S&P 500 vs. Gold (AKA Amigo #1); a Closer Look at Risk

By Notes From the Rabbit Hole

Not much has changed since the last 3 Amigos macro update. Amigo #2 (long-term yields) has long-since reached the Continuum’s ™ limiter (the 100 month exponential moving average on the 30 year Treasury yield) and Amigos #1 (SPX/Gold) and #3 (the 10-2 yield curve) are still on their respective trends (up for SPX/Gold and flattening for the yield curve), indicating a positive and risk ‘on’ macro backdrop.

Of the 3 wacky riders, with Steve Martin now having gotten home and Martin Short a duller indicator (and lesser light), let’s focus on the Chevy Chase Amigo. There he is on the left, a look of triumphant joy on his face riding one-handed with his arm up in the air. Not a care in the world (as Steve Martin braces for the impact of Continuum’s limiter).

Continue reading S&P 500 vs. Gold (AKA Amigo #1); a Closer Look at Risk

A Macro (Amigos) Update for Mid-Summer

By NFTRH

You have better things to do than read droning macro analysis or long, drawn out investment theses. It is a weekend in the dead of summer and for that reason we go easy this week; real easy.

The 3 Amigos are here to simply say that things are as they have been, with Amigo #2 (long-term yields) getting home and pulling back on cue, and the other two (SPX/Gold ratio & Yield Curve) still in process and indicating risk ‘on’ and ‘boom on’, respectively.

Amigo #1 (Stock Market vs. Gold)

While gold bug sentiment, Commitments of Traders and the historical seasonal pattern all indicate a good potential for a gold rally coming soon, the stock market’s ratio to gold continues to indicate that risk is on and the play has certainly not been to be hiding in precious metals from the stock crash that never arrives. Quite the contrary.

Continue reading A Macro (Amigos) Update for Mid-Summer

3 Amigos (SPX/Gold, Long-term Yields & Yield Curve) Updated w/ edit

By NFTRH

It has been a while since we’ve had a 3 Amigos update because a) Italy and global tariffs noise aside, nothing much has changed with the macro and b) I felt my ‘image-based metaphorical content to straight content’ ratio was getting a little excessive. So I gave it a rest.

Now it is time again for an update of these important macro riders in order to touch base with their signals. As always, I’ll remind you that there is much more to the macro market backdrop that NFTRH manages on an ongoing basis, but these three are important.

The quick answer is that only Amigo #2 (long-term yields on a rise to our preset limits) has reached destination. I marked up the graphic as he was approaching our targets.

[edit] The monthly charts driving the view that current trends remain intact can be considered big, dumb (i.e. not overly sensitive) indicators. Shorter-term views of these and other indicators can be used to gauge signs of oncoming changes. As one example, if daily SPX/Gold were to take a hard plunge on any given day or week (as was the case in February and March) we’d pay close attention as we did then before the larger trends ultimately took over again.

Amigo #1: Gold vs. the S&P 500 (or stock markets in general)

The theme for this Amigo is that the stock market (cyclical, risk ‘on’) has been trending up vs. gold (counter-cyclical, risk ‘off’) since 2011 in order to close out the negative cycle that completed that year.

The daily chart shows that despite the stock market’s recent weakness the ratio is making a new recovery high.

spx/gold ratio Continue reading 3 Amigos (SPX/Gold, Long-term Yields & Yield Curve) Updated w/ edit

As the Macro Turns…

By NFTRH

We began months ago, noting the 3 Amigos destined for their goals. Here’s a post from November 2017 explaining the macro fundamentals involved:

Updating the 3 Amigos of the Macro

  1. Amigo #1 (SPX vs. Gold): Either reach major theoretical resistance (it’s a ratio, after all) or abort mission by establishing a downtrend.
  2. Amigo #2 (10yr yield to 2.9% and 30yr yield to 3.3%): Destinations reached!
  3. Amigo #3 (also known as the slower, dumber Amigo, the 10yr-2yr Yield Curve): Still on his journey, flattening. The trouble would be indicated by steepening.

As we’ve noted, the two star Amigos (Steve Martin & Chevy Chase) were bracing for a smash against the yield Continuum ™ limiter and the conspicuous weakening of stocks vs. gold since February. The Martin Short Amigo is goofier, and on his own schedule. He’s a lesser light, after all. The two stars are making the headlines.

Beginning with Steve Martin’s character, the 30yr yield Continuum ™ hit the 100 month EMA ‘limiter’ and reversed. This does not have to be a long-term reversal. The point was for yields, which had been riding higher with stocks and risk ‘on’ assets, to hit and reverse or consolidate. What comes next is open to new analysis. We’d been expecting yields to rise to these limiters since last October and they have done so.

Continue reading As the Macro Turns…

3 Amigos of the Macro, Updated

By NFTRH

You thought I was done with the Amigos shtick, did you? Not by a long shot ma’am. They are the happy-go-lucky riders in play as the stock bull market churns on. They are the rising SPX/Gold ratio and stocks in general vs. gold (Amigo #1), rising US 10yr & 30yr yields (Amigo #2) and the flattening 10-2 yield curve (Amigo #3). On their current trends these goofy riders have signaled “a-okay!” to casino patrons playing the stock market and other risk ‘on’ items.

Taking our macro indicators out of order, let’s start with Amigo #2, who we have been noting to be bracing for something…

What is that something? Well, it is the targets for 10yr & 30yr bond yields we laid out 4-5 months ago in a bearish case for bonds; you know, back when everyone didn’t hate bonds as is currently the case under the much more recent expert guidance of Bill, Ray and Paul? It might as well have been Ringo, George and Paul making the call.

Another Heavy Hitter Calls Bond Bear

I am not trying to come off as a contrarian bond bull, deflationist. There are very valid reasons to be open to if not expect a new and secular bond bear market. But with the yields at our targets, which were established for a reason (being caution) and with the financial eggheads fully in unison, it has come time for caution on the bond bear stance and at least some aspects of a stock bull stance.

Continue reading 3 Amigos of the Macro, Updated