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.
Recently I have gotten wordy about the decline in ‘inflation expectations’ beginning on June 2, right on through yesterday’s update of the TIP-TLT ratio and TLT in essence, attaining their targets. The implication would be that the mini deflation whiff is coming to its limits.
As often happens at potential limit points, the market’s crosscurrents are strong. As noted yesterday, USD, gold, silver and the gold miners all did in-day reversals as items that had been risk ‘off’ got hammered. ‘What, USD and gold in lockstep? What is the meaning of this?!?’ think inflationists. See yesterday’s in-day post Strange Bedfellows.
The meaning is that these items, along with the VIX and US Treasury bonds have been plays for a risk ‘off’ market as it got the jitters over deflation. Gold miners had been, however fleetingly, rising in line with their counter-cyclical fundamentals and this is the mirror image to the reasons why I so often parrot that if you are a gold miner bull, at least realize that fundamentally at least, the sector is done no favors in an inflationary backdrop (price, for long stretches of time, can be something else all together).
Dear SoH, I know this is somewhat Gary-specific, or Gary-indulgent, but I like to hammer everybody over the head in none-too-subtle ways now and then…
It must be a gold bull market because…
- Gold analysts (code for gold obsessives; analysts cover asset markets, including gold), who for years pumped people to be bullish despite an obvious bear market, are now taken seriously again as they issue the same dogma.
- A Technical Analyst months ago advised “30,000 coffins” would be needed for gold bugs and has since gone quiet while another is bearish, no bullish, no bearish again, no bullish again. Charts are only one component of gold market management, but the TA’s are again enthralling the gold community with lines and squiggles.
- Yet another gold bug TA somehow manages to tie in cycles and God for a bullish view of gold and silver and a 2016 crash for world markets. There’s a niche for everything, I guess.
- The major media as well is in obsession mode, as we find out about bullish calls on gold by people smarter than we are, like Soros, Gundlach and Druckenmiller.
- And to balance it all out, there is a man and his computer advising that gold has not yet seen its cycle lows.
 Please see a new post with more perspective on a would-be ‘inflation trade’ and its limitations.
The following excerpt is the opening segment from this week’s edition of Notes From the Rabbit Hole, NFTRH 398…
Last week’s opening paragraph: “If we are going to highlight improving fundamentals, which we did as gold out performed commodities and stock markets, then we also have to highlight and respect eroding fundamentals; no ifs, ands or buts.”
This week’s opening paragraph: If we are going to highlight eroding fundamentals, which we did as gold under performed commodities and stock markets and Semi Equipment made an early positive economic indication, then we also have to highlight and respect improving fundamentals; no ifs, ands or buts.
Gold is about the economy, the market risk profile, implied confidence in policy makers and above all, the state of money and the perceptions of billions of people who hold this ‘money’ issued by governments with “Legal Tender” or other wording to give the holder a feeling of confidence in its origin, its backing.
I don’t write the title because the precious metals took off Friday on the bad jobs report. Far from it. That is what gold is supposed to do under such circumstances as its fundamentals got a boost and the perceptions of a hawkish Fed got repelled.
I write the title despite the fact that the inflation barometer, TIP/TLT, tanked and commodities were moderate, post-jobs. Yesterday we noted: Inflation Expectations Sagging, including a declining TIP/TLT and a bullish looking TLT (each a form of non-inflationary signaling). Friday they got bearisher and bullisher, respectively.
Following is the opening segment from the May 29 edition of Notes From the Rabbit Hole, NFTRH 397:
If we are going to highlight improving fundamentals, which we did as gold out performed commodities and stock markets, then we also have to highlight and respect eroding fundamentals; no ifs, ands or buts.
The plain and simple fact is that the Semiconductor Equipment sector is firming, with the April Book-to-Bill (b2b) joining Applied Materials’ quarterly report noted in NFTRH 396’s opening segment as another bullish [economic] indicator. Semi Equipment was a leader to the general Semi sector in early 2013, which in turn led the economy and job creation. Our fundamental gold view improved in January 2016 as gold launched upward vs. global stock markets, joining its positive status vs. commodities.
The following is the opening segment of this week’s Notes From the Rabbit Hole, NFTRH 396. The report also covers, in detail, the technical status of US/Global stock markets, precious metals, commodities, currencies and even a few individual gold miners and a couple of new (non-gold related) NFTRH+ trade ideas.
In January of 2013 we noted that the “Canary’s Canary” chirped and signaled an economic up phase (such as it was) on the horizon. The Canary was the Semiconductor sector, which is cyclical and economically sensitive. The Canary’s Canary is the Semi Equipment sector, manned by the likes of Applied Materials and Lam Research.