Here is a Bloomberg interview with Esther George from Jackson Hole that I thought you might find interesting.
Separately, here is today’s yield curve, with the 10′s and 5′s basically flat but rising vs. the 2′s, which means a rising 10yr-2yr curve today. FWIW…
People need to ask questions like ‘what, if anything are the implications of a declining BKX-SPX ratio?’ because this ratio, which has had us prepared for some bearish stuff since early 2014, remains bearish.
NFTRH was on the first two lower highs in real time and now the ratio has gone on to establish a beautiful bear trend. It’s only a daily chart, but the weekly is trend DOWN as well. There is no positive divergence for the stock market here.
Apparently the carry trade idea (based on the tapering of QE’s bond purchases, which would theoretically benefit the banks by pressuring long-term yields upward while ZIRP is maintained by Fed Funds) has run out of steam. Here again is the very notable reversal in lending activity, in line with the drop in long-term yields (makes sense).
The Gold Silver ratio is acting perfectly today… to NFTRH’s plan at least.
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Some risk off indicators looking pretty nasty…
Long-term T bonds breaking out of a short-term pattern vs. the stock market.
Inflation expectations (by TIP-TLT ratio) tanking. Don’t worry gold bugs, the metal’s preferred scenario does not include breakout inflation hysterics at this time.
Well the media always need to have a reason and this morning the reason for the hard down in the stock market is apparently second thoughts by investors on the Fed Minutes and QE tapering (with a side of Portugal/European problems).
What is actually happening is that it was time for a summer disturbance (at best) due to the factors we noted in the NFTRH excerpt on Monday. At worst the bull market is ending, but the favored plan is for a significant – possibly scary – drop that refuels the bull for one more thrust.
But that preference does not have a lot of conviction behind it. The only conviction I have right now is that the market is/was due for a July breather and this could be it.
People should have been prepared for this.
So we have been making a fairly big deal about the over bought state of silver vs. gold or put another way, gold’s extreme under performance to silver. Witness the Gold Silver Ratio (GSR)…
NFTRH 298 updates the precious metals rally, which has gone through what we called Resistance #1 on GDX and as of today rests right at Resistance #2. There is a viable Resistance #3 a little higher as well. Silver remains stretched vs. gold and the CoT data – not yet widely reported due to the holiday – made another disturbing move. We are still working a big bottom, and even established up trends in the quality items we follow. But there are short-term issues gathering.
There is also Option 1 and Option 2 on the stock market. Option 1 would be the healthy thing for the market to do and that is the way I am leaning. Option 2 would be exhilarating in the short-term and then… all done; macro pivot time.
Lot’s more including some NFTRH+ trade updates and the usual spectrum of global stock markets, commodities and currencies.
NFTRH 298 out now.
Reading MarketWatch makes my head spin sometimes (that’s part of the fun of it I guess).
Paul B Farrell (May 9, 2014):
10 peaking megabubbles signal impending stock crash (Fed driven rally is about to end badly)
Paul B Farrell (July 3, 2014):
Great Obama Bull Market will roar till 2016 (Historic market up 250%, aims for 300% gain by election)
Ha ha ha…
Meanwhile, here’s a headline for ya (clicking the graphic will yield the full report) from the BLS…
Hey, if a bearish biased guy (with tools to keep himself straight with the market ) could have seen this 1.5 years ago why do so many continue to be surprised? A simple progression went Front-end Semiconductor Equipment industry ramp → Semiconductor manufacturer ramp → strong manufacturing → buoyant Jobs data (despite the kicking and screaming of those unwilling to accept it) → ???
Now, how does this end? Well, I am a bear on the macro big picture. But insofar as the Fed has sat you down in front of your TV set and assumed control, as of 9:01 AM US Eastern on July 3 it is working.
There is nothing wrong with your television set. Do not attempt to adjust the picture. We are controlling transmission. If we wish to make it louder, we will bring up the volume. If we wish to make it softer, we will tune it to a whisper. We will control the horizontal. We will control the vertical. We can roll the image, make it flutter. We can change the focus to a soft blur or sharpen it to crystal clarity. For the next
hour [indefinite period], sit quietly and we will control all that you see and hear. We repeat: there is nothing wrong with your television set. You are about to participate in a great adventure. You are about to experience the awe and mystery which reaches from the inner mind to – The Outer Limits.