Rummaging for financial news and analysis from around the Web…
Gold-CCI & GDX and Gold CoT Improving, But…–NFTRH[biiwii comment: hey look, a fledgling rally appears to be getting started, but with PDAC next week the gold bug dream machine could get a bump up again and the sailing beyond the near-term is not yet indicated to be ‘all clear’]
Healthcare/Biotech Names Still Dominating–B.I.G.[biiwii comment: don’t I know it… did some profit taking last week but also a little replanting within the Bio’s. The weekly BTK chart has been bullish and until that changes, it’s on a trend]
Periphery Fragility List–Credit Bubble Bulletin[biiwii comment: i just found doug noland again, so CBB will be back either in ‘around the web’ format or directly published]
Despite all evidence to the contrary, an imbalanced ledger of data that grows more imbalanced by the month, commentary continues to describe QE as pro-growth stimulus. As usual, the purest form of rebuke to that sentiment can be found in Japan where QQE has performed a global service just not in the way its theorists and practitioners had envisioned. The Bank of Japan may well be proving beyond a doubt just how and why QE of any form is depressive, hopefully at some point freeing people to actually investigate alternatives (most especially stop doing more and more).
Despite GDP that was positive in Q4, there is absolutely no indication that it was anything but a positive number. Redistribution is supposed to benefit someone somewhere, but it is clear from the data that any such “winners” are not among the vast majority of Japanese people themselves. Instead, by inference, if there are Japanese enjoying QQE they are certainly located within the financial sector alone. Japanese households continue to get the QQE hammer:
Why, there will even be experts talking about expert things for attendees to consider and be enlightened with, including… “Top newsletter writers present their charts, thoughts and ideas on how to select good investments in the resources sector.” Ha ha ha. Otto’s not even going (I assume).
Anyway, it is time now to manage the fledgling bounce in the gold sector and to tune out the hype with extreme prejudice.
The gold sector, which is the only mining sector I am interested in right now, has been screwed every which way from Sunday for the last 3+ years and no amount of over intellectualizing or important sounding presentations will change the fact that it needs its macro fundamentals in line or else it will stay in Palooka Ville.
I wrote back in 2011 that the Fed could do a lot better with interest rate policy if the FOMC would just outsource the decision making task to the bond market, specifically the 2-year T-Note yield. The point is still the same, and the FOMC is still seemingly unaware.
To review briefly, this week’s chart shows a comparison between the 2-year Treasury Note yield and the target rate for Fed Funds, which is set by the FOMC. The NY Fed is then tasked with adding or withdrawing money available to loan to eligible depository institutions so that the “effective” rate of such loans is close to the target set by the FOMC. Read more about that process here.
“Audit the Fed”? We’ve Already Done That (Well, Kind of)
Our conclusion: The Fed is not in control of the economy — here’s why
If there’s one thing the Federal Reserve Board of the United States is not known for, it’s assertive language. After all the obfuscation and verbal sidestepping, Fed speak is usually as easy to comprehend as Marlon Brando’s Godfather character Don “Mumbles” Corleone.
But on February 24, Fed chairwoman Janet Yellen was 100% candid in expressing her disapproval of the controversial bill known as “Audit the Fed” — legislation that would open the central bank up to full government regulation and scrutiny:
“I want to be completely clear.
I strongly oppose ‘Audit the Fed'”
No – Confusion – There!
But, whatever side of the bill you stand on — nay or yay — for us, the prospect of pulling back the curtain on the most elusive quasi-government body seemingly besides the C.I.A. is irrelevant. Because we at Elliott Wave International have long since conducted our own “audit” of the Fed — and the results are like nothing you’ve ever heard before from the mainstream pundits.
The purpose of our “audit” was simple: Determine, once and for all, if the most powerful monetary institution on the planet does, in fact, have the power to control the U.S. economy or marketplace.
Below you can find a recap and extension of my post-CPI tweets. You can follow me @inflation_guy or sign up for email updates to my occasional articles here. Investors with interests in this area be sure to stop by Enduring Investments.
CPI -0.7%, core +0.2%. Ignore headline. Annual revisions as well.
Core +0.18% to two decimals. Strong report compared to expectations.
Core rise also off upwardly-revised prior mo. Changing seasonal adj doesn’t affect y/y but makes the near-term contour less negative.
y/y core 1.64%, barely staying at 1.6% on a rounded basis.
Core for last 4 months now 0.18, 0.08, 0.10, 0.18. The core flirting with zero never made a lot of sense.
Primary rents 3.40% from 3.38% y/y, Owners’ Equiv to 2.64% from 2.61%. Small moves, right direction.
Overall Housing CPI fell to 2.27% from 2.52%, as a result of huge drop in Household Energy from 2.53% to -0.06%. Focus on the core part!
RT @boes_: As always you have to be following @inflation_guy on CPI day >>Thanks!
A bit surprising is that Apparel y/y rose to -1.41% from -1.99%. I thought dollar strength would keep crushing Apparel.
Also New & Used Motor Vehicles -0.78% from -0.89%. Also expected weakness there from US$ strength. Interesting.
Airline fares, recently a big source of weakness, now -2.98% y/y from -4.71% y/y.
10y BEI up 4bps at the moment. And big extension tomorrow. Ouch, would hate to have bet wrong this morning.
Medical Care 2.64% y/y from 2.96%.
College tuition and fees 3.64% from 3.43%. Child care and nursery school 3.05% from 2.24%. They get you both ends.
Core CPI ex-[shelter] rose to 0.72% from 0.69%. Still near an 11-year low.
Overall, core services +2.5% (was +2.4%), core goods -0.8% (was -0.8%). The downward pressure on core is all from goods side.
…and goods inflation tends to be mean-reverting. It hasn’t reverted yet, and with a strong dollar it will take longer, but it will.
That’s why you can make book on core inflation rising.
At 2.64% y/y, OER is still tracking well below our model. It will continue to be a source of upward pressure this year.
Thank you for all the follows and re-tweets!
Summary: CPI & the assoc. revisions eases the appearance that core was getting wobbly. Median has been strong. Core will get there.
Our “inflation angst” index rose above 1.5% for the 1st time since 2011. The index measures how much higher inflation FEELS than it IS.
That’s surprising, and it’s partly driven by increasing volatility in the inflation subcomponents. Volatility feels like inflation.
Well, it looks like Robert Baird took an automated, 3D CMM probe right up its ratings book after downgrading Faro Technologies (FARO) and providing an opportunity for an NFTRH+ trade.
We +’d it in NFTRH 327 when it was still dealing with resistance (red stuff below, now obviously strong support) at 55 and set a target of 60. I personally sold during one of the candles that tickled 60 but right now market loves Faro long time, printing 60.87.
Today Faro’s earnings are propelling it higher. What was Baird thinking? They just didn’t like the way it had declined from all-time highs and got scared? Really? Buttoned down firms don’t get the jitters for no reason, do they?
Not all NFTRH+ trades work out of course and that is why we note strict parameters to LIMIT losses and strict targets and buy points up front.
Also of note on Faro is a monthly chart that was included in the NFTRH+ update that has a big story to tell. I am not doing ‘big picture’ at the moment, but am keeping an eye on it.
France and Italy are the Next Casualties of the Credit Bubble
Editor’s note: This article is excerpted from The State of the Global Markets Report — 2015 Edition, a publication of Elliott Wave International, the world’s largest financial forecasting firm. Data is updated to December 2014. You can download the full, 53-page report here.
These two charts depict two imminent casualties of the credit bubble — France and Italy — where sentiment has decoupled from reality.
I continue to believe that the Swiss National Bank’s action on January 15 opened a “release valve” of sorts inside the world of the global “dollar.” Prior to that day, heightened bearishness all throughout dollar-denominated credit dominated trading. That included funding markets, especially eurodollars. The eurodollar curve itself ignored almost everything else, including the FOMC switch to “patience” in December, running quite dramatically and contrarily to any idea of an end to ZIRP.