As the long-term interest rate Amigo continues upward, the anti-USD ‘inflation trade’ continues onward and more and more gold bug writers emerge from the woodwork, it is time for a little antidote to the inevitable pitches and hype to come.
Everything is playing to script and with this little pullback to a higher low in the miners being resolved in the favored direction, the writer bugs are going to further their bullish message and try to get more reader bugs to follow their guidance. But absolutely nothing has changed.
We caught the seasonal rally amid much disgust by writer and reader bugs, and it has simply not yet concluded. Nothing more to read into it than that. While I think 2018 is likely to see the confirmation of a new bull market, a selling opportunity is probably upcoming amid gold bug bravado and pomp (oms) because the fundamentals are not yet in order. (more…)
As symbolized by the 3 Amigos, the macro backdrop is riding on to its destiny. That forward destiny is a top in stocks vs. gold (Amigo 1), a rise in long-term interest rates to potential if not probable limits (Amigo 2) and an end to the yield curve’s flattening trend (Amigo 3).
When our zany friends complete the journey, big changes are likely in the macro markets.
Let’s take a checkup on each Amigo and consider some implications as well. (more…)
Since January 2013 we have been using the worldwide Semiconductor Equipment industry as a leader within the Semiconductor sector, which is an economic cyclical leader itself. That month we noted a positive move in Equipment bookings, which became a (3 month) trend that spring. This trend was used to project positive economic signals to come.
Through some turbulence in 2014 and 2015 the sector has remained on ‘economic up’ along with our cross reference indicator, the Palladium/Gold ratio right up to the current time as the economic Canary in a Coal Mine has kept on chirping.
But on November 21, two days before the sector topped I derisively poked at the mainstream media for hyping the Semiconductor Equipment sector with its bold headline… Fund manager looks beyond ‘FAANG’ stocks and finds even bigger winners for 2018. Talk about eyeball harvesting and greed stimulation. (more…)
This morning I noted that I did not appreciate seeing Jeremy Grantham’s note dismissed even in the slightest way and without rancor by a Biiwii author. His intro was “Here we go with the “melt-up” meme again.”, which I felt was not appropriate for our purposes, coming as it did from a writer who was cautionary all through 2017.
Look, I was pretty sure I was going to be wrong about a Q4 market top long before Q4 ended. I was led to believe that through subsequent information and analysis, most notably delivered by the 3 Amigos, who will ride bullish until their respective journeys end. At the time of the Q4 cycle forecast however, we noted that a roll over into a significant correction (at least) could actually be healthy for the market’s overall long-term bull. We also noted how a building mania would either precede the bull’s end or make the next correction much worse than had we had a top of some kind in Q4 2017. (more…)
Note: I’d like to thank Slope readers and especially Slope’s distinguished proprietor for the opportunity to post for you tales of Amigos, Horsemen, mania, greed, arrogance, stupidity, fear, terror and all the macro nerd stuff within my view of markets. Happy New Year SoH –Gary
Some monthly charts of interest in the commodity sector, including precious metals.
CRB Index dwells below key resistance. A break of 200 would target around 250 in 2018.
CRB/SPX Ratio shows the utter devastation of the Goldilocks era of Central Bank inflation with no apparent consequences. This is not likely to last. (more…)
See edit at end, adding in the favorable gold and silver CoT.
We have been expecting a seasonal rally in gold, silver and the miners off of a bottom due in either December or January, as is typical of the sector. I’ve marked up Sentimentrader‘s seasonal gold pattern to show the secondary low made (on average over 30 years) in December and the January ramp up that follows (on average).
But we’ve long contended that noise about global strife (geopolitics), inflation and most of all China/India demand need to be tuned out and the larger component planets of the Macrocosm ™ need to be respected in order to call a real bull market phase in gold and gold stocks. (more…)
As an email from [omitted] entitled “Cyclical Indicators Soar” hits my inbox, I thought I’d update a cyclical indicator of another kind. You know, the friggin’ cyclical indicator that preceded them all? Why, it’s none other than our Canary in a Coal Mine, the Semi sector and in particular, Semi Equipment. The progression and projection we used back in 2013 was Semi Equipment → Semis → General Manufacturing → Jobs → Completely bubble headed euphoric mania with a business friendly corporate stooge in the White House. Okay, well I just added that last part in, but you get the point.
The answer to the title question is no. We’ve put forth reason to believe that the earliest of birds, the Semi Equipment sector, may have issues in 2018. What’s more, this warning to ignore a MarketWatch article and the newly bullish fund manager it highlighted came exactly 2 days before the SOX index made its top. (more…)