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
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21
Dow Stock Market Trend Forecast 2021 - 3rd Apr 21
Gold Price Just Can’t Seem to Breakout - 3rd Apr 21
Stocks, Gold and the Troubling Yields - 3rd Apr 21
What can you buy with cryptocurrencies?- 3rd Apr 21
What a Long and Not so Strange Trip it’s Been for the Gold Mining Stocks - 2nd Apr 21
WD My Book DUO 28tb Unboxing - What Drives Inside the Enclosure, Reds or Blues Review - 2nd Apr 21
Markets, Mayhem and Elliott Waves - 2nd Apr 21
Gold And US Dollar Hegemony - 2nd Apr 21
What Biden’s Big Infrastructure Push Means for Silver Price - 2nd Apr 21
Stock Market Support Near $14,358 On Transportation Index Suggests Rally Will Continue - 2nd Apr 21
Crypto Mine Bitcoin With Your Gaming PC - How Much Profit after 3 Weeks with NiceHash, RTX 3080 GPU - 2nd Apr 21
UK Lockdowns Ending As Europe Continues to Die, Sweet Child O' Mine 2021 Post Pandemic Hope - 2nd Apr 21
A Climbing USDX Means Gold Investors Should Care - 1st Apr 21
How To Spot Market Boom and Bust Cycles - 1st Apr 21
What Could Slay the Stock & Gold Bulls - 1st Apr 21
Precious Metals Mining Stocks Setting Up For A Breakout Rally – Wait For Confirmation - 1st Apr 21
Fed: “We’re Not Going to Take This Punchbowl Away” - 1st Apr 21
Mining Bitcoin On My Desktop PC For 3 Weeks - How Much Crypto Profit Using RTX 3080 on NiceHash - 31st Mar 21
INFLATION - Wage Slaves vs Gold Owners - 31st Mar 21
Why It‘s Reasonable to Be Bullish Stocks and Gold - 31st Mar 21
How To Be Eligible For An E-Transfer Payday Loan? - 31st Mar 21
eXcentral Review – Trade CFDs with a Customer-Centric Broker - 31st Mar 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Currencies, and Some ‘Out There’ Thoughts on Inflation, Stocks, Gold and Miners

Stock-Markets / Financial Markets 2017 May 30, 2017 - 03:28 PM GMT

By: Gary_Tanashian

Stock-Markets

Uncle Buck’s index is weak and the SMA 50 is crossing below the SMA 200. Before long we will be reading about it in the media. Now let’s consider a theme we’ve promoted for years; when the media trumpet a “DEATH CROSS!” * it is time to brace for the opposite implication to the media’s bearish promotion. Our view has after all, included a decline to the mid-90s for the index. Meanwhile, USD/JPY is decent right at the SMA 50, USD/EUR and USD/CHF are at lateral support and USD is at least neutral vs. the Commodity currencies.


The weekly chart shows the USD index still at a higher low, neutral at worst vs. Yen, neutral/bullish vs. Canada and Australia dollars and not having broken down vs. Euro. I am not saying USD is in great technical shape but I am saying that we are approaching a time period (again, there’s that June thing… ) when a reversal of recent trends can come about.

So what would be the implications of a US dollar that fools the majority by bottoming out and rallying? We have noted that the current inflation operation has rooted first and foremost in US stocks on this cycle. Gold? You need not apply. Commodities? Ha ha ha… US stocks have been preeminent as the funny munny has flowed there along the path of least resistance ever since Operation Twist turned the macro into a pretzel and screwed up traditional inflation signals. Per the Fed’s own admission, this operation was specifically designed to raise short-term interest rates and contain long-term interest rates.

The result that was kicked into gear was a yield curve that keeps benefiting stock market bulls with a chronic decline – and an associated Goldilocks** backdrop – still in progress.

The problem is that on the current macro we have a completely new presidential administration (let’s keep the snide commentary aside for now) and a diametrically opposed political party in power to the one that applauded the “hero” Ben Bernanke and his non-stop, balls out monetary fire hose. The monetary has been replaced by the fiscal.

The Fed is now free to tighten its policy (supporting the dollar), and we do of course now have a favorable backdrop for long-term interest rates to rise again in the coming months, per the analysis in the ‘Bonds’ segment. Because it has been the beneficiary of a stealth inflation (a Goldilocks pretense, but the money was printed and it did go into asset inflation; it’s just that when it goes to stocks the majority do not call it inflation), the stock market may be the item that is most vulnerable to a rising dollar, not gold.

So much work in the report above indicates that June may be pivotal across several markets. The seasonal trend for stocks, the CoT data for gold and silver, the CoT and public optimism data for the 10yr Treasury Note and even Uncle Buck’s technical status noted above, as it declines to the mid-90s on the verge of a DEATH CROSS no less, which could signal the herds to believe in the “death of the dollar!” as the old promotion goes. A note here, the US dollar CoT and public sentiment data are not yet extreme to an over bearish level, but perhaps this too may be registered by late June.

Now think about our view that gold does not depend on inflation in order to be bullish and gold miners do not benefit fundamentally, from inflation. They benefit when gold out performs stock markets and commodities against an economically weak backdrop.

I can see two scenarios…

    1. Fiscal policy is ‘successful’ in stimulating inflation. Long-term yields rise in response, the yield curve rises, stocks are no longer stealthily inflated but may be vulnerable as other more traditional ‘inflation’ markets gain the relative bid.
    2. Fiscal policy is not successful and the USD and Gold ride together again as the 2 Horsemen of the Apocalypse. We are shifting to a ‘fiscal or bust’ situation. There is no going back to Obama era monetary bailouts. Gold would outperform most assets and in a drainage of liquidity, the yield curve would rise as well as players seek safety in short-term bonds relative to the long end.

So the above thought experiment is interesting, to me at least. This report has had several data points from different asset classes that seem to point to a change of some kind on the macro coming this summer, and possibly by late June.

The yield curve however, is the item about which the changes could be most profound if they come about. The two scenarios noted above deal with things that could make the curve rise. The first is fiscally-driven inflation and the second is draining market liquidity in the event that fiscal policy either does not work or does not work in a timely manner.

But let’s also consider that bearish forecasters have put forth rational work in the past that seemed to ensure that the stock market was all done. So let’s consider that the yield curve is currently declining and the stock market is currently rising. So that’s the current reality and all we are doing now is simply being prepared for potential changes.

* With the SMA 200 rising, the validity of any ‘DEATH CROSS’ muck raking in the media would be even more suspect.

** Goldilocks of course being an inflation/deflation backdrop that is not too hot (inflation) and not too cold (deflation) but rather, just right… ‘ah, perfect!’ think the bulls.

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

© 2017 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