Improving Macro Backdrop
In light of a shifting global macro backdrop that we can finally sink our teeth into with respect to a bullish orientation on the gold stock sector, I thought it might be a good idea to publicly post some bottom line thoughts from this week’s NFTRH report.
The report went into great detail to explain why more fundamentals that matter are starting to come in line, after the chart below refused to make a signal against our big picture view of global economic contraction, which has been the biggest key for the counter-cyclical gold mining sector.
The title is not meant to declare that this time gold stocks are going to exercise the excellent risk vs. reward stance vs. the US stock market. But it is meant to declare that the stimulus for the recent out performance is much healthier than it was last summer, during the last bounce.
Recall that was a time when Russia was sending armor into Ukraine and the pom poms came out in the gold sector, as if geopolitics have anything to do with investment merit.
With all the hype and noise built in to daily and weekly market management, sometimes it is worthwhile to dial out, calm things down and touch base with markets on the big picture. Here are views on various markets (with limited commentary) by way of some NFTRH monthly charts.
Let’s start with currencies, since they are a reflection upon global policy making, which has been unprecedented in its direct market interference over the last few years.
Nominal Charts – Currency
We noted the hot air patch in the Canada dollar last year. I had thought CDW might stop and find support at 85, which is a measurement from the topping pattern; but so far, no dice.
It looked like a few rats tried to jump ship as the bell rang on 2014. But it is hard to trust any one day or week as a guide during the holidays so we can just call it what it was, a down week within a general US market uptrend.
The strong uptrend however, is on the longer-term charts. Some dailies are in down trends kicked off by the pre-Santa correction (ref. the NDX below and the NYSE, as two examples). As we noted in NFTRH, the Russell 2000 was the first to go daily trend up into what is often ‘small cap season’. It has got a big fat gap though, and a test of the MA 50 seems in store.
Nasdaq 100 is relatively sloppy, remains in a daily downtrend and also has a big gap to fill. Of course, this index had a lot of momo in it into December and can fall quite a way without losing its bull market. The next two support levels are shown. As an aside, I sold Tech Generals INTC, MSFT and AAPL into the post-FOMC rise with a level of remorse. Now? Not so much. They remain on watch pending coming interpretation of this pullback. (more…)
So Baby 2015 has slammed the book on wrinkled old 2014 (this imagery just cracks me up), a year that featured the continuation of existing macro trends like US stocks up, global stocks wobbling, precious metals weak and commodities weak to tanking.
Personally, I found the year revolting as an honest market participant, but thankfully made like a caveman and simply used my tools to help me avoid the pitfalls of my emotions and logical mind. I try very hard to tune down the Tin Foil Hat stuff, but I continue to be in awe of Policy Central and the depths of what looks to me like depravity that they will stoop to in order to keep up appearances. Reference Operation Twist and its “inflation sanitized” selling of short-term notes and buying of long-term bonds.
Who would’ve thought managing an economy and a financial system could be so easy, so controlled and well, so sanitary? Of course, that was way back in 2011, when the macro began to quake in anticipation of change. An anti-market (AKA gold) was brought under control but good and though the masses would hold tightly to their fear (so deeply ingrained from 2008) for another year or more, 2013 and 2014 saw increasing momentum toward a complete recovery of hurt feelings from the 2008 crisis time frame.
NFTRH 322 covered the usual range of markets, from US to global stocks to precious metals and commodities to currencies and indicators. It also included an extended economic discussion about the realities of the strong US economy and its dangerous underpinnings.
The economic segment began with this look at the Semiconductor Equipment sector, which was our first indicator on economic strength exactly 2 years ago and will be an initial indicator on economic deceleration when the time is right. (more…)
What if I told you there is a ‘no risk’ investment that will out perform the S&P 500, even assuming the S&P 500 will continue upward at the pace it has over the second half of 2014? Would you buy that investment?
Then consider owning cash, if you are a US resident denominated in USD. Very simply, SPX in USD units has been declining since the middle of the year, with the weekly trend by AROON having gone negative and what looks like a topping pattern forming.