On September 12 we did a heads up NFTRH update about how the EM’s (MSEMF vs. SPX, EEM vs. SPY) was losing leadership and breaking the first level of support. It is still password protected, so no link. Here’s EEM-SPY…
Nominal EEM has since gone on to lose the August low, potentially indicating a bearish trend to come. I shorted this (jumping the gun a little because it had already broken down vs. US stocks) using EEV on Friday.
Excerpted from the September 21 edition of NFTRH, #309, which went on to do extensive technical and macro work across all the key markets…
Last week we noted that Uncle Buck would be front and center in the analysis, not because the strength in the (anti-market) currency was not expected (it was), but because our big picture theme of an ongoing economic contraction had remained intact (ref: gold vs. commodities ratio) over the long-term.
It is important here to remember that NFTRH would only be on its big picture macro themes as long as indictors implied they are still viable. I will be damned if I will let us follow a Pied Piper off an ideological cliff, no matter what readers (including me) might want to hear. We must dedicate to know what is happening, not what our hopes, dreams, egos, etc. think or worse, hope will happen.
People should try to get their heads out of their ass(et) classes and look at the signals that these assets may be sending. Look, gold bugs are screwed and being run up the analytical flagpole as outdated anachronisms and stuffy old fogies with outmoded views. The stock market has proven bullish again and again and policy making has worked swimmingly for a couple years now.
So take out the gold bug, the silver bug, the commodity and inflation bug and the stock market bull and/or bear and just look at the signals. The Gold-Silver ratio (GSR) is rising strongly and it is happening in unison with the now well bull horned US dollar, which everyone left for dead just a few months ago *. The question that should be asked now is not ‘how do I defend my stance?’ or ‘what asset should I buy or sell?’ but rather, ‘what does this mean from a macro market view?’
The correlation by daily view of the GLD/SLV and UUP ETFs is not very good, but over a longer-term is GSR and USD are generally in line. We have always felt that the USD (a global asset anti-market or counter party) is a bedfellow of the gold-silver ratio (a risk off/illiquidity indicator).
More to come on this in the form an NFTRH excerpt later on. But we should be beyond hoping that this or that asset class will go up and into a time of evaluating what, if any meanings can be taken from the USD-GSR relationship. A lot of people are interpreting the rise of the USD as a bullish event, with only gold and commodities to suffer. They had better do the work to confirm that view rather than just making assumptions.
* Not by me and not by my market management service. We charted its hold of important support and casually followed its progress every single week. Now Uncle Buck is all lit up in neon and as usual, a majority is now aboard the story and promoting distortions.
Guest Post by Bruno de Landevoisin
Like many of our readers, I clearly have a very hard time reconciling a U.S. stock market making new all-time-highs almost daily, especially in the face of what most economists consider to be a relatively weak domestic economy with negligible growth prospects. Moreover, when you layover the thoroughly stalled and certainly weaker overall global economic picture with the largest economic bloc on the planet in a near depression, it’s even harder to rationalize. Finally, throw into the mix the gravity of threatening geopolitical tensions between the U.S. and Russia, the two nations with the largest stockpiles of tactical nuclear weapons on earth, as well as the completely disintegrating Middle East mayhem, and the market actually welcomes it? Something simply does not add up here.
Everybody, run for the hills! The Russell 2000 is on the verge of a Death Cross! Really, don’t you know that TA’s are hand wringing and speaking in dire tones about the RUT’s DEATH CROSS!?!? If you want to read the article about the dreaded Death Cross clicking the graphic will yield its hair brained wisdom for you.
I don’t know how many times we have to go over this but the Death Cross and its happy-go-lucky brother the Golden Cross mean nothing. If anything, they are an announcement to naive market players that it is safe to get in just in time to wait out a period of nothingness prior to the market going against you. Recent example, HUI…
NFTRH 309 is 38 easy to read pages with lots of graphical evidence of an evolving macro environment. Geek heaven you might say.
NFTRH 309 is available now and was mailed to subscribers this morning. Simply subscribe using the PayPal button or contact for other options to get real analysis that fine tunes the the key precious metal, commodity, US and global stock market, currency and macro themes.
The first draft is me on Saturday fighting my way through piles of macro stuff, charts and personal observations, opinions and conclusions. A review on Sunday morning let’s me sit back, try to figure out where I may be confusing people, sounding like a pompous ass or who knows what else is not in the best interest of the work? It let’s me make the report presentable. Anyway, here’s one whacky macro chart from #309.
I love these crazy ones with different colors and mark ups. Note how the 6’s are the only numbers that are the same color on the correlation of the gold-silver ratio (GSR) and the S&P 500. It’s something we noted months ago, but it could be relevant going forward now that the USD is getting in correlation with the GSR.
Yup, improved a gain. A lot of good it did precious metals bulls today, but we can bet that the goons covered shorts again today (data are only through Tuesday) and I would assume speculators continued to puke. Got to play the game folks, in the casino at least. This has nothing what so ever to do with real physical gold. Note the open interest on silver; that is in line with the power of today’s thumpage. A coming low in these metals should be very interesting. Click the graphics to de-minify them.