Gold Ratios

By Biiwii

For your viewing pleasure, some pictures that readers of this site and NFTRH.com have been aware of for some time now and NFTRH subscribers are repeatedly kept aware of (whether they like it or not).

Gold is not just another metal…

gld.dbb

Gold is not Palladium, a flipped over version of which (weekly PALL-Gold) gave us a DOWN signal months ago.

gld.pall

Gold is not just another commodity…

gld.dbc

Gold is much different in its best investment environment from the things previously promoted to have been beneficial for oil…

gld.uso

Silver is not gold either.  But it’s much closer, which makes it a sensitive component of the metallic credit spread (Hat tip, Hoye) to economic, financial and monetary events…

gld.slv

And of course Gold vs. US Stock market, making a move but still technically in a big picture downtrend…

gld.spy

Gold vs. Euro-hedged Europe…

gld.hedj

Gold vs. Yen-hedged Japan…

gld.dxj

Gold is none of these things, because gold does not do anything other than sit there as a solid, pretty rock that irrational humans have alternately over obsessed upon and ignored for long stretches.  That is what makes it a marker or barometer.  Its very lack of utility and income distribution make it the anti-asset.  In that resides its value when the levered up games start to unwind.

Other than that, I have no strong opinions on gold.  :-)

Bond Safety?

By Biiwii

[edit]  Upon re-reading, it’s another of those posts I sometimes receive critiques about.  Few conclusions and no clear direction.  Maybe that is just the point though.

@ Fidelity…

Equity outflows at 15-week high as investors seek bond safety

And there they go, conventional lemmings jumping from the frying pan, into the fire, soon to realize the fire is way too hot, and heading for that cliff over there.

(B)ut (i)t i(s) (w)hat (i)t (i)s and (N)otes (F)rom (T)he (R)abbit (H)ole are so named because we are all about anti-convention, as global markets have not been comfortably conventional since the late 1990’s, I think.  This most recent cycle has existed to put all of us malcontents, cranks and alarmists back in a box under the bed, if not into the dustbin of history.

Well today, conventional sheep are flocking to conventional positions.  “Bond safety” is what they run to when they are afraid of stocks.  Of course, with gold now showing strength, the promoters over there are retooling their former “China/India demand” and “employment growth will spur inflation, which will drive people to gold” pitches to something more appropriate for the times, when global economic contraction comes to the fore and deflation is front page news.

Imagine that, investors flocking to bonds while DEFLATION! is all up in the headlines.  Reminds me of Q4 2008, just before the next INFLATION.

This market is now officially fun again after the post-October drudgery that last month forced me to admit that my trading sucks and that I needed to take a time out and sit on my hands (as the market’s swings became too frequent and too contracted).

Do you see?  Investors are seeking safety in bonds.  Media are managing a global stock crash.  Bull trend followers’ heads are spinning (‘Am I still a brave, resolute, trend following stock bull?  Should I keep posting as such or is my inner fear barometer stronger than my resolve?’) and oh yes, the precious metals are bouncing while commodities continue to tank.

There are only a few entities who have called this environment.  One is an influence of mine, Bob Hoye (decisively, but on what some might find an inconveniently long time frame).  Another is NFTRH (less decisively, but on a very tight time frame).  This is a market that is going to put all the carnival barkers (including gold touts) in their rightful places because now changes are happening and it will not be so simple as ‘stocks are tanking, buy bonds!’ and obviously, the whole ‘economy brings inflation, buy gold!’ promo.

Tops are spinning on the table and it all makes perfect sense.  And I am not even a stock market bear.  I just do not buy or hold tops.  I look forward to a real bull market in the gold sector, but there is yet work to do folks.  The US market’s big trend is still up and gold’s is still down.  Not saying change is not in the offing, just saying trends have not yet changed.

With respect to gold, this summer’s event is so much more in line with fundamentals that matter than last summer’s Ukraine→Russia→Ebola pitch that was nothing more than promotion.  But there remain some rocks beneath the surface.

As to the article linked above, this certainly does put Martin Armstrong front and center, with his ‘final flight to the safety of the government bond bubble’ analysis…

LONDON (Reuters) – Equity outflows hit a 15-week high of $8.3 billion in the past week, with fears of a China-driven global economic crisis pushing investors towards safe-haven money-market funds and Treasuries, Bank of America Merrill Lynch said on Friday.

I have not really known what to make of Marty and his computer, but this is 100% in line with his forecast.

I just love a market where things are in motion.  Robo market was a dead thing, momentum waning and hopes fading.  Now resolution is to the downside.  From this point, it is now time to throw out the easy analysis and be prepared for the counter-cyclical environment we have expected upon completion of the post-2008 economic recovery (and all that paper and all those digits behind it).

Now you do not get points for just showing up and following the trend.  Now you find out if that which you hold true actually is.

Global Stocks Slide

By Elliott Wave International

Markets are moving! Want to get on board?

“When the alarm goes off and the dreamers awake, it will be pandemonium in the stock market.” — Bob Prechter, from the just-released Elliott Wave Theorist.

You would agree that markets around the world have served investors a lot of surprises lately:

  1. Crude oil just fell to $40 a barrel, a 6 1/2-year low.
  2. Gold — after hitting lows not seen in five years and disappointing just about every gold bug on the planet — just broke above $1150 an ounce.
  3. The U.S. dollar, doomed to failure by the mainstream consensus a few years ago due to the Fed’s “inflationary” QE policies, is enjoying strength not seen in years.
  4. Chinese stocks, up almost 60% YTD into their July peak, suddenly crashed, sparking fears of global contagion.

And almost every step of the way, Elliott wave price patterns have guided us and our subscribers:

  1. Last November, a joint bulletin from our Elliott Wave Theorist and Elliott Wave Financial Forecast called the low in gold and silver to within two days. Last month, on July 24, we issued another bullish bulletin — the exact day of the intraday lows in gold and silver after four years of decline.
  2. On June 6, 2012, we sent to subscribers a Special Report calling the low in 10-year T-bond yields after 31 years of decline. The top in T-bonds came right around the same time.
  3. Crude oil has followed its Elliott wave script since 1998, including the all-time high near $150 in 2008 and the more recent secondary peak — one from which oil fell to $40 a barrel this week.
  4. Wave patterns warned us of the huge declines in commodities — and the huge rally in the U.S. dollar, both against nearly universal disagreement.

Plus, says Bob Prechter in the new Elliott Wave Theorist,

“With rare foresight, our European and Asian analysts predicted the failure of both the Swiss franc peg and the Chinese yuan peg, dramatic events that caught economists completely off guard. You have to know a lot about markets to do these things.”

Yet the credit doesn’t go entirely to our analysts — it goes to the Elliott wave method. For the past 80 years, waves have warned thousands of investors about risks — and new opportunities! — at countless market junctures.

Today’s #1 story is the 358-point sell-off in the Dow. Both the DJIA and the S&P 500 are now in the red for 2015.

Even the white-hot NASDAQ ended the day with a 3% decline

Is this a “normal correction” — or are the “bubble days” really over?

Prechter’s new Elliott Wave Theorist — which got published just yesterday (Aug. 19) — says:

“When the alarm goes off and the dreamers awake, it will be pandemonium in the stock market.”

We invite you watch a free 5-video series from Elliott Wave International’s Chief Market Analyst Steve Hochberg, “Economic Crisis Meets Investor Opportunity.” We think you’ll find Steve’s insights into global debt, real estate, the Federal Reserve and shifting investor psychology valuable, while his charts will show you the evidence that informs his forecasts. You’ll get a perspective on the markets that you simply won’t find elsewhere.


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“Economic Crisis Meets Investor Opportunity”
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See the rest of the hand-picked highlights from Steve Hochberg’s recent presentation: A compelling argument, supported by charts, facts and figures, for a precarious financial and economic position America finds itself in today.

Steve’s video presentation topics are: “A Shorter Fuse on a Bigger Debt Bomb,” (5:13 min.) “Global Stock of Debt,” (1:55) “What Growth Boom?” (1:45), “The Housing Crater” (2:54) and “Failed Economic Growth” (4:17)

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This article was syndicated by Elliott Wave International and was originally published under the headline Global Stocks Slide. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Pivotal Events

By Bob Hoye

Bull Markets Die Epicurean

bob hoye

Even Slower Now

By Alhambra Investment Partners

June was the for-sure liftoff point early in the year. That followed last year’s for-sure exit as March, April at the latest. Now more than a halfway through 2015 September is increasingly in doubt. They have to start somewhere even if they claim a methodical and slow pace to ensure as little disruption (in their twisted view). As I wrote yesterday, “’Intend to move slowly’ gets slower with each ‘dollar’ wave and that is the relevant motion of policy and economy quite against all the continued propaganda.

The first reaction from the Wall Street Journal is telling in that regard:

The Federal Reserve’s next policy meeting is four weeks away and officials show no clear sign of having settled on a decision about whether to raise short-term interest rates at that time.

That cannot be in light of all the certainty with which the recovery was given and not all that long ago. Last year was 5% GDP and full employment while this year stands as the gaining drip of “downside risks.” At the very least, it shows the FOMC knows nothing when it comes to this economy (and any other).

Continue reading Even Slower Now

Market Sentiment Getting Too Bearish

By Biiwii

Well, bearish sentiment is getting stoked up but good.  There will be a bounce or rally at some point.  This summer’s bearish media and investor sentiment have tipped toward out of whack with the US market’s price action.  Foremost in this regard was Sentimentrader‘s AIM model, which we reviewed as over bearish last weekend in NFTRH 356.

When prices stop declining and the rally comes from whatever bottom is ahead it could be a strong one, much like how the precious metals have bounced hard out of a hugely over bearish sentiment backdrop, as anticipated and expected.

I have already added a couple bull items against two US market short positions (added a short on a leveraged NDX bull fund to an existing SPY short).  These are items I bought for my own reasons and that I think have good potential should the market not fall apart.  If it appears we are going to get the type of sentiment wash out that happened in October a good post-summer, post-September trade could shape up.

NFTRH 356 noted the Housing sector before this week’s hype got the trend followers all over it, blowing a would-be entry point.  There is a pullback ‘buy’ target, which I now am not so sure will be hit.  But if yields go a certain way* in this deflationary swoosh, it could be a ‘buy’ if it pulls back enough.  There should be plenty of other items coming on sale as well.

For now though, just as price ruled in favor of the bull case despite waning momentum all these months, price rules for the bear case despite improving sentiment profiles.

*  Once again in the interest of full disclosure, just yesterday I speculated about a rise in long-term interest rates in an NFTRH update.  Ehhh… wrong, at least for now.  At some point the ‘inflation trade’ is going to bounce big.

SPX Diamond Breaking

By Biiwii

The consolidation pattern is looking none too good so far today.  At some point this could play into our overall Macrocosmic plan as the Microcosm Expands incrementally.  Of course those running the machines in the fantasy factory may start to concoct a ‘Fed’s not gonna hike!’ bull story at any point.  But right now, this thing is going bearish.

spx

Basic Gold Market Facts

By Steve Saville

Here are ten basic gold-market realities that are either unknown or ignored by many gold ‘experts’.

  1. Supply always equals demand, with the price changing to maintain the equivalence. In this respect the gold market is no different from any other market that clears, but it’s incredible how often comments like “demand is increasing relative to supply” appear in gold-related articles.

  2. The supply of gold is the total aboveground gold inventory, which is currently somewhere in the 150K-200K tonne range. Mining’s contribution is to increase the aboveground inventory by about 1.5% each year. An implication is that there should never be a shortage of gold.

  3. Although supply always equals demand, the price of gold moves due to sellers being more motivated than buyers or the other way around. Moreover, the change in price is the only reliable indicator of whether the demand side (the buyers) or the supply side (the sellers) have the greater urgency. An implication is that if the price declines over a period then we know, with 100% certainty, that during this period sellers were more motivated (had greater urgency) than buyers.

  4. No useful information about past or future price movements can be obtained by counting-up the amount of gold bought/sold in different parts of the gold market or different parts of the world. An implication is that the supply/demand analyses put out by GFMS and used by the World Gold Council are generally useless in terms of explaining past price moves and assessing future price prospects.

  5. Demand for physical gold cannot be satisfied by “paper gold”.

  6. Prices in the physical and paper (futures) markets are linked by arbitrage trading. For example, if speculative selling in the futures market drives the futures price down relative to the physical (or cash) price by a sufficient amount then arbitrage traders will profit by selling the physical and buying the futures, and if speculative buying in the futures market drives the futures price up relative to the physical (or cash) price by a sufficient amount then arbitrage traders will profit by selling the futures and buying the physical.

  7. The change in the spread between the cash price and the futures price is the only reliable indicator of whether a price change was driven by the cash/physical market or the paper/futures market.

  8. In a world where US$ interest rates are much lower than usual, the difference between the price of gold in the cash market and the price of gold for future delivery will usually be much smaller than usual. In particular, when the T-Bill yield is close to zero, as is the case today, there will typically be very little difference between the spot price of gold and the price for delivery in a few months. An implication is that in the current financial environment the occasional drift by gold into “backwardation” (the futures price lower than the spot price) will not be anywhere near as significant as it would be under more normal interest-rate conditions.

  9. Major trends in the US$ gold price are determined by changes in the general level of confidence in the Fed and the US economy. An implication is that major price trends have nothing to do with changes in jewellery demand, mine supply, scrap supply, central bank buying/selling, and the amounts of gold being imported by India and China.

  10. The amount of gold in COMEX warehouses and the inventories of gold ETFs follow the major price trend, meaning that changes in these high-profile inventories are effects, not causes, of changes in the gold price.

Post-CPI

By Michael Ashton

Below is a summary of my post-CPI tweets. You can (and should!) follow me @inflation_guy or sign up for email updates to my occasional articles here. Investors with interests in this area be sure to stop by Enduring Investments. And sign up to receive notice when my book is published! The title of the book is What’s Wrong with Money?: The Biggest Bubble of All – and How to Invest with it in Mind, and if you would like to be on the notification list to receive an email when the book is published, simply send an email to [email protected].

  • core CPI+0.13%, softer than expected. Core y/y rose from 1.77% to 1.80% due to soft year-ago comparison.
  • Next month we drop off an 0.05%, so we will almost surely get a core uptick. Surprising we haven’t yet. Waiting for breakdn.
  • Both primary rents and owners’ equiv accelerated slightly, Which means core EX HOUSING was actually slightly down m/m
  • core services rose to 2.6% (mostly on housing); core goods fell to -0.5% from -0.4% y/y. Same story overall.
  • Apparel accelerated to -1.64% from -1.85% y/y. Story for years in apparel was deflation; in 2011-12 prices rose>>
  • >>and looked like return to pre-90s rate of rise. Then it flattened off, and has been declining again.
  • Apparel could well be a dollar story now – it’s almost all made overseas, almost no domestic competition so dollar matters.
  • our proxy for core commodities is apparel + cars + med care commodities. all 3 decelerated. Cars went from +0.5% to 0.0% y/y.
  • sorry, Apparel actually ACCELERATED to -1.6% from -1.9%, but still negative.
  • airfares not really a story. -5.6% y/y vs -5.2% y/y. The NSA number dropped but it always drops in late summer. [Ed note: see chart below]
  • airfares was -8.5%, but it was -8.1% last july, -2.9% in 2013, -2.6% in 2012…no story there. didn’t affect core meaningfully.
  • Primary rents 3.56% from 3.53%. OEW 3.00% from 2.95%. Both will continue to rise.
  • Lodging away from home also rebounded to 2.9% y/y after a one-off plunge to 0.8% y/y last month. Household energy of course down.
  • Transportation accelerated (-6.6% y/y vs -6.9%) on small motor fuel recovery. btw, airline fares are only 0.7% of CPI, so 0.9% of core.
  • Med Care: goods were dn (drugs 3.2% vs 3.4%,equipment -0.9% vs 0.0%) but prof services up (2.1% vs 1.8%),hospital svcs dn (3.2% vs 3.5%)
  • Health insurance only +0.9% y/y vs 0.7%, but more expenditures out-of-pocket under the ACA so higher infl for those categories hurts.
  • Median (due out later) might only be +0.1% this month. I have it cuffed at 0.15% but I don’t seasonally-adjust the housing sub-components.
  • Last yr Median was +0.17% m/m, so best guess is it roughly holds steady at 2.3%.
  • I don’t see how the Fed embarks on a meaningful tightening in Sep, with global economy weaker than it has been in a couple yrs.
  • Median inflation and growth plenty strong enough to “normalize” rates but that’s not a new story.
  • I’ve been saying they should tighten for a few years but not sure why they would NOW if they didn’t in 2011.
  • But Fed doesn’t use common sense or monetarist models.It’s all DSGE;who knows what those models are saying?Depends how they calibrated.
  • FWIW our OER models diverge here. Our nominal model says pressures on core start to ebb in a few mo; our real model predicts more rise.
  • I like the real model as it makes mose sense…but it’s not tested in a real upswing.
  • US #Inflation mkt pricing: 2015 0.8%;2016 0.7%;then 1.6%, 1.7%, 1.8%, 1.9%, 2.0%, 2.1%, 2.2%, 2.3%, & 2025:2.2%.
  • …so inflation market doesn’t see inflation at the Fed’s target (about 2.2% on CPI vs 2.0% on PCE) until 2023.
  • The market is not CORRECT about that, but another reason the Fed can defer tightening if they want to. And they have always wanted to.

Continue reading Post-CPI

S&P 500 Consolidation

By Biiwii

Hello, I am the S&P 500 and I am here to annoy the hell out you whether you are a bull or a bear. 

Just look at how perfectly this robot stopped at the SMA 200 on this morning’s little jittery squiggle.

spx

Call it a Triangle (continuation, implication upward but nearly as often it seems, they go the other way) or a Diamond (often seen as a reversal pattern, but nearly as often seems to continue a trend).

What it actually is is a consolidation in preparation for something… which should arrive shortly.

[edit]  I have been short SPY straight out with no leverage for a few months now.  So that is a hint about the direction I think it’s going and also about the limited conviction behind it until the consolidation breaks.

Gold’s Safe Haven Status is Not in Doubt

By Steve Saville

Gold is very different from all other commodities. This is due to physical characteristics that caused it to be money for thousands of years and led to its aboveground supply becoming orders of magnitude greater than its annual production*. However, despite the huge size of its existing above ground supply relative to the rate at which new supply is created, that is, despite its massive stocks-to-flow ratio, gold is still a commodity and its US$ price is still affected by the overall trend in commodity prices. In particular, a major decline in commodity prices will naturally put downward pressure on the gold price and a major advance in commodity prices will naturally put upward pressure on the gold price. That’s why gold’s performance can be most clearly ‘seen’ by comparing it to the performances of other commodities, with the most appropriate comparison being with ‘non-monetary’ metals**. Such a comparison reveals that gold has performed exactly as a safe haven should have performed given the economic and financial-market backdrops.

Continue reading Gold’s Safe Haven Status is Not in Doubt