Author: Gary Tanashian

Gold Gets Hammered But Copper Fails To Seize The Moment

Posted on by Gary Tanashian

The Copper/Gold ratio remains at a key decision point. Gold has been clobbered lately but a key metallic macro indicator remains in a long-term congestion zone. If it’s going to be cyclical ‘inflation ON’ we’d expect Cu/Au to break through and do what it has not done since a major inflation trade blew out in 2006-2008, and for the 30yr Treasury yield to eventually catch on and rise at least to the EMA 100 (blue line).

copper/gold ratio & 30 year treasury yield

Here is the daily futures view of Cu/Au. Going by simple TA (daily trends) it looks poised to break out to the upside, especially in the face of a government at the ready to pump Trillions more funny munny into the economy. The economically cyclical metal would benefit over the more counter-cyclical monetary metal. It’s logical, but still theoretical. Markets do not always do the logical thing, now do they? Continue reading "Gold Gets Hammered But Copper Fails To Seize The Moment" →

The Inflation/Deflation Debate Wears On

Posted on by Gary Tanashian

Our 30 year Treasury yield ‘Continuum’ chart indicates that deflation is the dominant trend, but…

Steve Saville has written a post that got me thinking about carts and horses and more precisely, which comes before which. Is the inflationary horse pulling the deflationary cart uphill or is the deflationary cart leading the horse to drink from the shrinking liquidity pool periodically?

See The Crisis-Monetisation Cycle

In conclusion to this short post, Steve asserts…

“The crisis-monetisation cycle doesn’t end in deflation. The merest whiff of deflation just encourages central bankers and politicians to do more to boost prices. In fact, the occasional deflation scare is necessary to keep the cycle going. The cycle only ends when most voters see “inflation” as the biggest threat to their personal economic prospects.”

And over the course of decades now that is exactly the case. Every damn time that the public becomes terrified of declining asset (especially equity) prices the Fed springs into action.

On March 19, 2020, we asked… Continue reading "The Inflation/Deflation Debate Wears On" →

Stock Market Risk Not Yet Realized

Posted on by Gary Tanashian

The stock market is at high risk, but…

The ‘but’ is the old saying “markets can remain [seemingly] irrational longer than you can remain solvent” if you fight a trend that is intact at any given point. Since March 2020 that trend has been up.

Structurally Over-bullish

Below is a chart showing the 10-week exponential moving average of the Equity Put/Call ratio (CPCE) that we review periodically in NFTRH for a view of the structural over-bullish situation in stocks. I write structural because it has extended much longer than extremes in the CPCE have done at previous ‘bull killer’ danger points, after which risk was realized in the form of moderate to severe corrections.

The trend began logically enough at a ‘bear killer’ reading in the midst of max pandemic fear. We noted at the time that market participants were not just bearish, not just risk-averse, but absolutely terrified. So the recipe is this: take 1 lump of terrified investors, add a heaping helping of the Fed’s money printing and voila, enjoy the taste of a slingshot rally that is very filling despite its inflationary odor.

Risk? Well, when SPX took out the previous 2020 high last summer we established a target of 4400 (conservative) to 4600 (at an extreme). The market is in the target zone, CPCE has begun to labor up and out of the structurally over-bullish floor and well, it could be a signal of a later stage bull market. But a warning about jumping into a heavily active bearish position is that using the run-up to 2016 as an example, the pressure can build for months, even years before risk is realized. Another caveat to going full frontal bear is that the EMA 10 is starting to hook down again as pressure is being relieved lately. Continue reading "Stock Market Risk Not Yet Realized" →

Market Liquidity Is Draining From Different Vantage Points

Posted on by Gary Tanashian

On Wednesday I made a post that showed the “metallic credit spread” (as coined by Bob Hoye) known as the Gold/Silver ratio (GSR) flipped on its head (to Silver/Gold) to indicate a dangerous situation for the S&P 500, if past is prologue. Here is that post and here is the Tweet that followed…

Silver, with more cyclical inflation-sensitive characteristics than gold (which is more counter-cyclical with utility during liquidity crises), has broken down of late vs. its monetary daddy. The chart speaks for itself as to why caution and risk management are now warranted. Continue reading "Market Liquidity Is Draining From Different Vantage Points" →

Signs Of Inflationary Reflation Running Low On Gas

Posted on by Gary Tanashian

The summer (inflation) cooldown continues…

We anticipated it in NFTRH well ahead of time using the (monthly 30yr yield) Continuum as a visual guide. The idea was that the inflation uproar of Q1…

Inflation

…needed to be tamped down, preferably to a roughly symmetrical right side shoulder to the one on the left side of a would-be inverted H&S. Continue reading "Signs Of Inflationary Reflation Running Low On Gas" →