Best of the Week
Most Popular
1. Crude Oil and Water: How Climate Change is Threatening our Two Most Precious Commodities - Richard_Mills
2.The Potential $54 Trillion Cost Of The Fed's Planned Interest Rate Increases - Dan_Amerman
3.Best Cash ISA Savings for Rising UK Interest Rates and High Inflation - March 2018 - Nadeem_Walayat
4.Fed Interest Hikes, US Dollar, and Gold - Zeal_LLC
5.What Happens Next after February’s Stock Market Selloff - Troy_Bombardia
6.The 'Beast from the East' UK Extreme Snow Weather - Sheffield Day 2 - N_Walayat
7.Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’ - MoneyMetals
8.Significant Decline In Stocks On The Cards! -Enda_Glynn
9.Land Rover Discovery Sport Extreme Driving "Beast from the East" Snow Weather Test - N_Walayat
10.SILVER Large Specualtors Net Short Position 15 Year Anniversary - Clive_Maund
Last 7 days
Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - 17th Mar 18
Strong Earnings Growth is Bullish for Stocks - 17th Mar 18
The War on the Post Office - 17th Mar 18
GDX Gold Mining Stocks Fundamentals - 16th Mar 18
Nationalism, Not the Russians, got Trump Elected - 16th Mar 18
Has Bitcoin Bought It? - 16th Mar 18
Crude Oil Price – Who Wants the Triangle? - 16th Mar 18
PayPal Cease Trading Crypto Currency Bitcoin Warning Email Sophisticated Fake Scam? - 16th Mar 18
EUR/USD – Something Old, Something New and… Something Blue - 16th Mar 18
DasCoin: A 5-Minute Guide to How It Works - 15th Mar 18
Stock Market Downward Pressure Mounting - 15th Mar 18
The Stock Market Trend is Your Friend ’til the Very End - 15th Mar 18
6 Easy Ways to Get What Women Want, for Less! - 15th Mar 18
This Isn’t Your Grandfather’s (1960s) Inflation Scare - 15th Mar 18
Eye Opening Stock Market Index, Volatility, Charts and Predictions - 15th Mar 18
Gold Cup At Cheltenham – Gold Is For Winners, Not For Gamblers - 15th Mar 18
Upcoming Turnaround in Gold - 14th Mar 18
Will the Stock Market Make Another Correction this Year? - 14th Mar 18
4 Ways To Writing An Interesting Education Research Paper - 14th Mar 18
China Toward Sustainable Economic Growth - 14th Mar 18
Stock Market Direction Is No Longer Important - 14th Mar 18
Trade Tariffs Defeat Globalists and Return Prosperity - 14th Mar 18
Stock Market Crash is Underway and Cannot be Stopped! - 14th Mar 18
Are Energy Sector Stocks Bottoming? - 14th Mar 18
Nasdaq Stocks Soars to New Record High After Strong Job Reports - 14th Mar 18
Bitcoin BTCUSD Elliott Wave View Calling for Rally toward $15,000 - 13th Mar 18
Hungary’s Gold Repatriation Adds To Growing Protest Against US Dollar Hegemony - 13th Mar 18
Record Low Volatility in Precious Metals and What it Means - 13th Mar 18
Tips for Writing and Assembling the Classification Essay - 13th Mar 18
Gerald Celente "If Rates go up too High, the Economy goes Down, End of Story" - 13th Mar 18
Stock Market Selloff Showed Gold Can Reduce Portfolio Risk  - 13th Mar 18
Silver Does it Again! Severe Consequences - 12th Mar 18
Has the Stock Market Rally Run Out of Steam? - 12th Mar 18
S&P 500 at 2,800 Again, Stock Market Breakout or Fakeout? - 12th Mar 18
The No.1 Energy Stock To Buy Right Now - 12th Mar 18
What Happens Next When Stock Market Investor Sentiment is Neutral - 12th Mar 18
Economic Pressures To Driving Gold and Silver Prices Higher Long-Term - 12th Mar 18
Labour Sheffield City Councils Secret Plan to Fell 50% of Street Trees Exposed! - 12th Mar 18
Stock Market Uptrend Resuming? - 11th Mar 18
Bond Market Interest Rate Yields Are Rising Again… Stocks Are on Thin Ice - 11th Mar 18
Death of Europe's Greenest City, Police State Sheffield Labour Council to Fell 50% of Street Trees - 11th Mar 18
Do All Bull Stocks Markets Need to Have a Bearish Divergence? - 11th Mar 18
An Inflation Indicator to Watch, Part 3 - 11th Mar 18
Online Stock Trading Tips - Tips about Online Trading & Day Trading - 11th Mar 18
NDX makes a new high. What does that mean? - 10th Mar 18
Blue Chip Companies on Track for $800 billion Buyback Record in 2018 - 10th Mar 18
Cheap Gold Stocks Basing - 10th Mar 18
An Introduction to Online Forex Trading - 10th Mar 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

1 Week Later, Stock, Bond Market Risk Remains ‘On’ as 2 of 3 Amigos Ride On

Stock-Markets / Financial Markets 2018 Feb 17, 2018 - 02:10 PM GMT

By: Gary_Tanashian


Despite a tough week for stocks into Friday, February 9, three big picture macro indicators have continued to support a risk ‘on’ backdrop. Many of the shorter-term indicators we watch, like Junk bond ratios and the Palladium/Gold ratio say the same thing. Junk/Treasury and Junk/Investment Grade are threatening new highs and as we have noted in NFTRH updates all through the recent market volatility, Palladium (cyclical) got hammered vs. Gold (counter-cyclical), but only to test its major uptrend. Now the ratio is bouncing with the market relief that is so predictably taking hold (here’s a public post where we effectively called bullish, in-day on that Friday).

As for the bigger macro indicators, the middle one, Amigo #2 (long-term interest rates) has that funny look on his face because he is bracing for something.

He is bracing himself for impact because he has already smashed into the 10yr yield target of 2.9% (it’s important for people making claims to be able to prove it, and so here again is the December 4th post making the 2.9% claim) and sees the limiter (red dashed monthly EMA 100) on the 30yr just ahead. He knows what happened every other time the yield approached the limiter over the last few decades. Smash! Meanwhile, the hype about the new bond bear market lives on.

Amigo #2 is probably going to encounter some resistance here because as noted in a previous post, the sentiment backdrop favors bonds right now. Against a range of portfolio long stock positions I’ve done some balancing not only with a few strategic short positions but yes, 3-7 year and 7-10 year Treasury bonds… the same bonds that are supposedly in a new bear market. If people liked them at the previous very low interest rates, they should love them now. But alas, that is not the way markets work.

On Feb. 12 we noted that the risk in the Treasury Bond market is in not having any Treasury Bonds and since presenting the sentiment and Commercial hedging data supporting a contrarian bullish view on the 10yr, the 30yr has improved as well to a contrary bullish stance. Here are the latest readings, courtesy of Sentimentrader.

The public has really taken the ‘inflation trade’ that we’ve been working on since December, to heart.

And Commercial hedgers have actually moved to a net long stance, taking other other side (the smart money side) of the trade.

This is not a comment on whether or not a new bond bear is being birthed. It is just a comment about letting it be proven first and meanwhile, keeping said cart behind said horse. Okeedoke? The 30yr bond can decline further and the yield rise further in the short-term, but that Amigo is in essence, played out. So he braces for impact.

Moving on, Amigo #1 is completely intact. Period. The stock market maintains its uptrend vs. gold and it is no more complicated than that. While we are scouting some sensitive, preliminary and possibly negative economic cycle signals in NFTRH, the duller aspects of the macro are just fine after the recent volatility eruption in US and global stock markets. As such, the trend toward the 2.50 target is intact until such time as this ratio drops below the 2015-2016 lows. This bullish scenario for stocks and risk ‘on’ includes the possibility for a new drop to fulfill a would-be A-B-C correction in stocks to the equivalent of the 2400s on nominal SPX.

If the recent market mini crash was not the final buying opportunity, SPX 2400s could well be. If it comes about and short and long-term macro indicators are intact, that is.

We will of course watch for divergences and/or degradation in the macro backdrop because there is this thing from distant history called a bear market, and it could happen again. But given what the average mope was searching for a week ago per this post, sentiment was fully set up for the rebound in play currently.

Now the market is at its bounce parameters. It will either take them out or fail, perhaps into a ‘C’ leg down. But the big trends are up in nominal SPX and in its ratio to gold (again, cyclical vs. counter-cyclical).

Finally, the forgotten one, Amigo #3. With the predictable uproar about nominal bond yields, the yield curve seems to have gone back burner as a concern. It steepened with the broad market’s recent stress but much like SPX/Gold, it remains on trend… in this case, toward flattening. A steeping curve comes with pressure on the financial and economic system. A flattening curve goes with risk ‘on’ and the happy stuff, AKA a boom.

Most recently, the curve has steepened with a little whiff of inflation in the air, completely as expected, given our projections for rising long-term yields (to targets).

Thus concludes another update of our happy-go-lucky macro men on horses. While long-term interest rates are approaching a logical limit point (whether temporary or otherwise), they are not actionable in real time as a negative indicator. How often have we seen the stock market simply spin a new reason to be bullish? We’ve anticipated a stock market rise with yields under an inflationary regime, but a pause or gentle decline in yields would work well with a temporary return of the Goldilocks spin.

Bottom Line

The macro is intact to a risk ‘on’ situation, even if some of the dynamics may soon change beneath the surface. That view may very well encompass an A-B-C correction to the nominal SPX per this chart’s negative speculation. As the SPX finished the week a hair above our preferred bounce resistance, it also opens the prospect of a try at the two upper gaps or even bull market continuation, with the recent scare having been all there would be as a bullish sentiment cleaner. Next week should be telling, but as for the Amigos, they are still riding and so the macro is still fully intact until they hit targets or abort.

Subscribe to NFTRH Premium for your 40-55 page weekly report, interim updates 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 and Also, you can follow via Twitter ;@BiiwiiNFTRH, StockTwits, RSS or sign up to receive posts directly by email (right sidebar).

By Gary Tanashian

© 2018 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

© 2005-2018 - 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