No matter the debates over inflation vs. deflation, increasing employment vs. sound monetary policy or systemic health vs. fragility (and whatever else is flying around in Jackson Hole this week), the CPI marches onward and upward. That is the system and it is predicated on creating enough money out of thin air while inflation signals are (somehow) held at bay.
The Straw Man* in this argument lives in the idea that inflation is not always destructive, that inflation can be used for good and honed, massaged and targeted just right to achieve positive ends to defeat the curse of deflation that is surely just around the next corner. Currently, the Straw Man is supported by the reality of the moment, which includes long-term Treasury yields remaining in their long-term secular down trend.
Indeed, right here at this very site was displayed much doubt about the promotion having to do with the “Great Rotation” out of bonds and into stocks (i.e. that the yield would break the red dotted EMA 100 this time). We noted it right at that last red arrow on the Continuum© below. Now, with commodity indexes right at critical support and precious metals not far from their own, the time is now if a match is going to be put to that dry old Straw Man and silver is going to out perform gold, inflation expectations barometers (TIPS vs. unprotected T bonds) are going to turn up and the Continuum is going to find support.
Individual investors are lathered up again and chasing the renewed stock rally, at least on a relative basis to their usual stance. This market sentiment indicator is usually a sign of impending market disturbance although timing is not finite with this data.
Self-explanatory chart of the day; the silver weekly chart…
I had not been aware that silver and gold now show CMF and Accum/Dist and OBV at stockcharts.com. Thanks to Morris Hubbartt’s post at 321gold I now know.
A good question would be which is more valid as a leading economic indicator, Palladium vs. Gold or broad Commodities vs. Gold?
PALL-Gold continues to indicate economic strength as positively correlated Palladium has just made a new high vs. Gold. This chart along with information I got on the Semiconductor equipment sector pointed to a coming up cycle well over a year ago.
CCI-Gold is in a more precarious position. These indicators do not always correlate well but have eventually come in line with each other for important economic up and down cycles. Today PALL-Gold is flying high while CCI-Gold rolls over.
I sold half of my INTC position so as not to be greedy, but am going to hold the other half for a run at the target. This has been a fabulous NFTRH+ trade. There have also been some clunkers (PPLT, CCJ, JNPR) with losses limited, some aborts (SIMG, LSCC, SLV) as funda or technicals changed before buy targets activated and a few decently profitable (CORN, LIT, DBB, SNY, CTRL, SQQQ) ones. Also, BBRY put on a bearish engulfing candle today after my little show of bravado yesterday. Still holding that one. Anyway, here’s Intel improbably enough steaming toward target in a near vertical manner.
Reference the recent post using monthly views of HUI, Gold and Silver. It is linked above for review. Today I have taken the updated gold chart from that post and marked it up with a (blue) line showing gold’s current price. Note the strategic small Symmetrical Triangle. If that lower Triangle breaks down, gold is done. If not, we grind forward. The original post gives upside and downside targets.
Just setting the table for the Jaw Bone of Jackson Hole? You know, if you look at the markets with a certain sense of humor it can be very funny. I mean, I don’t know who da boyz is dat is behind da scenes but my late friend Jon used to know all of them; all da COMEX boyz. He sat on dat deer COMEX after all.
Anyway, all I know is that it is awfully convenient as a table setting measure that we have no inflation effects (see, look at gold bowing below… look at commodities, look at TIP-TLT… look at silver!) as the Jawbone warms up this week. Just the imagery alone makes me laugh. There is no inflation! Ha ha ha… ZIRP infinity?
In the previous post’s video Esther George talked about how it is difficult to know what is ahead with regard to a build up of inflationary pressure. She rightly wants to make sure policy is out ahead of it, although I suspect that if the inflationary horse is going to get out of the barn it will not be put back in an orderly manner that catch-up policy can handle.
In this post we present a couple tools for viewing the inflationary backdrop (or more accurately, the current lack of one) and also a guest post by ‘Inflation Trader’ Michael Ashton.
First, here is the Silver-Gold ratio, which simply must bottom if commodities and the inflation trade are going to get a boost. It is no coincidence that commodities are on a tiny bounce along with the same situation in the Silver-Gold ratio.
Next is the TIP-TLT (inflation protected vs. unprotected Treasuries) ratio, still burrowing southward…
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…
I ended up swapping out GOOGL for CTRL, which was bought yesterday on a potential bottom scenario. A mega tech stock of high quality for a company in a market that I am not overly excited about, trying to grab some of the ‘internet of things’ (IoT) hype out there.
It is probably a gap fill play around 17 with a stop below the August lows. CTRL got beat up on earnings as it is pretty richly valued, but the company also has acquisition hype surrounding it (like Google or Apple with respect to the IoT). We’ll see.