Slope of Hope Blog Posts
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It wasn’t that long ago that I didn’t even pay attention to the bond market. Since 2018 began, however, I have followed it constantly, since I believe a sea-change in bonds (and, thus, interest rates) is the only thing left that’ll break equities. If nuclear war can’t do it, maybe soaring interest rates can.
It’s been dicey lately, since bonds have been so strong, but as I pointed out late last week, we were once again getting terribly close to both the topping pattern and the broken trendline:
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.
Note: 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. (more…)
Holy MOSES what a boring day! As I’m typing this, the ES is up .12% and the NQ is down .12%. Average ’em out, and you get…….a Saturday trading session. So I’ll just put up the good ol’ TLT chart, which is utterly core to my options portfolio (two positions – TLT and XLU January 2019 puts).
As shown below, it broken its trendline ages ago, and it’s about 90% done with what could be (if complete) one of the greatest topping patterns ever.
Since early last week, it has been heartening to see bonds resume their downward trek. Not only has the progress lower been steady, but the “lower highs” are getting weaker each time, not even mustering a tag of their resistance trendline anymore. My TLT and XLU puts are counting on a long-term erosion. I also continue to hold the view that rising interest rates will sink real estate prices (Palo Alto notwithstanding).
As this quiet Memorial Day weekend wraps up, I thought I’d share a couple of interest rate charts shared by a thoughtful fellow Sloper. The resistance is pretty stiff. I’m crossing my fingers that it breaks to the upside, of course, as I’m definitely in the interest rate bull camp. Looking at the ZB this long weekend, interest rates are clearly continue to weaken!
Sooooooooo……….I guess the Nobel Prize is going to wait, eh?
Anyway, it’s nice to wake up to a morning with so much red on the screen. The one huge exception is bonds, which are up over half a percent. I’m not worried, though. It’s all following a pattern. You can see the “big tops” (with little exploration zones, in grey) followed by a “V” shaped drop and retest. That’s all we are doing right now. We are in retest mode. I’m going to increase my January 2019 TLT puts this morning.
Today was a pretty interesting one. One bit of bleakness, in spite of the dip on the Dow, was that we’ve got a set of higher highs and higher lows, as I’ve illustrated below with the arrows. I’m hoping this is a one-hit wonder and not a trend change, but – – – them’s the facts.
I can hardly remember the last time I woke up to a red NQ, red ES, and red ZB (bonds). I think it was about thirteen or fourteen years ago. But it’s a delight to hold, and of course I’m grateful to the obvious impetus behind this move.
In particular, the weakness in bonds is key (as you well know by now). Here’s the close-up view, and as I’m typing this, bonds are down about six-tenths of a percent.