CoT – Gold, Silver, Commodities & T Notes

Among its 29 pages of high quality market analysis, this week’s NFTRH (#287) reviewed the Commitments of Traders (CoT) structures of a few markets and their implications.

cot.au

The above CoT graph clearly shows that gold has declined as the structure improved (red arrows). It then bottoms with the circled extremes and rises in conjunction with a degrading structure (green arrows). Gold is still on its journey toward bottoming.

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10-2 Yield Curve Flips

I don’t want to became a yield curve play-by-play announcer, but the spread flipped this morning in a lurch toward risk ‘off’ as yields drop with the 2′s dropping more.  What’s it mean?  Hey, these are manic, over played, over stimulated markets.  It means what it means… for this little moment in time.  I am just the play-by-play guy, not your Swami.  :-)

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10.2 spread from Bloomberg

10-2 Yield Spread Down Again

The 10 vs. 2 is, you guessed it, unfavorable for gold once again as it has been for a week now.  The declining spread (2′s up harder than 10′s) indicates that risk is coming back ‘ON’ in the markets as people dump their liquidity safe havens in the 1-3 year realm.*

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10yr – 2yr yield spread from Bloomberg

The good news for gold – should risk go ‘off’ again – is that it is no longer part of the ‘all one market’ syndrome.  It’s a risk ‘OFF’ item, which is what it should be.  Tune out the myriad rationalizations by conspiracy detectives and realize that gold is going nowhere until a counter cycle is indicated.

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NFTRH 287 Out Now

nftrh287We got the market bounce that was anticipated by NFTRH 286.  Now #287 gets about the business of gauging what the bounce will be.  A post here at the site set a target for the NDX up around 3600.  If that comes about, the S&P 500 for one could pop to new highs.

Then, there is the Semiconductor status to deal with (above 10 year support) and a whole host of indicators that beg caution.  The market is now fun for me even though the Market Gurus Association would not even let me in the front door, let alone issue me a crystal ball.

Precious metals?  Well there’s a short-term view, which I think we all know by now is bearish.  But there remains a longer-term view that continues to support a different potential.

Also, in line with the rhythms of my own personal journey, a new aspect of the service will be coming as I finally get comfortable with the idea of managing chart based trading opportunities, both long and short for those interested.  NFTRH+ (trading) will be coming soon and it will give some people more of what they want, while separating out noisy updates for those who want to keep a non-trader’s perspective, which should in my opinion be the majority of people who are not full time market participants.

NFTRH 287 is out now and it’s (IMO) a good one.

Automatic Stabilizer?

Guest Post by Doug Noland

Yellen comforts New York – and the Bulls.

Fundamental to modern thinking on central banking is the idea that monetary policy is more effective when the public better understands and anticipates how the central bank will respond to evolving economic conditions. Specifically, it is important for the central bank to make clear how it will adjust its policy stance in response to unforeseen economic developments in a manner that reduces or blunts potentially harmful consequences. If the public understands and expects policymakers to behave in this systematically stabilizing manner, it will tend to respond less to such developments. Monetary policy will thus have an ‘automatic stabilizer’ effect that operates through private-sector expectations. It is important to note that tying the response of policy to the economy necessarily makes the future course of the federal funds rate uncertain. But by responding to changing circumstances, policy can be most effective at reducing uncertainty about the course of inflation and employment. Recall how this worked during the couple of decades before the crisis–a period sometimes known as the Great Moderation. The FOMC’s main policy tool, the federal funds rate, was well above zero, leaving ample scope to respond to the modest shocks that buffeted the economy during that period. Many studies confirmed that the appropriate response of policy to those shocks could be described with a fair degree of accuracy by a simple rule linking the federal funds rate to the shortfall or excess of employment and inflation relative to their desired values.” Janet Yellen, April 16, 2014

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US Stock Market

Guest Post by Ino.com

U.S. STOCK INDEXES

us.stocksThe June NASDAQ 100 closed higher for the third day in a row on Thursday as it consolidated some of the decline off March’s high. Today’s high-range close sets the stage for a steady to higher opening when Monday’s night session begins trading. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. Multiple closes above the 20-day moving average crossing at 3558.39 are needed to confirm that a low has been posted. If June renews the decline off March’s high, the 38% retracement level of the 2013-2014-rally crossing at 3345.52 is the next downside target. First resistance is the 20-day moving average crossing at 3558.39. Second resistance is the reaction high crossing at 3599.50. First support is Tuesday’s low crossing at 3404.75. Second support is the 38% retracement level of the 2013-2014-rally crossing at 3345.52.

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Yield Spreads; Gold Bugs Avert Eyes…

Better yet, look square at it because this is the market, not ideology, making the rules.  I don’t want to pile on (ref: Tom McClellan’s guest post) but this is extremely gold unfavorable with yields up and short term yields up way more.  Insert here the boiler plate about not taking any one day’s reading in a vacuum… but then consider the spreads have been degrading nearly every day for a week now.

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10 & 2 year yields, from Bloomberg

Gold will get where it is going one day, but not until fundamentals come back in line.