The UUP ETF already hit its measurement at 22 and now the over bought Uncle Buck is nearing its measurement at 83.50. One valid question in trying to plot Unc’s future is how long will the Fed choose to sit by and hold ZIRP as the economy strengthens?
Personally, I don’t understand how they can conduct this Kabuki Dance where half of them fret about being too dovish and the other half of them act as if they can maintain ZIRP-Infinity (or even ZIRP-mid/late 2015). The economy is strong, the currency is strong and the stock market is strong. What could go wrong? Why not normalize rates in 2% chunks beginning next week? Ha ha ha…
The Continuum ™ (monthly 30 year yield) is bouncing hard today after dropping deep into the support zone we have been noting for months after inserting another red arrow at the peak of the Great Rotation hype (GRH).
What usually comes next (with gold breaking down technically) is the US dollar bulls, not to be found when we got bullish many weeks ago, will start talking about rising yields being bullish for the now over bought dollar (they are) and bearish for gold (they are too, but only if aligned in a declining yield curve as they are currently).
As for the US stock market, it rose with yields out of the 2012 low. It also topped with yields at the peak of the GRH. What happens if yields find a bottom here and the curve continues to decline?
The point though, is that the whole perceptions game is going to get cranked up again with every a-hole with an opinion throwing their hat into the ring and most will just be guesses by hog callers hoping to be da man (or da wo man). Here is an opinion from one a-hole… this is a market driven nearly berserk by relentless policy input and the signals are flashing like red and green blinking lights on a fake Christmas tree. Here is another; Q4 is going to be interesting.
Folks, this is a barn burner of a rush out of T bonds. With yields launching like this we should note that the the curve is actually declining as people are getting the heck out of short-term bonds faster than any other kind.
So you can see that this gold negative alignment is only becoming more so today. Here we recall all those continually telling us how bullish gold’s fundamentals are and then we recall that this here spot on the internet has been calling them ‘not fully baked’ at best, with the yield curve (and strong US economy) being among the most bearish funda’s on gold.
As for the regular markets, this is a risk ‘ON’ picture, so we’ll have to see how things go there. I have been wondering how long the stock market can rise with inflationary expectations going down the drain but interestingly, the TIP-TLT meter is popping today in opposition to the commodity wipe out. Yet with both TIP and TLT down nominally, it may not mean much. Weird and complex market right now. I guess summer play time is over.
Surprised? Anyone? Beuller?
The most relevant items are circled. I have forward looking industry research (see EDA Industry Insight linked under Technical & Data) and anecdotal input from a former associate who is a machine tool dealer that may belie the sustainability of this data going forward. But this graphic below, full on strong for so long now, is the child of that other anecdotal research I got in January of 2013. That would be the ramp up of the Semiconductor equipment sector.
The last item in NFTRH 306′s ‘Wrap Up’ segment:
“The Boyz come back next week and it is time to be coming off summer maintenance mode and really paying attention.”
Okay Boyz, you’ve got our attention.
This is really not a serious post in any way imaginable. In fact, these things usually strike my funny bone. I mean the myth, the predictability and then seeing the visual above is just funny. Da Boyz, back from da Hamptins and ready to roll.
Using monthly charts I want to update more big picture views of where we stand in the financial markets. This is just a brief summary [edit; okay it's not so brief. In fact it had to be ended abruptly or else it would have just kept on rambling] and not meant as in depth analysis with finite conclusions.
I was listening to Martin Armstrong talk about his ‘economic confidence’ model and realized that the way he views gold is similar to the way I do (and very dis-similar to the way inflationists and ‘death of the dollar’ promoters do). I don’t love the way he writes, and I usually avoid these weird interview sites, but checked it out (linked at 321Gold) anyway and found him enjoyable to listen to.
Anyway, this prompted another big picture look at gold vs. the S&P 500 and as with the shorter-term views, the picture is not pretty.
Well, it is pretty if you have patience and no need to promote gold as a casino play. Gold will be ready when gold is ready and that will not be until confidence in policy making and by extension the stock market, starts to unwind.
Gold vs. SPX has meandered out of a long Falling Wedge (blue dotted) with 2008′s Fear Gap still lower. On the big picture the risk vs. reward is with gold over the stock market. But it is a funny thing about big pictures; they move real sloooow. A fill of that gap may not feel so good to anyone vested in an immediate conclusion to gold’s bear market vs. SPX.
Moving on, let’s look at some ratios of components of the stock market…
Given the in-week updating of shorter-term charts, #306 takes a good look at the bigger picture of the HUI. US and global stock markets are covered thoroughly along with commodities, currencies and the messages coming out of Bond Land in credit spreads and short vs. long-term interest rates. An interesting market as da boyz gets ready to come back from da Hamptins.
NFTRH 306, out now…
Guest Post by Doug Noland
The gulf between inflating global securities prices and deteriorating fundamental prospects widens by the week.
Another captivating week capped off a dramatic summer. War erupts in Europe. In the Middle East, a terrorist organization with unprecedented military might blows through Iraqi defenses to take control of a large swath of Iraq to go along with its considerable territory in Syria (establishing an “Islamic caliphate”).
Meanwhile, global securities markets enjoyed rallies that were equally dramatic. Mustering a summer surge, U.S. equities disregarded geopolitics to post all-time highs (S&P 2000!). Curiously, Treasury yields were in no way excluded from the frenzy. In the face of rallying stocks and generally positive U.S. economic data, Treasury yields surprised with a determined move to the downside. This latest “conundrum” saw 10-year yields sink to 2.34%, a 15-month low. While notably volatile, corporate Credit spreads ended August about where they began June.
As expected, there was improvement this week in the gold and silver CoT data. Silver did not do much but it had been improving much more steadily than gold, which mysteriously (ha ha ha) took a sizable hit a week ago Thursday. This data includes that hit. The goons did some covering on that day. Click graphics for full view…
Au Commitments of Traders
Ag Commitments of Traders