Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Gold Stocks Triple Breakout - 15th Dec 18
The stock market fails to rally each day. What’s next for stocks - 14th Dec 18
How Low Could the S&P 500 Go? - 14th Dec 18
An Industrial to Stock Trade: Is Boeing a BUY Here? - 14th Dec 18
Will the Arrest of Huawei Executive Derail Trade War Truce? - 14th Dec 18
Trump vs the Fed: Who Wins? - 13th Dec 18
Expect Gold & Silver to Pullback Before the Next Move Higher - 13th Dec 18
Dollar Index Trends, USDJPY Setting Up - 13th Dec 18
While The Stocks Bulls Fiddle With The 'Fundamentals,' Rome Burns - 13th Dec 18
The Historic Role of Silver - 13th Dec 18
Natural Gas Price Setup for a Big Move Lower - 13th Dec 18
How to Get 20% Off Morrisons Weekly Supermarket Shopping - 13th Dec 18
Gold Price Analysis: Closer To A Significant Monetary Event - 13th Dec 18
Where is the Stock Market Santa Claus Rally? - 12th Dec 18
Politics and Economics in Times of Crisis - 12th Dec 18
Owning Precious Metals in an IRA - 12th Dec 18
Ways to Improve the Value of Your Home - 12th Dec 18
Theresa May No Confidence Vote, Next Tory Leader Betting Market Analysis and Forecasts - 12th Dec 18
Gold & Global Financial Crisis Redux - 12th Dec 18
Wow Your Neighbours With the Best Christmas Projector Lights for Holidays 2018! - 12th Dec 18
Stock Market Topping Formation as Risks Rise Around the World - 11th Dec 18
The Amazing Story of Gold to Gold Stocks Ratios - 11th Dec 18
Stock Market Medium term Bullish, But Long Term Risk:Reward is Bearish - 11th Dec 18
Is a Deleveraging Event about to Unfold in the Stock Market? - 11th Dec 18
Making Money through Property Investment - 11th Dec 18
Brexit: What Will it Mean for Exchange Rates? - 11th Dec 18
United States Facing Climate Change Severe Water Stress - 10th Dec 18
Waiting for Gold Price to Erupt - 10th Dec 18
Stock Market Key Support Being Re-Tested - 10th Dec 18
May BrExit Deal Tory MP Votes Forecast, Betting Market Analysis - 10th Dec 18
Listen to What Gold is Telling You - 10th Dec 18
The Stock Market’s Long Term Outlook is Changing - 10th Dec 18
Palladium Shortages Expose Broken Futures Markets for Precious Metals - 9th Dec 18
Is an Inverted Yield Curve Bullish for Gold? - 9th Dec 18
Rising US Home Prices and Falling Sales - 8th Dec 18
Choosing Who the Autonomous Car Should Kill - 8th Dec 18
Stocks Selloff Boosting Gold - 8th Dec 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

S&P 500 vs. Gold (AKA Amigo #1); a Closer Look at Risk

Stock-Markets / Stock Markets 2018 Jul 29, 2018 - 08:52 AM GMT

By: Gary_Tanashian

Stock-Markets

Not much has changed since the last 3 Amigos macro update. Amigo #2 (long-term yields) has long-since reached the Continuum’s ™ limiter (the 100 month exponential moving average on the 30 year Treasury yield) and Amigos #1 (SPX/Gold) and #3 (the 10-2 yield curve) are still on their respective trends (up for SPX/Gold and flattening for the yield curve), indicating a positive and risk ‘on’ macro backdrop.

Of the 3 wacky riders, with Steve Martin now having gotten home and Martin Short a duller indicator (and lesser light), let’s focus on the Chevy Chase Amigo. There he is on the left, a look of triumphant joy on his face riding one-handed with his arm up in the air. Not a care in the world (as Steve Martin braces for the impact of Continuum’s limiter).


The Central Bank instigated asset mania that began in the US with the brilliantly evil Ben Bernanke and his innovative monetary engineering has long-since gone global. The important thing to consider is that Central Bankers have invested years and much of their host country’s and/or economic zone’s seed corn into promoting this asset mania and risk ‘on’ environment. Don’t let them fool you when they go hard, like the currently tightening US Fed; they instigated the asset mania that finally melted down in 2008 and they, in a coordinated manner, instigated the ongoing global boom of today.

The problem with Central Bank instigated booms is that they don’t abolish cycles, and when they expire they have a nasty tendency to liquidate in a disorderly manner. Wax on, wax off.

They call us doom and gloomers and perma bears simply for acknowledging the obvious; that the thing has been cooked up by will of man (and woman). We all saw it in real time, over a span of years. We witnessed Bernanke cooking the yield yield curve with Operation Twist, we witnessed Bernanke and global Central Banks buying bonds of all kinds in order to shall we say adjust the market’s perceptions of risk. Now the market’s animal spirits (risk ‘on’) have taken over, and with the US Fed ever so slowly stepping aside we are on a countdown to the day that the ‘on’ is replaced by ‘off’ after the word “risk”, which has not been outmoded no matter the lack of experience today’s younger players have with it.

I (and by extension, NFTRH) have put in a lot of effort going against the grain of the preceding 4 paragraphs. I have gainfully played as a risk ‘on’ casino patron, finding interesting stock situations in cool industries that make sense for today’s (and tomorrow’s) macro backdrop. While keeping hefty income-paying cash equivalents (like T-Bills), I have been bullish most recently since the big market dump in February.

But that is exactly why a player needs to be aware that risk has an ‘off’ button as well, and I think stocks vs. gold is among the best indicators to that. Bear players want to scare you to death (i.e. stimulate emotion like the fear of losing it all) and bull players want to greed you up (i.e. stimulate emotions like FOMO). But a risk vs. reward player remains conscious all along the way and manages emotions, preferably using tools like Amigo #1. There are of course, many more.

S&P 500/Gold (Monthly & Daily Views)

More and more it appears that the climax – if we are right about the 2.50 to 2.75 targeting of this big picture monthly chart – may come sooner rather than later. SPX/Gold is simply booming as the nominal S&P 500 rises to test the January highs (as we’ve anticipated for months) and gold just farts around in the dumps like the lump of inert monetary stability that it is. I had been thinking that maybe there would be one significant pullback in SPX/Gold before the ultimate high, but now it looks like a drive to target may be in play.

Whether the target range holds or is crushed as the bulls rampage to a grand new era of risk ‘on’ speculation and greed (like a von Mises style “Crack Up Boom”) is beyond the scope of this article. Here we are making an assumption that risk is increasing and the targeting on this chart will mean something.

Dialing in a daily view, it’s all systems go. This lends support to the idea that a terminal drive could be on because the indicator is taking on the look of an overbought stock, as it slopes ever more toward vertical while momentum indicators start to flash warnings (like 1: get the hell out of the way of the risk ‘on’ express and 2: be aware that risk ‘off’ comes next). As a side note, if you believe that a daily chart pattern on an indicator can have a functional target, this one measures to 2.40, which is the extreme lower end of the resistance zone noted above.

Bottom Line on SPX/Gold

Why, it’s bullish out there! And risk is rising, just as NFTRH anticipated for its subscribers would be the case back in February. What you do with risk is up to you. What I do with it is to try to present it in pictures so that people can make informed decisions about it.

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

© 2005-2018 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