Isn’t it amazing how the spring, 2011 top in commodities coincided with the Fukushima Daiichi nuclear accident in Japan? Uranium was on a bounce at the time and after the disaster it has been on a 2.5 year journey to new post-bubble lows. A high of 65 on 2.28.11 is noted.
Normally I would look at this chart and think that the ‘C’ leg might have much further to fall, to below 20. But one wonders if a stronger would-be rise was in the making before the accident and the associated global anti-nuclear sentiment. In other words, does U have unfinished business on the upside?
Uranium like most commodities, is positively correlated to the global economy.
Long term interest rates are rising in line with manufacturing, jobs and other signs of a ‘healthy’ economy. Clown 1 popped out of the little clown car at center ring yesterday and regaled the audience with a show about non-Tapering… Taper Hype Continues.
Then a day later (about 30 seconds in circus time) the little car zoomed over to the second ring, and with Time for Fed to put taper on the table another one popped out and entranced the audience with the other side of the shtick.
Tomorrow is the employment report. In less than 2 weeks comes the FOMC. In between a a lot of mental whipsaw that just doesn’t need to be. In the good old days these people would just cook up whatever it was they were cooking and hit us with it. I have really come to dislike this age of transparency because they should not be arguing their viewpoints in public when the viewpoints are so… opposite. All they end up doing is moving hyper kinetic markets that don’t need the stimulus (no pun intended).
But get this, the ‘taper’ hype is just that. The hype is exacerbated by self-important people getting their jawbones in front of microphones. Meanwhile, market participants believe that they are supposed to be afraid of tapering when a withdrawal of QE is probably the best thing for delivering the inflation (and isn’t that what this is ultimately all about?) to Main Street via the banks and lenders. Yes, the interest rate spreads that would incentivize these institutions are being repressed by QE.
So the question remains, what are these guys afraid of? Just shut up and TAPER already!
As the ‘Continuum’ lurks below the red line (monthly EMA 100)…
I noticed that a Fed pumper is out saying ‘Only taper when sure economy on right track‘ (despite the wonderful economic signals coming out of manufacturing, corporate profits and even ‘jobs’, to a degree) but the long bond’s yield could have other ideas.
The 10 year yield (TNX) continues to look bullish. In the lower panels are Housing, Banks and Utilities. Banks should prefer a rising yield and the other two? Not so much.
A disclaimer: I am long and/or trading several regular ‘bull stocks’ (as well as short a couple). Don’t interpret the sober message below as a ‘sell your stocks right now!’ style bearish warning. Indeed, after an expected choppy start to December I think more bull market mania, errr… rally, could still be ahead. But it would be just dandy if people would keep their perspective along the way.
From the December 1 edition of Notes From the Rabbit Hole (NFTRH 267):
Closing the 2008 ‘Gap’
In 2008 market and economic participants suffered a hard downside ‘gap’ in the prices of their assets and in the levels of their expectations. The bull market that began in March of 2009 is doing a fine job of closing that gap and fully resetting the herd from the utter fear mode of Q4, 2008 to a 2007 or even 1999 style greed mode today.
So here is the playbook folks. ISM is going to be released today at 10:00 US Eastern. If it is strong, as it has been for the last several releases (Surprised? You shouldn’t have been) then there will likely be some ‘taper’ jawbones out again because long term yields already look bullishly constructive. Relentless manufacturing strength would put more upward pressure on yields.
The Fed should just give up on its chronic manipulation and let the ‘organic’ economy be; let it ride. Let the banks take over and ‘carry’ the yield differentials as they become incentivized through higher profit motive to borrow short and lend long.
I’ll probably release the opening segment publicly, but the screenshot gives you an idea of where it is going. NFTRH 267, a damn good and rational market letter… is out now.