He’ll bring them [inflation], and they will love him for it

By Notes From the Rabbit Hole

[biiwii comment: going back to posting select items of my own content here, because… why not?]

I used to make fun of the FOMC rate hike “decision” language in the mainstream media because under the Obama administration and its economic policies overseen by the Fed’s monetary policy, there really was no decision, was there? It was ZIRP-eternity, interrupted by a lone and token rate hike in December 2015 (the Dec. 2016 hike does not count because the transition to a new administration and policy regime was already known; in effect, the Fed has already made its first hike under Trump).

According to the traders who make up the Fed Funds futures, there is no decision tomorrow, either. From CME Group, we have virtually no one predicting two successive rate hikes.

cme fed funds futures

That may or may not be the case. I think everything changed with the election, and the Fed you had before is not the Fed you have today. That Fed was a promoter of inflation and a hands-on supporter of the economy and especially, asset markets. The Fed had kept its implied ‘inflate or die’ mantra and associated monetary policy in place for 8 long years. But now with the country flipped over like an egg onto its sunny side, a new administration has proven it means what it says (beginning with its blunt, heavy handed and in my opinion, misguided delineation of race and religion on immigration policy).


Focusing on the financial realm, what the Trump administration says is it is going to implement is fiscal (as opposed to monetary) policy in the form of tax breaks to corporations large and small, to tax payers, including and especially the wealthy, infrastructure building, including ‘the WALL’ (more symbolic than realistic in my opinion) and environmental and business deregulation far and wide. It is a much more business-friendly environment and keeping pure politics out of it, that is a good thing, economically.

In short, what is described above is a scenario where the administration has grabbed the policy burden from the Fed and thus, the Fed is free to do as it pleases now, no longer playing politics. The Fed knows, just as you and I know, that the indirect, and maybe even unintended aim of the Trump administration is to promote inflation. That is because they intend to promote economic growth through policy, just has the Fed has been trying to do for the last 8 years under Obama. By one method or the other, it is in the ‘promotion’ that inflation lives.

Continue reading He’ll bring them [inflation], and they will love him for it

3 Killer Charts, 2 Fast Looks at Politics

By Elliott Wave International

3 Killer Charts, 2 Fast Looks at Politics

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Alice's_Adventures_Under_Ground_-_Lewis_Carroll_-_British_Library_Add_MS_46700_f45v“If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would. You see?” –Alice in Wonderland

Silver out performs gold as both rise with Treasury bonds, which are in turn rising with stocks, as Junk bonds hit new recovery highs while USD remains firm as inflation expectations are out of the picture. This is highly atypical, maybe even unprecedented.

Some, deeply dug into their particular disciplines and biases, might say it is dysfunctional, as this backdrop simply does not make sense using conventional methods of analysis. Why again did I name this service Notes From the Rabbit Hole?

When the S&P 500 was robo rising month after month, year after year as it did from 2011 to 2015, you did not need the market report with the funny name because all was linear and as it should be. The same actually, could be said for gold. It was linear and as it should be in its relentless downtrend. Casino patrons simply ride the trends!

But today things are making sense simply because we don’t have a need to make them make sense as linear thinkers would do; we go with the indicators and charts.

As I watch the macro burp up all kinds of paradoxes and inconsistencies, I can’t help thinking back to the day that the ‘Hero’ announced Operation Twist, which in turn got me announcing “they are painting the macro”. When Ben Bernanke took the bold step into the great unknown of extreme and unconventional policy I felt the markets had been disconnected from commonly accepted wisdom maybe not for good, but for as long as the system and its current modes of operation are in effect.

To review, Operation Twist forced changes upon the macro because it “sanitized” (the Fed’s actual word for it) inflation expectations right out of the picture. The mechanics of this sanitization were the Fed selling short-term Treasury bonds (putting upward pressure on short-term yields) while simultaneously buying long-term Treasury bonds (putting downward pressure on long-term yields). The yield curve was changed from out of control (up) to in control (and down trending). From the Calculated Risk blog (http://www.calculatedriskblog.com/)…

Continue reading at nftrh.com →

Details Behind Semiconductor Leadership

By Biiwii, as posted at NFTRH.com

I am prompted to write this article because TA’s are starting to pick up on the Semiconductor index’s bullishness and even the overwhelmingly bearish website, the Daily Reckoning is calling bull on the Semiconductor sector.

These Tech Stocks Are Ready to Lead the Market. Before Buying, Read This…

The author uses only charts to clue readers in to this little secret (Semis led the market down and now they are leading it up) but there is much more to the story, and since it has been our story (for its upside and downside market leadership) since 2013 I’ll lay claim before the whole enchilada opens up and every wise guy with a chart or a stock pick is touting the Semis.

In NFTRH we have been noting the relatively bullish status of the SOX (and this week, in light of the May book-to-bill, begun charting equipment stocks in NFTRH+), along with a few other ‘relative bull’ sectors.  But I came across the most compelling evidence of a Semiconductor revival quite by accident while running through the US market indexes.  Well, it was on purpose, but I was surprised at the timing as you’ll see.  Here’s a clip from NFTRH 400…

<begin excerpt>

I took a long on the Banks [edit: quick profit taken on Monday, along with another on rising rates vehicle TBT] as BKX dropped to support. That did not reflect a view on the pigs, it reflected a view on the hysteria surrounding declining interest rates, inflation expectations, etc. The warning here is that hysterias can last longer than your trade tolerance, so I’ll not be too patient. SOX is still bullish and the book-to-bill data will be out on… folks, we interrupt our regularly scheduled programming for (see below)


Attn: Stock Market Players & Gold Bugs Alike

I just went to check the date of the coming SEMI equipment sector book-to-bill data release and what did I find? This is what I found. Unexpectedly, it is already out.

Continue reading Details Behind Semiconductor Leadership

NFTRH 391 Out Now

By Biiwii

This week we abbreviated to a review of limit and/or trend change points in several markets, further discussion of inflation and what needs to be in place to call an ‘inflation trade’.  I was away for a few days in NYC seeing to daughter #1’s prospective educational destination, barely looking at the market until this morning.

nftrh 391

NFTRH 390 Out Now

By Biiwii


nftrh 390We do the usual macro coverage and per a subscriber’s request also add in some extensive charting of individual gold stocks.  I added a few of my own ‘relative quality’ holdings as well.  We are not going full frontal gold bug here, however.  Because to do that is to feed the beast.  We are simply charting, noting fundamentals and anticipating a key level that would technically begin the bull market confirmation process.

As for other markets and assets, all current themes remain applicable and we update those as well in a comprehensive, well-rounded report that provides us with solid groundwork heading into a new week in the markets.

Gold Sector: Macrocosm Updated

By Biiwii

As posted at nftrh.com…

We do in depth analysis on a weekly basis (and every day in-week) because there is no substitute for working to be right with the market’s evolving situation as opposed to making bias or ego stoked calls in hopes of being right.

The current situation has seen some calling ‘bullish’ on the stock market despite a still intact bear trend (noted repeatedly in NFTRH), people going bullish on commodities despite their “bounce only” (also noted repeatedly) status in the absence of real, market-based inflation signals (which I do think are coming soon) and global markets bouncing within bear trends of varying degrees.

But the good feelings of the last 1.5 months have been indicated as a counter-trend bounce to reset the unsustainable bearishness of January and February’s downside, although the bounce has come very close to the point where it could negate the bear trend. As yet, it has not.

Continue reading Gold Sector: Macrocosm Updated

NFTRH 389 Out Now


389screenAs noted in yesterday’s post, doing the work in the weekend report changed me. Maybe just by an increment as I had been thinking I was inching closer to a Greenspan era (esque) bullish view. Well, not so fast.

The market’s fundamentals vs. price stinks to the high heavens and corporate management and Wall Street analysts are busy revising expectations down. If you put on a tin hat you might think that ‘they’ are putting in the fix this earnings season in order to rip the cover off the ball. If you don’t put on a tin hat you might think that this graph + an extended stock market + an extended sentiment backdrop + hedge funds going all in might = high risk.

Graph courtesy of Factset.com

What I think is that my portfolios are at their 2016 highs and I am going to raise cash this week. And I also think I still hold SPY short. In fact, I know I do. 😉