Below is the Continuum today. Since the linked post from February 2020, a lot has happened and it has been according to the plans we laid out last spring. The plan was inflationary because the Fed was going into steroidal inflation mode. The \u2018Fed comfort box\u2019 on the chart has thinned out from the original post because the red dotted limiter (monthly EMA 100) has declined appreciably since then.<\/p>\n
These many months the\u00a0NFTRH<\/strong><\/a> target has been 2.5% to 2.7% on the 30yr Treasury yield. This week that zone\u2019s lower bound got dinged. It is coming time for a cool down at least if the macro reflation is going to get a second wind. What could provide that second wind?<\/p>\n A rally in long-term bonds that flies in the face of the now bearish herds, including the number #1 indicator to such a contrarian call, the BOND KING indicator, a tried and true contrary indicator right up there with the\u00a0Cramer indicator<\/a>\u00a0and the\u00a0Gartman indicator<\/a>. Incidentally, the Cramer indicator worked in real-time as a short-term bull signal on March 5th, 2021 and the Gartman indicator worked successfully as a bigger picture contrary indicator as the S&P 500 began tanking by 20% two months after his 2018 prediction for an \u201cexaggerated and stunning rally\u201d<\/em> was bull-horned by the media.<\/p>\n But the undisputed KING of bonds and contrary indications is Bill Gross, he of the 2011\u00a0\u2018short the long bond!\u2019<\/em><\/strong> call as the Continuum had not broken the limiter that has held it in check over decades. That limiter has been the monthly EMA 100 and it has worked to contain the yield over decades, including the close call in late 2018 when Powell remained inexplicably hawkish despite tanking markets. We knew better because\u00a0we knew that the Fed was not going to incinerate itself<\/a>\u00a0in an inflationary bonfire with the yield rebelling as it was around 3.3%.<\/p>\n \u201cBut the 30yr could rise to 4% and still be historically low!\u201d<\/em>\u00a0you say. I am not going to pretend to know the dynamics that have put this long-term structure in play, but the fact is that the EMA 100 has declined over decades and it has also contained the yield over decades. That\u2019s a pretty strong trend.<\/p>\n If that trend changes, it changes. But the implication would be an inflation problem unlike most of us have experienced before. Discussion in this post relates to the potential for a pause in inflationary pressures, not an end to them. Not yet, anyway.<\/p>\n A friend alerted me to this tweet<\/strong><\/a> by a Bloomberg reporter noting that Gross is shorting long-term bonds again and predicting breakout inflation. I don\u2019t want to minimize the inflation play, especially since we have been on it for a year now. But I do want to point out that with the lower bound of the Continuum\u2019s target zone hit and the BOND KING now put to us by the media, the time is right for an interim cool down.<\/p>\n Our experienced analyst carefully scours financial publications, balance sheets, press releases, charts, live events, and more to locate the most liquid, undervalued, and overlooked stocks.<\/p>\n Reveal The Stock of the Week<\/a>\n <\/div>\n<\/div>\n Who could benefit? Well, there\u2019s the gold mining sector, which has logically and rightly been impaired by cyclical inflationary forces.\u00a0Gold sentiment is registering an extreme<\/a> on the Bleak-O-Meter. That is the most obvious candidate*, as it has been in correction since the herds began picking up on the inflation\/reflation theme back in the summer. But there are others as well. Maybe Tech is not done, after all. The sexy (and over-valued) stuff has taken big hits lately and the storyline has been that yields have been the culprit (well, that and sentiment begging to have the air let out of it).<\/p>\n If the macro does see a short-term easing of inflationary pressures or at least, long-term yields, don\u2019t count Tech out. If however, the ole\u2019 BOND KING happens to find his nut\u00a0this time<\/em>\u00a0things will only get more extreme in the inflation\/reflation trades. Extreme means \u2018risk of reversal\u2019 if our Continuum indicator above works on the bull\/inflation end as it did on the bear\/deflation end a year ago.<\/p>\n Ah, but the macro has another option at the ready. That would be the Stagflationary option. US manufacturing has been booming, with a big number\u00a0from the Philly Fed<\/a>\u00a0being the latest example.<\/p>\n That\u2019s all well and good. But the prices manufacturers are paying for raw materials and equipment have just ramped to a post-2008 high.<\/p>\n Regardless of any technical, sentiment, and contrary indicator-based analysis that may come into play in the short-term, a picture like the one directly above implies cost-push inflation. Manufacturers will be forced to push the rising costs they incur into the economy. When that situation gets bad enough, whether at or below the Continuum\u2019s limiter or scarily enough, on a breakout above it, that is when the Stag is likely to make its entrance on the macro scene. It will either be that or another liquidation (mini or a Q4 2008 style maxi), which has been the trend for decades.<\/p>\n But with the inflation they\u2019ve been wooing for the last year, I am not prepared to go on autopilot and quant the past to the future. Not this time. Best to take it as it comes, adjusting on the short-term using bonds\/yields (among other indicators) as a guide, and planning for the long-term as well based on incoming information.<\/p>\n * If a cool down comes about but inflationary pressures resume the miners would go back to being \u201cnothing special\u201d (at best) as they have been since last summer. Someday, if the Stag wrecks the economy that could be a different story for the counter-cyclical gold mining sector. Check back to see my next post!<\/p>\n Best, For \u201cbest of breed\u201d top down analysis of all major markets, subscribe to\u00a0NFTRH Pre<\/strong>mium<\/strong><\/a>, which includes an in-depth weekly\u00a0market report<\/strong>, detailed interim\u00a0market updates<\/strong>\u00a0and\u00a0NFTRH+\u00a0<\/strong>dynamic updates and chart\/trade setup ideas. You can also keep up to date with actionable public content at\u00a0NFTRH.com<\/a>\u00a0by using the\u00a0email form on the right sidebar<\/strong>. Follow via\u00a0Twitter<\/strong>\u00a0@NFTRHgt<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" As our Continuum chart predicted over a year ago, Jerome Powell was called to his higher inflationary powers when the macro markets liquidated with great violence and terror. This link shows the Continuum (30yr yield and its monthly EMA 100 limiter) as it was then, begging for inflationary action\u2026 Oh Jerome? Bond market calling\u2026 Below […]<\/p>\n","protected":false},"author":31,"featured_media":54263,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6920],"tags":[4273,31529,9526,8499],"class_list":["post-54262","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ino-com-contributors","tag-gary-tanashian","tag-macro","tag-notes-from-the-rabbit-hole-nftrh","tag-treasury-yield-30-years-tyx"],"yoast_head":"\n![\"30](\"https:\/\/i1.wp.com\/nftrh.com\/wp-content\/uploads\/2021\/03\/continuum.png?resize=840%2C490&ssl=1\")
<\/a><\/p>\nSee This Week's Stock Pick<\/a><\/h5>\n
![\"macro\"](\"https:\/\/i2.wp.com\/nftrh.com\/wp-content\/uploads\/2021\/03\/philly.png?resize=588%2C394&ssl=1\")
<\/p>\n![\"philly](\"https:\/\/i1.wp.com\/nftrh.com\/wp-content\/uploads\/2021\/03\/philly2.png?resize=587%2C397&ssl=1\")
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\n<\/em><\/p>\n
\nGary Tanashian<\/a><\/p>\n