”?).