What better day than today’s predictable hard bounce to present the other side? If you believe the bounce and want to be a happy bull, just step along from this post. If you don’t mind considering other opinions or are like me in thinking 2014 stands a better than even chance of being the year that the current cycle ends, check out EWI’s 24 page report by clicking one of the graphics below.
We have come to a point in this cycle where we are supposed to feel ashamed for having bearish views or opinions. Prechter’s wrong again after all. The thing is, even a bull could use some alternate opinions. I am not talking about a market crash. Please. I am talking about a macro view. That should be someone’s basis for operation. I have my views and they have not changed since early last decade because the things I had negative views about have not only not changed, they have intensified and shifted (commercial credit replaced by official credit). But there is still a debit waiting out there.
We who hold a negative big picture macro view were stupid until the 2008 liquidation made us geniuses. Now we are stupid again and trend followers are smart. Wash, rinse, repeat. EWI is an affiliate and I make a commission on sign ups to their services. So consider this a promo. Also consider that EWI was founded by someone who was an influence of mine. So it’s not just a pitch. We’ve only recently gotten with the idea of partially funding all the free information here with ads, like most blogs have routinely done all along. Consider this an ad that I wholeheartedly recommend. And the darned thing is free for crying out loud.
Think about the year long topping process of up and down spikes on the HUI Gold Bugs index in 2011. Now think about things that may be working on replicas of that activity (hello US stocks) and things in the mirror that may be working on the inverse of it (hello grinding and dispiriting gold sector).
Now think about how long these processes take to play out and the patience involved. Also think about trading or defaulting to cash, because at times of change the volatility is something to behold (going both ways).
NFTRH 286 out now.
I have had positive feelings about DoubleLine Capital’s Jeff Gundlach since I saw him interviewed last year talking about strong Treasury bonds amidst the hype and hysteria about rising interest rates and the ‘Great Rotation’ out of bonds and into stocks. While the media trend followers tried to take advantage of headlines, he simply said what he thought.
MarketWatch live blogged a luncheon speech by Gundlach
I am in a bit of a hurry this morning so all I’ll say is that I liked this letter because it helped me understand where I am within the market milieu. It helped me understand short and long term parameters and the potentials within those parameters for several different markets… or something like that.
Just continuing to do what I feel needs to be done in a market like this. The Semi’s would lead a bull charge, while Tech, Biotech and Small Caps would lead the bear. Throw in some indicators like BKX-SPX and especially the Equity Put/Call ratio (making a hidden bear signal that I for one found pretty compelling) and we lean bearish.
As for the precious metals? Well, when we were noting a bearish CoT structure and Ukraine hype, the ‘community’ was noting breakouts and bullish objectives. Nagging details like the CoT? Cue the crickets…
That’s all under the bridge now. It’s what’s directly ahead that is important. NFTRH 284 looks ahead to coming signals, and it’s out now.
The TIP-TLT ratio has been in decline from a resistance point since late last year. The ratio tends to generally rise and fall with inflationary and deflationary concerns, respectively.
That little bump up (that ended up failing at the trend line) was probably in line with the explosion in certain outlier commodities like Agriculturals. People need to eat food after all. But the Fed’s introduction to the discussion of a Fed Funds rate hike out in the 2015 distance (“you know, that sort of thing”) has wrung any inflation concerns right out of this market.
A great gig they have going; with ZIRP intact indefinitely they continue to inflate, but with a few words, the market gets right back in line and in full servitude mode.
So is that what went on? Markets will be back to positive tomorrow? Well a positive for the gold bugs is that the precious metals did not try to do any popping on Ukraine hype. They are busy fulfilling downside objectives and it is best they get that done sooner rather than later.
But the interest rate fundamentals must be married with the technicals. They are interesting today.
In other news, I guess the question of why Europe and Emerging are strong is answered by the ECB and China stimulus hype going around. I swear, without hype we would not have a financial market. It’s what makes the (financial) world go round.
Excerpted from the 31 page NFTRH 283 (dated 3.23.14), which also thoroughly analyzed the precious metals and several other markets from a technical standpoint.
Gold’s Macro Fundamentals
This spike in short-term yields (2-year shown) is what harpooned gold last week and finally got it under control.
More importantly, this spike in the 2-year vs. the 30-year really hurt gold.
These spikes predictably came as the FOMC successfully managed to get the market thinking about an end to the damaging Zero Interest Rate Policy, ZIRP.
Silicon Motion (SIMO) was sold on the pop and as it dutifully pulled back yesterday it was bought back. I don’t know, seemed like the thing to do. As long as SOX remains above that 10 year resistance line I’ll be constructive on these things, and the stock market too. Below the breakout line may be a handy stop on a trade like this.