The signals of gold vs. other assets and markets have become so important to financial markets over the last year (hello Macrocosm, July 27 2015) that I have created a standard segment in NFTRH called ‘Gold vs.‘. The segment regularly checks up on gold vs. stock markets, currencies, bonds and of course, commodities.
Here is the state of the latter. After the chart I’ll summarize some of the market signals.
- Au-CRB is in a long-term uptrend. This uptrend has been in place since late 2014, when not coincidentally, volatile market disturbances started to erupt. The uptrend is in place, indicating a generally counter cyclical global atmosphere. If gold breaks down vs. cyclical CRB the ‘inflation’ play would drive hot money out to other areas beyond gold mining. If not, the favored gold mining fundamental backdrop will have held up.
NFTRH 404 deviated from the usual format of widespread, in-depth coverage of US and global markets, precious metals and commodities in order to focus on two main themes. One was a view of building short-term risks in the gold market (possibly pending new rally highs) and the other of a developing bullish phase in the US stock market. We reproduce part of that segment here…
More on the ‘Breadth Thrust’ and Market Internals
Ref. Breadth Thrust: Prelude to a Crash? (July 12)
Subscriber ‘LN’ presented a view of the impending ‘breadth thrust’ signal and we both came to the same conclusion; that this is ending action in the stock market. It is at once very bullish and very bearish, depending on time frames. Below is additional information per ‘LN’, who is a financial adviser and thus, not a casual observer. I would also note that both ‘LN’ and I have similar caveats about analogs from the past projecting to the future (they often do not do it well). But for reference (emphasis mine)…
“I went back and looked at 1987 a little closer. I know the price action isn’t going to be identical but I wanted to see if they rhyme at all. (more…)
Pardon the sensational post title, but an email from a subscriber (‘L’, a financial advisor) had a grounding effect on me. He sent me this photo along with…
“I thought you might be interested in the breadth thrust that is going to trigger today. For some reason the Internet seems to be full of misinterpretation of a thrust. My numbers show that this will trigger today. Sets up for a 1987 scenario it seems to me. Attached is the history of it.”
“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?
Subtitle: Brexit!!! Silver!!! Bonds!!! Deflation!!!
It’s a funny title for a segment, but it is appropriate. I don’t want to be too flippant with dismissals of inflammatory market events like ‘Brexit’ as simply hype. There is very real macro fundamental shifting going on behind the hype. But in market management, macro fundamentals play out over long stretches of time and nobody knows exactly how all the moving parts are going to affect the subject of the hype (in this case Britain and the EU), let alone the asset markets we are tasked to invest in, trade or avoid.
This is where market psychology comes into play, hence the ‘!!!’ title. As already noted, I get the feeling that the Brexit drama was an exclamation point on the global deflationary phase that has been in play since 2011, when the acute phase of the ‘Euro Crisis’ first erupted (sending gold to 1900+ an ounce). You may recall that silver and commodities had already blown off and blown out but gold pulled in the risk ‘off’ bid amid a developing deflationary force. It then blew out and global deflation ensued.
Yes, it’s another inflation post going up even as inflation expectations are in the dumper and casino patrons just cannot get enough of Treasury and Government bonds yielding 0%, near 0% and below 0%.
Feel free to tune out the lunatic inflation theories you’ve found at nftrh.com over the last few weeks. But if by chance you do want to look, here’s a visual path we have taken to arrive at the barn door, behind which are all those inflated chickens, roosting and waiting. All sorts of animals will get out of the barn if macro signals activate.
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.