Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Did AMAT Chirp? Implications for the Economy and Gold

Stock-Markets / Financial Markets 2016 May 23, 2016 - 12:50 PM GMT

By: Gary_Tanashian

Stock-Markets

The following is the opening segment of this week's Notes From the Rabbit Hole, NFTRH 396. The report also covers, in detail, the technical status of US/Global stock markets, precious metals, commodities, currencies and even a few individual gold miners and a couple of new (non-gold related) NFTRH+ trade ideas.

In January of 2013 we noted that the "Canary's Canary" chirped and signaled an economic up phase (such as it was) on the horizon. The Canary was the Semiconductor sector, which is cyclical and economically sensitive. The Canary's Canary is the Semi Equipment sector, manned by the likes of Applied Materials and Lam Research.


On Friday the market got a nice quarterly report from AMAT as it beat estimates across the board and offered positive guidance. The broader market used it as an excuse to at least temporarily neutralize a perfectly good (daily) bearish pattern on the S&P 500. AMAT received $3.5 Billion in new orders, which is up 37% from last year. Now, does this rhyme with something we have reviewed recently? Recall that the March Book-to-Bill ratio ('b2b', shown below) for the Semi equipment sector was positive and more importantly than that, the 'bookings' side of the equation was strong. The next b2b is due to be released on May 24 and it will be a key to our analysis going forward.

Display and NAND Flash memory chips saw big jumps while DRAM floundered. This illustrates why more modern, specialty chip companies are doing well and dinosaurs are lagging. But is it an economic signpost? I have created new multi-paneled charts with relevant gold ratios and this seems like a convenient time to introduce them. So lets interrupt the Semi discussion and see how the counter-cyclical theme is shaping up.

Gold vs. stock markets (counter-cyclical indicator) has been flat to down for several months now as markets positively correlated to the global economy have experienced relief. That is fine, we knew it would happen. At this time Au-Stocks remains on a counter-cyclical theme (above the moving averages), but it is being tested.

Gold versus World Indices Chart

Gold vs. commodities was the earliest counter-cyclical indicator, bottoming in 2014 (whereas gold vs. stocks bottomed at the end of 2015). Up trends abound, especially vs. industrial metals. But gold vs. crude oil continues to drop and that is a drag, not only to the gold mining sector's cost structure, but can also be watched as an early indicator on whether the counter-cyclical (and anti-inflationary) environment will remain intact.

Gold versus Commosities Chart

So I ask gold bugs among the NFTRH subscriber base, what happens if the Semi equipment b2b comes in strong again on Tuesday? What do we then do if gold vs. stock markets and certain commodities continues to weaken and fail the tests of support that it is now on?

I ask these questions as Devil's advocate, not as a predictor of coming events. Right now each of the chart panels remain above moving average breakout support (Au-Stocks) or new 'higher highs, higher lows' up trends (Au-Commodities). But I will ask the question again if Tuesday's b2b comes in strong. Remember, the Semi equipment cycle is a very early economic cycle indicator. Is this a false positive or a new trend?

One positive month on bookings does not a trend make, but a second positive month would have to open the discussion (again, we'll know more come Tuesday) and a third month (data to be released in June) would be a trend.

Book/Billings

Traveling back in history again, nobody was talking about the prospect of a new economic up cycle in January of 2013. We were. Last summer, nobody was talking about a coming change to a counter-cyclical environment that could launch the gold sector. We were (the 'Macrocosm' theme was introduced in July).

By the eye test the gold "community" is over bullish. Even the ones predicting an imminent correction are now long-term bullish on gold. And yes, the gold ratio charts above show that is the way to be right now. Even if the 'gold vs. commodities' charts break down gold itself may do just fine if a persistent inflationary environment were to engage, because that would be consistent with a positive message in Semiconductors and an (inflation-fueled) economic bounce. But gold mining would become suspect vs. its peers in an 'inflation trade'. History has shown the miners can rise a long way while under suspicion, but we will call the fundamentals as we see them every step of the way.

We are using the Greenspan era as a blue print. That 'inflation bull' was launched from a similar backdrop to what has been going on so far in 2016; i.e. a counter-cyclical (in that case, the 2001-2002 recession) environment.

We should not use one report from one Semi equipment company as anything remotely like a be all, end all. But as we have shown routinely, Semi leadership broke down last summer and has remained in breakdown mode vs. the S&P 500. Is this (the AMAT report) the Canary's last gasp or something more musical to the ears of stock market players and even possibly, inflationists (investing for inflation-fueled economic growth)? I will seek input from my industry contact and we'll see what, if any kind of a case we might build. The trend remains with 'counter-cyclical', but trends do change eventually.

SOX:SPX ratio Weekly Chart

SOX-SPX above and SOX-NDX below are still each in post-2012 'leadership abdication' mode, technically speaking. If that changes and the Book-to-Bill changes trend, we will need to evolve our plans from counter-cyclical to 'inflationary growth', which was the phase that held sway for several years into the big market top in 2007.

SOX:NDX Weekly Chart

Post Script to the public version of this article...

Analysis like this tends to be early to the party, as it was in January of 2013 well before the economic turnaround (such as it was) had become obvious to a majority. Indeed a challenge I continually have is to read signals yet remain in the moment of what is happening in the here and now and what the herd is doing. Right now the herd has gold fever and to this point at least, that has been the right stance as indicated by the first two charts above, among other things.

Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates (including Key ETF charts) and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2016 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules