Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
In Just 45 Mins., Learn to Spot New Opportunities in ANY Market for FREE! - 25th April 19
If This Pattern Holds True, the US Economy Could Face the Worst Stagnation in History - 25th April 19
8 Reasons Why Investment in Education Always Pays Off - 25th April 19
Want To Earn A Safe 5% In Fixed Income? Buy Preferred Stocks - 24th April 19
Can Gold Price Rise Without a Rate Cut?  - 24th April 19
Silver’s Next Big Move - 24th April 19
How Can a College Student Invest Wisely? - 24th April 19
Prepare For Unknown Stock Market Price Action As New Highs Are Reached - 23rd April 19
Silver Plays a Small but Vital Role in Every Portfolio - 23rd April 19
Forecasting 2020s : Two Recessions, Higher Taxes, and Japan-Like Flat Markets - 23rd April 19
Gold and Silver Give Traders Another Buying Opportunity - 23rd April 19
Stock Market Pause Should Extend - 21st April 19
Why Gold Has Been the Second Best Asset Class for the Last 20 Years - 21st April 19
Could Taxing the Rich Solve Income Inequality? - 21st April 19
Stock Market Euphoria Stunts Gold - 20th April 19
Is Political Partisanship Killing America? - 20th April 19
Trump - They Were All Lying - 20th April 19
The Global Economy Looks Disturbingly Like Japan Before Its “Lost Decade” - 19th April 19
Growing Bird of Paradise Strelitzia Plants, Pruning and Flower Guide Over 4 Years - 19th April 19
S&P 500’s Downward Reversal or Just Profit-Taking Action? - 18th April 19
US Stock Markets Setting Up For Increased Volatility - 18th April 19
Intel Corporation (INTC) Bullish Structure Favors More Upside - 18th April 19
Low New Zealand Inflation Rate Increases Chance of a Rate Cut - 18th April 19
Online Grocery Shopping Will Go Mainstream as Soon as This Year - 17th April 19
America Dancing On The Crumbling Precipice - 17th April 19
Watch The Financial Sector For The Next Stock Market Topping Pattern - 17th April 19
How Central Bank Gold Buying is Undermining the US Dollar - 17th April 19
Income-Generating Business - 17th April 19
INSOMNIA 64 Birmingham NEC Car Parking Info - 17th April 19
Trump May Regret His Fed Takeover Attempt - 16th April 19
Downside Risk in Gold & Gold Stocks - 16th April 19
Stock Market Melt-Up or Roll Over?…A Look At Two Scenarios - 16th April 19
Is the Stock Market Making a Head and Shoulders Topping Pattern? - 16th April 19
Will Powell’s Dovish Turn Support Gold? - 15th April 19
If History Is Any Indication, Stocks Should Rally Until the Fall of 2020 - 15th April 19
Stocks Get Closer to Last Year’s Record High - 15th April 19
Oil Price May Be Setup For A Move Back to $50 - 15th April 19
Stock Market Ready For A Pause! - 15th April 19
Shopping for Bargain Souvenirs in Fethiye Tuesday Market - Turkey Holidays 2019 - 15th April 19
From US-Sino Talks to New Trade Wars, Weakening Global Economic Prospects - 14th April 19
Stock Market Indexes Race For The New All-Time High - 14th April 19
Why Gold Price Will “Just Explode… in the Blink of an Eye” - 14th April 19

Market Oracle FREE Newsletter

Top 10 AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

US Bond Market 3 Amigos Bottom Line

Interest-Rates / US Bonds Mar 09, 2018 - 01:20 PM GMT

By: Gary_Tanashian

Interest-Rates

You thought I was done with the Amigos shtick, did you? Not by a long shot ma’am. They are the happy-go-lucky riders in play as the stock bull market churns on. They are the rising SPX/Gold ratio and stocks in general vs. gold (Amigo #1), rising US 10yr & 30yr yields (Amigo #2) and the flattening 10-2 yield curve (Amigo #3). On their current trends these goofy riders have signaled “a-okay!” to casino patrons playing the stock market and other risk ‘on’ items.

Taking our macro indicators out of order, let’s start with Amigo #2, who we have been noting to be bracing for something…


What is that something? Well, it is the targets for 10yr & 30yr bond yields we laid out 4-5 months ago in a bearish case for bonds; you know, back when everyone didn’t hate bonds as is currently the case under the much more recent expert guidance of Bill, Ray and Paul? It might as well have been Ringo, George and Paul making the call.

Another Heavy Hitter Calls Bond Bear

I am not trying to come off as a contrarian bond bull, deflationist. There are very valid reasons to be open to if not expect a new and secular bond bear market. But with the yields at our targets, which were established for a reason (being caution) and with the financial eggheads fully in unison, it has come time for caution on the bond bear stance and at least some aspects of a stock bull stance.

For my part, as written on several occasions in NFTRH and in public, Treasury bonds (T bills, 1-3yr, 3-7yr & 7-10yr) are now playing a balancing role in my portfolios and spitting out monthly income to boot. Is this an investment? Absolutely not. Not with Treasury bonds overseen by the chronic debtor AKA the US government and manipulated by the chronic inflator, the Federal Reserve.

But the long-term ‘Continuum’ chart has been kind of obvious, don’t you think? While the 10yr has hit target, the 30yr dwells just under its historical limiter (and target) at 3.3% (the monthly EMA 100).

At the same time the long bond, which goes opposite its yield, has come down to its EMA 100, which has historically limited declines. This time different? Maybe. There are no absolutes. But this is a risk vs. reward business.

The bottom line on Amigo #2 is that with the ‘inflation trade’ that got going in December, yields would rise along with the bullish backdrop. But if the limiter once again lives up to its name, that which was most bullish during said ‘inflation trade’ would be at risk. Since the macro moves at a snail’s pace, this is not necessarily bearish yet; but it would demand rotation and rebalancing for right minded casino patrons.

Moving on, let’s see where Amigo #1 is at. He’s the one on the left in the picture above. He’s utterly euphoric, out there riding along the foothills in the warm Mexican sun. Not a care in the world… just look at that goofy, blissful expression on his face. Indeed, despite a hard spill in February the uptrend in SPX vs. Gold is intact and the target of 2.50 is still valid. But this is a maturing situation.

We are watching companion indicators like Gold vs. Palladium, Copper and Industrial Metals for fine tuning as well. One very possible scenario is that the stock bull is not ending but the ‘inflation trade’ of the last several months is. If you get a chance have a look at the GYX/Gold ratio and think about rotation, balance and early warnings.

Last but not least is Amigo #3, the yield curve. He’s pretty much the least noticeable one in the picture. I mean, Martin Short compared to Chevy Chase and Steve Martin? Come on… He may not be as noticeable, but he is sure as hell as important, or even more so.

The daily view appears constructive for a bounce similar to the Q4 2017 bounce.

But on the big picture the curve is still completely in a flattening trend as it flattens with a boom and steepens with economic weakening and eventually, a bust.

Bottom Line

The 2nd Amigo is the only one to have hit target (and even there the 30yr has a little wiggle room) and the others are still in process. Even if interest rates stall here, the market could simply continue to rotate (as it is currently doing as tech gets the 2018 version of a safety bid I assume due to its lack of inflation sensitivity).

The stock market is up trending vs. gold and it may take finer tuned indicators like cyclical metals vs. counter-cyclical gold to give early warnings there. But for now the first Amigo is intact.

The yield curve is probably the least sensitive indicator, but maybe the most important because when it changes trend the chart above instructs that based on years of history, it would be time for everyone to get out of the pool polluted by central bankers’ inflationary policy designed to keep asset markets afloat. It would be time to be very careful about what you own and it would be time to own the counter-cyclical metal and its miners (those of relative quality, anyway). This is antithetical to inflationist gold bugs, but it’s the way it is.

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 NFTRH.com and Biiwii.com. Also, you can follow via Twitter ;@BiiwiiNFTRH, StockTwits, RSS or sign up to receive posts directly by email (right sidebar).

By Gary Tanashian

http://biiwii.com

© 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

© 2005-2019 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