Tag: Notes From The Rabbit Hole (NFTRH)

A Market Festivus

Posted on by Gary Tanashian

They say that Festivus is the “anti-Christmas”, but in this case we are going to call it the anti-Christmas Eve as the markets close out 2018’s Christmas Eve massacre.

“Many Christmases ago I went to buy a doll for my son. I reached for the last one they had, but so did another man. As I rained blows upon him I realized there had to be another way!”

This year markets are going another way.

Market festivus

We have been managing a potential Christmas Eve close-out sale in the stock market since SPX hopped the Bull Turnstile, negating topping potential and confirming bullish ascending triangles (not shown below as they appeared on daily charts) and its own major trends by breaking upward. Here is the most recent chart (from NFTRH 582) used to illustrate the situation.

Please consider this weekly chart for reference only. We had a lot of words in #582 about what I think is in play, but ultimately this public post is simply illustrating what is currently in play. And that is an upside extension (with associated sentiment readings to be updated this weekend in NFTRH 583) that would be roughly equal and opposite to the 2018 downside blow off (note: though the chart allows for higher levels, SPX has already qualified for a price and sentiment close-out, in the general spirit of the season). The blue box is the same height as the yellow shaded area. It’s more art than TA, but there you have it… some frame of reference. Continue reading "A Market Festivus" →

Wooing Inflation

Posted on by Gary Tanashian

The Continuum (the systematic downtrend in long-term Treasury yields) has for decades given the Fed the green light on inflation. Sometimes it runs hot (as per the red arrows) and sometimes it runs cold. One year ago people were confused about why a declining stock market was not influencing Fed chief Powell to reverse his relatively hawkish tone.

tyx-Inflation

The orange arrow shows exactly why, per this post that will be one year old tomorrow (Dec. 19)…

FOMC at Center Stage (NFTRH 530 Excerpt)

Inflation is what the Fed does, after all. But it needs periodic deflationary episodes in order to keep the racket going. I will stick with my original view that the Fed is not adverse to a market correction or even a bear market. It is exactly what is needed to reload the next inflation gun.

The “BOND BEAR MARKET!!!” stuff ran very hot on this cycle as the 30 year yield broke the Continuum’s limiter (monthly EMA 100) before failing over the last few weeks (to the surprise of many, but not us ;-)). As I have noted previously, in my opinion the Fed does not want a bond bear (breakout in yields) or its running mate, a breakout in inflation expectations because the Fed is an inflation machine. But it has inflated against this pleasant continuum of declining yields over the decades that has encompassed the entire training of most of us as market participants.

Inflation

I am not saying that a red dashed line is the be all end all of market analysis. But it is a marker that we have used in NFTRH since 2008 in order to correctly interpret the macro situation. My interpretation today is that the Fed has countered the cost-push inflationary pressures that by definition are injected through fiscally (political) stimulative policy by withdrawing liquidity until something breaks. Ironically, that has involved raising the Fed Funds interest rate and withdrawing QE, which theoretically would raise long-term yields. But when something breaks, the risk ‘off’ herds buy the bond driving yields down.

Fast-forward to today. The herds bought the bond alright; they bought it for most of 2019 amid ‘trade war!!’ and ‘inverted yield curve!!’ headlines and associated economic fears. And so the Continuum dropped again, along with inflation concerns and logically, the Fed’s hawkishness after the Q4 2018 orange alert. Continue reading "Wooing Inflation" →

Gold & Silver Stocks Belie COT Caution

Posted on by Gary Tanashian

We all know that the gold and silver Commitments of Traders are very extended and at levels of commercial net shorts and large spec net longs that tend to be in place at tops in the metals. Well, the metals topped in the summer, so what does that tell us?

For one thing, it tells us that bull market rules are different from bear market rules as per this post from August as gold was topping.

Gold and Silver Commitments of Traders for This Week

Listen sports fans, I just call ’em as I see ’em. The Commitments of Traders for gold is as extended as it has been lately and open interest is significant. Speculators are all-in here and while we note that bull market rules are different than bear market rules, extended is extended. Gold is vulnerable to pullback by this measure, especially since the gold price is in the target zone we laid out months ago.

Gold dropped about 100 bucks an ounce from the time of that post and yet the CoT are not cured. Talk about bull market rules! CoT was and is a reason for a level of caution, but as noted last weekend in NFTRH 579 the charts of several miners we track (and I own) belied a cautious stance.

From #579…

The way things appear to be setting up is that the miners are preparing to be a ‘go to’ play when the stock market party burns out. Despite the caution begged by the gold and silver Commitments of Traders, the chart of HUI, the Gold/SPX ratio on page 30 and the fact that Friday was a holiday shortened affair, the overall look of our charts this week is constructive to bullish…

HUI has gone on to have a thus far bullish week this week with a move to break the post-summer consolidation and as we’ve noted in NFTRH, the HUI/Gold ratio has remained intact and is also now in a bullish stance. It’s a leader, as is the Silver ETF vs. silver. Get a load of this. Continue reading "Gold & Silver Stocks Belie COT Caution" →

Today vs. 2012; Different This Time For Gold

Posted on by Gary Tanashian

Gold bugs will remember 2012 as the last year of hope that gold was still in its bull cycle as it managed to hold key support around 1550 into year-end. It should not be lost on us that here into year-end 2019 gold’s new bull cycle has risen to, and logically halted at, the very same former support that is now important resistance to a new bull market.

We anticipated this resistance in the summer, and although the up-turning Semi cycle of 2013 was logical to gold’s demise 7 years ago, that is no longer the case as Semiconductor leadership takes a new leg up in 2019. Why? Well, let’s explore just a few of the differences between then and now.

gold

Difference #1: The Yield Curve

The post-crisis era into 2012 was “inflation all the way baby!” as so well stated by my friend, the late Jonathan Auerbach back in Q4 2008. It was monetary fire hoses all day every day and policy makers didn’t care who knew it. There was a major systemic meltdown of the previous inflation in play and of course, our heroes at the Fed fought that realized risk with more of what created it in the first place, balls-out inflationary policy.

The crowning achievement – and gold killer – of post-crisis policy was 2011’s Operation Twist and its stated mission of controlling the yield curve, as Twist’s agenda to buy long-term Treasury bonds and sell short-term Treasury bonds was the very essence of a flattener. That cannot be disputed. Bernanke kicked off the great flattening and gold was done for years to come. Continue reading "Today vs. 2012; Different This Time For Gold" →

Updating The 3 Amigos And The Global Macro Message

Posted on by Gary Tanashian

This morning in pre-market the Amigos’ futures charts update the macro story…

global macro

…which goes something like this…

Copper, the cyclical Amigo (weekly chart) has furthered the intermediate trend line break we noted on October 25th. This is in line with the rally in US and global stock markets and even more so, the global macro reflation theme. It does not look so impressive yet on this weekly chart, but other components of the macro trade are starting to look impressive, especially on daily charts. So… steady as she goes. Continue reading "Updating The 3 Amigos And The Global Macro Message" →