Yield Curve, etc.

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.

10.5.2

10, 5 & 2 year yields from Bloomberg

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.

tip.tlt

ISM Still Booming

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.

ism

Welcome Back Boyz!

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.

gold.kitco

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.

Market Ratio Messages

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.

au.spx

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…

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NFTRH 306 Out Now

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…

nftrh306

Pondering the Summers of 2012 & 2014

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.

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Gold and Silver CoT

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.cot

Au Commitments of Traders

ag.cot

Ag Commitments of Traders

HUI Timing Boxes

In the previous post about ‘Gold Miners & Inflation’ it was mentioned that the 2013-2014 would-be bottoming grind in HUI has been almost exactly the duration of the 2010-2011 topping grind.  Here is a visual to put with that statement.

hui

The current yellow box is an exact duplicate of the 2010/11 box, which came with an over bought MACD crossed down.  The breakdown candle implies that September would be the month that a break UP candle comes into play if this relationship has any predictive power.

Taking it further, as also noted in the previous post, the Ukraine noise does not help the sector and indeed could hurt in the short-term, because it keeps the wrong gold bugs on the tout.  So NFTRH keeps open some minor downside targets.

Taking it further still, those downside targets would end up being buying opportunities if gold’s macro fundamentals start to improve, which despite the emails I get to the contrary, really has not happened yet beyond a few ongoing positives.  But it had not happened yet in 2000 either.

Gold Miners & Inflation

A constant struggle in writing about the precious metals is in trying to be clear about the differences between the gold stock sector and other sectors when it comes to inflation.  That is because there are two types of bullish environments for gold stocks…

  1. The ‘play’, where all the inflatables rise with inflation expectations; this would be the ‘gold is silver is copper is oil is hogs is corn’ trade.  This is the play where the inflation and commodity gurus tell you to buy resources to protect yourself from the US dollar crash that is going to happen any day now.  A problem is that in this environment many resources often out perform gold, thus hurting miners’ fundamentals.
  2. The other is a longer trade or dare I say it, investment.  This is where commodity prices are declining and the USD is firm.  Gold is stronger than silver and the inflation oriented gold bugs get bearish because they can’t understand how gold will not go down with oil and indeed, inflation expectations.

I have often called #1 a ‘SELL’ on any strong rally that results.  #2 is a more difficult animal because it can be a grind as it sets up.  That grind would be the misperceptions game kicking in where the majority gets fooled into thinking if copper goes down so will gold.  After all, China’s gonna decelerate again!

tip.tlt.gdx

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