Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stocks and Bonds Still Only 1 of 3 Macro Amigos to Destination

Stock-Markets / Financial Markets 2018 May 13, 2018 - 03:38 PM GMT

By: Gary_Tanashian

Stock-Markets

It’s the happy-go-lucky 3 Amigos (in play since we began this goofy metaphor last fall), which would signal macro changes to come. When you are talking about the macro however, things move slowly and to date, only one of our riders has made it to his destination.

To review, they are Amigos 1-3, Chevy, Steve and Martin.

  1. Stocks vs. Gold
  2. 10yr & 30yr Yields
  3. The 10yr-2yr Yield Curve

Below we’ll review a daily (short-term) and monthly (long-term) chart of each to check the status.

Amigo #1: Stocks vs. Gold

We noted Amigo #1’s eyes closed as stocks vs. gold took a big plunge in early February and again in March. This has actually set a lower highs, lower lows downtrend in 2018, and the swings have been very dynamic. Right now we are on an up swing and if you are a gold bug and this ratio rises above the March high please prepare to take caution, as the macro would be moving against you, at least relative to risk ‘on’ assets. But for now the lower highs and lower lows daily trend is intact.

The big picture uptrend in SPX/Gold remains intact and our upside target is higher still, at around 2.5 which, while not shown on this chart is roughly a 38% Fib retrace from the 2011 low. We have noted that taking out the September 2017 low (shown above) would put cyclical players on notice for bad things to come. The ratio has not threatened that level. We are still cyclical and risk ‘on’ by this measure. But if the daily chart’s down trend resumes trend changes would have to start somewhere and that somewhere is a daily chart.

Amigo #2: Long-term Interest Rates

It has not been rocket science. Ever since we established the Continuum ™ as a way not to get fooled by the financial media and the hysterical news of the day, the 30 year yield and its monthly EMA 100 limiter (red dashed line) have been a simple guide about when to have caution on a rising yields stance. After all, decades of consistent history should be respected, shouldn’t it?

So I ask you to please consider whether the limiter will live up to its name and limit the move in inflationary hysterics and eventually risk ‘on’ market activity (as far back as October 2017 we had, after all, expected stocks and interest rates to climb together to the 3.3% limiter) or become a gateway to something very new and very off-the-hook with respect to a continuation of what has been considered ‘normal’ for decades now. Such a breakout may force a reevaluation upon casino patrons as to previous linear thinking about bullish and bearish bearish market forecasting.

For now, Amigo #2 has dutifully ridden to his destination along with the risk ‘on’ trades, which remain intact. I am not going to pretend to lecture anyone on what will happen if it breaks through or if it is limited and fails again, for that matter (that will take ongoing management as we do in NFTRH). But changes will eventually come and they could be highly inflationary or quite the opposite, depending on which way yields go, in line with recent decades of history or on to a new trend.

As for the daily view you can see a potential for a double top as the 30yr neared our 3.3% target (actually 3.27% per the limiter above). For all intents and purposes Amigo #2 has been bracing for a smash against the limiter (the 10yr ticked above target a while ago) and the daily situation should be watched to see if it is already in. A drop below 3.1% could signal an end to the move and a rise above 3.2% quite the opposite.

For reference, the daily 10yr yield has been the leader and it continues to appear in a higher rates stance.

Amigo #3: 10yr-2yr Yield Curve

The media continue to trumpet inversion of the curve as a reliable warning about recessions to come. After all, the last 2 recessions came about after the curve inverted and the media love to extrapolate easy answers. But the actual warning comes when the curve stops flattening and begins to steepen, regardless of whether it inverts first or not. Inversion or lack thereof is more an arbitrary signal that the financial media fetishize over. It is the direction of the curve and the macro signals implied that matter.

As you can see, the Yield Curve continues to burrow ever flatter and still indicates risk ‘on’ for the broad markets and a cyclical up phase for the economy. This is unchanged from its status per the article linked above in the Amigo #2 segment:

“Now, to really change the macro we are going to have to add in yield dynamics to the view as well; and no yield dynamic is more important than the yield curve…

At this time… it just lumbers along on trend; and that trend is bullish for stocks (and bearish for gold).”

The daily view is not really needed, but here it is anyway showing no ill headwinds for the risk ‘on’/cyclical trades. Notice how the February market disturbance was accompanied by a spike the curve. Not so today.

Bottom Line

Amigo #1 (Stocks vs. Gold) is still intact, but under stress by daily chart. It has not yet turned macro negative.

Amigo #2 (Long-term Interest Rates) have arrived at potential limit areas, but these can dwell for months before a resumed uptrend or a failure are registered. But a condition for change, the first condition, is in play.

Amigo #3 (10yr-2yr Yield Curve) is still flattening in line with the cyclical and risk ‘on’ trades. While likely much closer to the trend’s conclusion than to its beginning, the macro moves… Bueller? Yes… sloooowly.

While I hold open continued corrective potential in the stock market, until it and other cyclical items weaken and change trend vs. gold it is a fact that the current trend remains cyclical and risk ‘on’. Even with a harsher correction than that seen so far in 2018 the stock market is leagues above any danger zone beyond a mild cyclical bear potential. See this post of the big picture S&P 500 from earlier in the week.

Gold and the counter-cyclical gold sector on the other hand, could be leading the indicators shown in this article by remaining firm (i.e. failing to break down). But a solid fundamental backdrop has not yet engaged and will not engage until many of the trends in play post-2011 are reversed. The Amigos need to reach their destinations and other macro indicators will need to start turning before that is the case.

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