Consumer Sentiment Forecasts Employment

By Tom McClellan

Consumer Sentiment Still Forecasts Employment Growth

Unemployment rate and University of Michigan Consumer Sentiment Survey
May 15, 2015

The unemployment rate has not finished falling.  That is the message from the data provided by the University of Michigan’s Survey of Consumers.

In this week’s chart, I am comparing an inverted plot of the US civilian unemployment rate to the UMich sentiment data.  It makes complete sense that how consumers are feeling should have a strong positive correlation to the unemployment rate.  In a recession, when more Americans are out of work, it would be natural for consumers to be bummed out.  So to find a relationship between them is not much of a surprise.

Continue reading Consumer Sentiment Forecasts Employment

Gold: Contrary Indicators

By Biiwii

It was bad enough that a numbered bullet point (!) using tout has been lathering the gold “community” lately with an amazing fundamental consideration he calls “the Chindian love trade” (you know, in China they buy gold for love and as their economy grows gold will go way up in price).  Never mind that he promoted gold for Indian Weddings and China demand all through the bear market or that as recently as last week he predicted that the US ‘jobs’ number would be huge and gold would sky rocket due to panicked institutional demand in the face of rising inflation.

You can’t make this stuff up.  It annoys me, but now this darker thing comes about in the mainstream media, right on cue, just as gold hit the key resistance area surrounding 1220 that NFTRH, for one, has been noting.


Peter Schiff, more bullish than ever, sees gold headed to $5,000 an oz.

Schiff: upside potential in gold equities is ‘phenomenal’

Get this, gold equities have been on an anti-USD bounce along with all kinds of other stuff that will probably not be rising with them when a real bull market gets started.

The same people who were surprised that the USD rose to begin with (we were not; we gauged and tracked it from day 1) are now getting pumped again due to its correction, which was predictable given its strenuously over bought and over loved status.  But an ‘anti-USD’ bounce is all it is in the precious metals until certain parameters are taken out and certain fundamentals join other fundamentals in indicating a real bull market.

I won’t go into details because well, those are for NFTRH.  But I had to make this post because the timing of this article made my jaw drop when I saw it.

Schiff argues that more QE is coming to try to fix the damage done by the previous QE’s and that there really is no limit on gold’s price.  Fine, there are reasons that gold can one day get unchained.  But this MSM highlight is casino patron stuff.

The MSM seem to have an inventory of apt stories for any given environment.  Gold pops for a few days and MarketWatch pulls out the Schiff card.  It’s a 2 of Spades when a King and a Queen are already laying face up.

Gold and Interest Rates

By Biiwii

How many times I have read gold sector gurus working gold-bearish promotions talk about a “strong dollar” and “rising interest rates” as being bearish for gold.  Transfixing certain among the gold “community” with authoritative words about gold’s drivers, they keep ’em transfixed.  Some attained reputations by having been touted by  ‘Mr. Gold’, Jim Sinclair and then turned around and bit the hand that fed them right off when it was time to create a cottage industry of sentiment against poor old Jim and the other gold ‘Generals’ as I used to call them during the previous bull market.

They now offer the cartoonish opposites to Sinclair’s formerly cartoonish bullish stuff.  The dollar is bullish so gold is bearish… interest rates are rising so gold is bearish.  Well, for different reasons neither of those statements – fed to some non-discriminating gold bug herds who lap anything, as dispensed by an authoritative figure, that fits their current view (in this case, ‘we won’t get fooled again’ bearish) – are true.  It’s just paint-by-numbers stuff that is easy to digest and understand.

In the case of interest rates, they are rising.  What do the newfangled gold bears have to say about that?  I saw their anti gold cult ‘cult’ leader write several times that rising interest rates would hurt gold.  I did not see any mention of interest rate differentials, which mean only everything where gold is concerned.

Get this, gold can benefit greatly when rates are rising, as long as the inter-bond signals are inflationary and indicative of an inflation problem.  Gold can benefit when rates are dropping, as long as short-term rates are dropping harder and the implication is a flight to liquidity and risk ‘OFF’.

The reason Thing 2 in the chart below has been stable to (now) firm while Thing 1 launched upward…

…is because Thing 1 has also been steady and has gently risen vs. Thing 3 (2 year yields)…


There is no simple analysis of gold and interest rates.  If someone in the mainstream print or TV media or a gold guru going on reputation (and a talent for serving easy to digest tidbits) talks about gold and interest rates in surface, linear terms it is advisable to disregard it.  There are reasons that most people are not going to be on board when the time is right, and this is one of them.  This stuff is fairly, but not overly, complex.

Add in the other elements involved like economic trends, psychology/confidence and okay, it’s complicated.  But its doable if you keep cool and keep a working b/s detector against all of those trying to sell you analytical tidbits.

Trouble in Bond Land

By Bob Hoye

Click for PDF file

ASS Economics

By Steve Saville

To the Keynesian economist, the world of economics is a sequence of random events — an endless stream of anecdotes. Things don’t happen for any rhyme or reason, they just happen. And when they happen the economist’s first job is to come up with an explanation by looking at the news of the day, because there will always be current events that can be blamed for any positive or negative developments.

It’s futile to look any deeper, for example, to consider how policies such as meddling with interest rates might have influenced investment decisions, because, even though the real-world economy involves millions of individuals making decisions for a myriad of reasons, the individual actors within the economy supposedly form an amorphous mass that shifts about for unfathomable reasons. In fact, in the Keynesian world the economy can be likened to a giant bathtub that periodically fills up and empties out for reasons that can’t possibly be understood, although if an explanation that goes beyond the news of the day is needed the economist can always fall back on “aggregate demand” or its more emotional cousin — “animal spirits”. Specifically, a slowing economy can be said to be the result of falling “aggregate demand”, and when the pace of economic activity is rapid it can be said to be the result of surging “animal spirits”. There’s no need to try to explain the changes in these mysterious entities, because they are inexplicable. They just happen.

Having explained what’s happening to the economy by pointing at seemingly random/unpredictable events or citing unfathomable changes in “aggregate demand”, the economist’s second job is to recommend a course of action. And since the economy can supposedly be likened to a bathtub filled with an amorphous liquid, the level of which periodically rises and falls, it’s up to the economist to suggest ways that add liquid when the level is too low and drain liquid when the level is too high.

Fortunately, adding and draining liquid is very easy to do. For example, to add liquid all that has to be done is for the government to increase its spending and/or for the central bank to create some money out of nothing. It doesn’t matter that the government’s spending is unproductive and that the central bank’s money-pumping falsifies the price signals upon which the market relies; it only matters that more liquid is added to the bathtub.

This approach to economics might seem ad-hoc. It might seem superficial. And it might seem short-sighted. That’s because it is all of these things, which is why Keynesian Economics should be re-branded ASS (Ad-hoc, Superficial and Shortsighted) Economics.

Charts of Interest

By Biiwii

As previously noted, I have the potential to become distracted and busy elsewhere this week.  So for that and market related reasons I am very lightly positioned (heavy cash).

But one position I hold is an NFTRH+ trade idea on Gilead.  The ‘+’ update was produced before GILD reported its good earnings.  It was based solely on the chart.  It’s got a theoretical target up higher if this pattern is any good.  I may take the profit at any time (or limit the loss if that becomes the play).  GILD held up during the recent hard hit in Biotech, weekly MACD is triggering up and RSI is above 50.  So technically, this thing looks pretty decent when viewed in a vacuum.


The ‘Apples to Apples’ European equities ‘credit spread’ (daily) chart (Euro unhedged Spain vs. Euro unhedged Germany) continues to sport a bullish pattern and so, I continue to have interest in Europe for when the current correction ends.  I would like to see one more upside burst in the Euro (which remains bearish on the big picture), which could drive down QE-stoked European stocks to a theoretical buying opportunity.  If the chart below is still intact at such time, it would be a positive divergence indicating that risk is still ‘ON’ in Europe.


Around the Web

By Biiwii

Market analysis & news from around the web
  • Wall Street Vampires  –Paul Krugman  [biiwii comment: i’ll highlight anyone, incl. Krugman, when they are right about something; or at least mostly right about something. imo Krugman is right about this something]


Cash Hot Potatoes

By Steve Saville

Large Sums of Cash Are Hot Potatoes

There’s a line of thinking to the effect that Quantitative Easing (QE) is not inflationary because it involves the exchange of one cash-like instrument for another. Taking the case of the US, the Fed’s QE supposedly adds X$ of money to the economy and simultaneously removes X$ of “cash-like” securities, leaving the total quantity of “cash-like” instruments unchanged. However, even putting aside the fact that many of the securities purchased as part the Fed’s QE programs are not remotely “cash-like” (nobody with a modicum of economics knowledge would claim that a Mortgage-Backed Security was cash-like), this line of thinking is patently wrong.

Continue reading Cash Hot Potatoes

NFTRH 342 Out Now

By Biiwii

A very good one, dealing in the short-term across major markets.  I also hit myself over the head with a clear view of the gold stock sector and what it is probably doing vs. broad stocks with implications over the coming months.  A clear picture that will work out well for people with perspective.


Posting may be lighter than usual this week.  Life’s priorities have entered the picture.

Eurodollar CoT Indication

By Tom McCellan

Eurodollar COT’s Leading Indication

eurodollar COT data
May 08, 2015

The second half of 2015 could be a problematic time for the US stock market, if this week’s chart is correct.  I introduced this relationship to Chart In Focus readers back in 2011, and it has been a regular feature in our twice monthly McClellan Market Report and our Daily Edition since 2010.

The basic idea is that I take data from the weekly Commitment of Traders (COT) Report on the commercial traders’ net position in eurodollar futures, and then use that as a leading indication for the SP500.  In this case, the term “eurodollar” (ED) refers not to a currency relationship, but rather to dollar-denominated time deposits in European banks.  So it is an interest rate futures product.

Continue reading Eurodollar CoT Indication

Pivotal Events

By Bob Hoye

“Skewed Growth Curves: Unstable”