SOX-SPX is still down below the channel. While the book-to-bill data have been firm (through June), the Semi index is starting to act like it would like to be in line with 2013 bullish running mate PALL-Gold, which is now bearish.
As for former leader RUT, it is just too erratic now (vs. SPX) to do much good as a short-term indicator.
With reference to the first chart above, here’s it’s pal PALL-Gold on its ‘economic down’ signal. Again, we recall that it was quite some time before PALL-Gold seemed to mean anything to the majority of participants when it triggered up early in 2013. So what about the recent signal? Should we not have the same kind of patience, in reverse, as back then?
After all, mainstream financial professionals were cashed up and braced against the ‘Fiscal Cliff’ disaster in Q4 2012 and did not begin to recognize a new market phase until well into 2013. I know this for a fact, since I interacted with one who spoke for the ‘best and brightest’ fund managers back then. We also know our friends at the MSM were in full bear mode back then.
Maybe PALL-Gold means nothing this time and maybe the Semi divergence is going to repair itself. Then again, maybe not, which is why I think patience is kind of a big thing now.
To begin with, I like Mark Mobius. When I feel like Asia and Emerging markets are worthy of investment I use Mobius’ actively managed funds as opposed to FXI or EEM (associated bull and bear funds of which are very tradable).
On crude oil: “at below 50 this is something that no one, ah, ever imagined…”
This is something I would take issue with. Prechter most certainly imagined it, and stated so even at the peak of ‘Peak Oil’ hype, which is just another beautiful illustration of human hysteria in financial markets. I do not assign prices to things unless I can chart them, and so I have long-since assigned 1.50/lb. to copper. But during the ‘Peak Oil!’ craze I did my share of bitching and moaning about it from a contrarian perspective.
Anyway, Mobius goes on to say that he thinks the price of oil has no relationship to its supply/demand fundamentals. He says it is all sentiment. One thing I would mention is that Deflation is largely sentiment as well. At some point it becomes impulsive (as leverage gets taken down, as in Q4 2008) but for now, as Prechter often states, a deflationary mindset is taking hold. Commodities have been ground zero for the first phase of Deflation, which makes sense.
Also of note on Mobius, he thinks that some commodities (in particular the precious metals) are going to get a spike upward soon. He then babbles about supply/demand in the precious metals, which is to be ignored. But like many gold bugs, he may just dumb luck into a gold rally… if risk goes ‘OFF’. That is where the PM’s would assume ‘1st mover’ status in [anticipation of] any coming inflationary operations.
In a blog post a couple of weeks ago I noted that it’s normal for large and fast price declines in the major financial markets to be accompanied by unusually-high trading volumes, meaning that it’s normal for large and fast price declines in the major financial markets to be accompanied by increased BUYING. I then wondered aloud as to why it is held up as evidence that something nefarious or strange is happening whenever an increase in gold buying accompanies a sharp decline in the gold price. Right on cue, ZeroHedge.com (ZH) has just published an article marveling — as if it were an inexplicable development — at how the recent sharp decline in the gold price was accompanied by an increase in buying.
Don’t look now but the Dow Transports are working on a short-term trend change to the upside with a ‘W’ bottom and a pop above the declining MA 50’s.
Will TRAN have ended up leading the way to the mildest of market sags before bullish reversal? Well, not until it gets through the red resistance line and then the MA 200. If it does those things, it is going to get bullish and if Dow Theory means much (I still have my doubts) it would eventually spread out to the broad markets. First things first…
The answer to the first question is ‘sort of’. The answer to the second question is no. The effects of having an institution with the power to manipulate interest rates and the money supply at whim are equally pernicious whether the institution is privately or publicly owned. However, if you strongly believe that the government can not only be trusted to ‘manage’ money and interest rates but is capable of doing so to the benefit of the economy, then please contact me immediately because I can do you a terrific deal on the purchase of the Eiffel Tower.
Doctor Martenson came from the same group of alarmists that I came from early in the Greenspan Inflation around 2002-2004. It is one thing to be alarmist (we were proven correct in 2007-2009, but my preferred tack was to play these macro swings driven by out of control policy. First off, secure true monetary value (hint hint) and second, get rid of personal, and in my case business, debt. Then go forth and speculate (this included bullish stock market positions in 2003-2007).
Where I disagree with certain types of gold bugs and alarmists is that you do not live your ideology or even your deepest held beliefs on a daily basis; not in the financial markets you don’t. You continually remain vigilent as to negative potentials and you go forth and you enjoy life as best you can in sometimes insane circumstances. But you do not scare the shit out of people in the here and now, because most of those people receiving the information are going to make emotional moves in real time and then… the macro crawls along ever so slowly to where it is going.
That is why I tune these things down, despite the obvious intelligence of the speaker. It’s all psychology my friends. I put the Armstrong input I get in the same category. These are the financial markets, not some war of ideology.
This interview came my way via LinkedIn.
 I have not listened to Chris in a long time. How long has he been talking about deflation? I thought the big focus had been on inflation. The contrarian in me is curious.
In a tiny subsection of the analytical world, analysis is becoming more pointed and poignant. I appreciate Bill Gross’s August commentary, where he concluded: “Say a little prayer that the BIS, yours truly, and a growing cast of contrarians, such as Jim Bianco and CNBC’s Rick Santelli, can convince the establishment that their world has changed.”
I’ll include the names Russell Napier, Albert Edwards and David Stockman as serious analysts whose views are especially pertinent. I presume each will exert minimal effect on “the establishment.”
Back to Bill Gross: “The BIS emphatically avers that there are substantial medium term costs of ‘persistent ultra-low interest rates’. Such rates they claim, ‘sap banks’ interest margins…cause pervasive mispricing in financial markets…threaten the solvency of insurance companies and pension funds…and as a result test technical, economic, legal and even political boundaries.’ ‘…The reason [the Fed will commence rate increases] will be that the central bankers that are charged with leading the global financial markets – the Fed and the BOE for now – are wising up; that the Taylor rule and any other standard signal of monetary policy must now be discarded into the trash bin of history.”
NFTRH 354 was produced as an online edition at NFTRH.com on Friday morning before the US opening bell and this morning a 13 page PDF ‘add-on’ went out to add color and perspective, especially on the bigger picture using mostly long-term charts.
The “dollar” has ended the month much the way it started. Despite headlines suggesting the dollar is “down” today, it is very much proving to be disruptive across every proxy. Gold was down to $1,080 at the AM fix before rebounding. Commodities were sold broadly, with copper back near $2.359, down almost $0.02 at some parts of the futures curve; oil is down too, with WTI in the front back close to $47.
Kind of a dumb rock song I guess. Somehow Chris using his software, took my guitar and turned it around; inverted it or something, for the intro, which I think is really cool. Jim’s got a great solo on this thing. There is a weird part near the end that was actually a drum screw up, which we kept in and worked with by making it another section for a song that already had the verse-chorus-bridge thing going on.