I have made no bones about the fact that some of the tools I have depended on have stopped working, at least temporarily. For example, the gold-silver ratio would normally have croaked junk bonds and the stock market by now. For another, the 30yr-2yr yield spread would have pulled gold up as opposed to its current bear market state. There have been other indicators that have just stopped working and the temptation is to rave “Bernanke this!” and “Bernanke that!”
But that does no good. Bernanke is winning (duh) and he is the man on the cover of the Atlantic, smugly grinning out from behind the bold headline The Hero. I on the other hand am just a schmo with some broken tools. But I also have nominal technical charts that have helped avoid the hazards that we might believe active policy making have wired in to the markets.
By the way, speaking of indicators that don’t seem to make sense, why on earth are T bonds (which do not like inflation) and commodities (which do) both getting hammered today?
TLT & DBC hourly
The hit to commodities of course has something to do with the strength in the USD* (which we have noted over the last several weeks is on a bullish – not bearish – signal by weekly chart), but what on earth is up with T bonds if inflation is not an issue? Could it be that somewhere in the T bond market lies the future undoing of the Hero’s myth?
I am going nowhere with this post other than it is an over-stimulated market with policy makers front, center and every which way screwing with normal market management. Within that context, survival in the short term in service to proper positioning in real value over the long term is vital.
Gold bugs may be right with the hysteria (like that showing up in my inbox) about Cypress being the first leg kicked out from under the neatly set table, and oncoming confiscatory policies. But those that went all in with ideology are paying the dearest price in the interim. This is speaking of the paper markets, anyway. Gold is gold (value) in the monetary realm and ain’t nothing gonna change that.
The play remains to be intact first and ready to capitalize second. That is because the other way around, trying to capitalize (on ideology) first and be intact second is not working and has not worked for over a half a year, and has not worked well for 2 years.
* Here is the weekly USD chart from NFTRH 230, created 7 weeks ago noting a bullish moving average cross.
US dollar, weekly