Inflation Signals Non-Existent by TIP-TLT

Another NFTRH 287 excerpt…

tip.tlt

It’s a busy I chart, I grant you. But these are my favorite charts because in their busy way they try to tell stories. The story told by TIP (Inflation protected Treasury bonds) vs. TLT (regular long-term T bonds) is not one of inflationary concerns. Quite the contrary, TIP-TLT shows a break down in inflation expectations.

The gold ‘community’ does not publicize this because it is antithetical to the fundamental they most often tout for gold (inflation). In the short-term, a deflationary bout may indeed be a negative. But in the longer-term, a failing ‘inflation trade’ would be what eventually builds stronger fundamentals for the sector. Again, economic contraction (with gold rising not necessarily in nominal terms but in relation to most everything else) is what the sector needs. Moderate the inflation hysterics.

The above picture would be positive for US stocks if it results in a continued Goldilocks atmosphere, but last year Goldilocks held sway with TIP-TLT gently rising but muted. It is debatable how well she would do if this indicator of deflationary pressure keeps dropping.

CoT – Gold, Silver, Commodities & T Notes

Among its 29 pages of high quality market analysis, this week’s NFTRH (#287) reviewed the Commitments of Traders (CoT) structures of a few markets and their implications.

cot.au

The above CoT graph clearly shows that gold has declined as the structure improved (red arrows). It then bottoms with the circled extremes and rises in conjunction with a degrading structure (green arrows). Gold is still on its journey toward bottoming.

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10-2 Yield Curve Flips

I don’t want to became a yield curve play-by-play announcer, but the spread flipped this morning in a lurch toward risk ‘off’ as yields drop with the 2′s dropping more.  What’s it mean?  Hey, these are manic, over played, over stimulated markets.  It means what it means… for this little moment in time.  I am just the play-by-play guy, not your Swami.  :-)

10.2.yields

10.2 spread from Bloomberg

10-2 Yield Spread Down Again

The 10 vs. 2 is, you guessed it, unfavorable for gold once again as it has been for a week now.  The declining spread (2′s up harder than 10′s) indicates that risk is coming back ‘ON’ in the markets as people dump their liquidity safe havens in the 1-3 year realm.*

10.2.yields

10yr – 2yr yield spread from Bloomberg

The good news for gold – should risk go ‘off’ again – is that it is no longer part of the ‘all one market’ syndrome.  It’s a risk ‘OFF’ item, which is what it should be.  Tune out the myriad rationalizations by conspiracy detectives and realize that gold is going nowhere until a counter cycle is indicated.

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NFTRH 287 Out Now

nftrh287We got the market bounce that was anticipated by NFTRH 286.  Now #287 gets about the business of gauging what the bounce will be.  A post here at the site set a target for the NDX up around 3600.  If that comes about, the S&P 500 for one could pop to new highs.

Then, there is the Semiconductor status to deal with (above 10 year support) and a whole host of indicators that beg caution.  The market is now fun for me even though the Market Gurus Association would not even let me in the front door, let alone issue me a crystal ball.

Precious metals?  Well there’s a short-term view, which I think we all know by now is bearish.  But there remains a longer-term view that continues to support a different potential.

Also, in line with the rhythms of my own personal journey, a new aspect of the service will be coming as I finally get comfortable with the idea of managing chart based trading opportunities, both long and short for those interested.  NFTRH+ (trading) will be coming soon and it will give some people more of what they want, while separating out noisy updates for those who want to keep a non-trader’s perspective, which should in my opinion be the majority of people who are not full time market participants.

NFTRH 287 is out now and it’s (IMO) a good one.