Tag: Notes From The Rabbit Hole (NFTRH)

Amigos 1 & 2 Arrive, #3 Is Still Out There

Posted on by The INO.com Team

The 3 Amigos were a blogger’s way of not boring himself to death while fleshing out important macro indicators month after month.

Amigo #1 (SPX/Gold ratio) got home and dropped from target. What’s more, it has taken back the ratio’s equivalent of the entire Trump rally and that is an eventuality we are very open to on nominal SPX as well.

The gaps are interesting and among several possibilities for 2019 we could see fear, loathing and a fill of the lower gap (a greed gap of sorts) prior to a filling of the upper gap, which could blow out the stock bull in manic fashion one day. Relax, it’s just one of several possible roadmaps. For now, we simply state that SPX/Gold reached a very viable target and dutifully dropped with the market stress.

Yield

Amigo #2 (30yr Treasury yield AKA the Continuum) got the bond bears on the wrong side of the boat and kept them there for a couple of months before the big reversal (back below the monthly EMA 100) that came along with the risk ‘off’ rush amid Q4 2018’s market stress. Continue reading "Amigos 1 & 2 Arrive, #3 Is Still Out There" →

The Men Who Stare At Charts

Posted on by The INO.com Team

gold/silver ratioI was going to look around to see if I could find a media article out there (complete with a TA trying to sound really important) that would be appropriate to be made fun of in our little Men Who Stare at Charts series. But then I decided to create my own chart, stare at it a little, post it and talk about it (hopefully not too self-importantly).

Introducing an all too busy long-term (monthly) view of the Gold/Silver ratio, along with some key nominal markets.

The Continuum in the lower panel symbolizes the deflationary backbone that has been in place for decades. I maintain that this is a firm marker against which the Fed inflates money supplies, manipulates bonds and by extension manipulates inflation signals. We have been on a theme that like Jerome Powell or hate him, he knows exactly what he is doing because to do otherwise (promote ongoing bubbles on top of bubbles) would, in essence, end the Fed’s racket, as symbolized by a real breakout in long-term yields. Continue reading "The Men Who Stare At Charts" →

Cyclical Assets Vs. Gold

Posted on by The INO.com Team

In January of 2018, we noted a cyclical leader (Semiconductor Fab Equipment) in trouble: Semi Canary Still Chirping, But He’s Gonna Croak in 2018.

We also ran a series of articles featuring the happy-go-lucky 3 Amigos (of the macro) in order to gauge a point when larger herds of investors would become aware of cyclical issues facing the global (including the US) economy. Each Amigo (SPX/Gold Ratio, Long-term Treasury yields, and a flattening Yield Curve) would ride with the good times but signal an end to those good times when reaching destination (Amigos 1 & 2 got home but #3, the Yield Curve is still out there). Here is the latest Amigos status update from October: SPX/Gold, 30yr Yields & Yield Curve.

Today I would like to stick with a cyclical macro view, but do so through a lens filtered by the ultimate counter-cyclical asset, gold. As market participants, we are lost if we do not have road maps. That is why we (NFTRH) gauged Semi Equipment vs. Semi (and Tech), the unified messages of the macro Amigo indicators and many other breadth and cyclical indicators along the way to safely guide us to Q4 2018, which has been a challenge for many, but business as usual for those of us who were prepared.

But gold, which all too often gets tied up in an ‘inflation protection’ pitch by commodity bulls, is one of the best signalers of a counter-cyclical backdrop as its best characteristic is that of value retention and capital preservation. Gold, being outside the constellation of risk ‘on’ assets does not pay any income, does not leverage good economic times and does not inherently involve risk because it is a marker of stable value. Hence its underperformance during cyclical good times (leverage and all) and its outperformance during troubled counter-cyclical times.

So let’s take an updated look at gold vs. various cyclical items Continue reading "Cyclical Assets Vs. Gold" →

How Low Could The S&P 500 Go?

Posted on by The INO.com Team

Our target for the first half of 2019 is and has been the 2100 to 2200 area for the S&P 500. A friend asked…

I’ve been meaning to ask (and possibly) know the answer, 2100-2200 for H1 2019 is your ultimate bear market target or opening act?

Opening act. It could be the ultimate target because there is a lot of support at that area and a good solid bear phase could put the Fed on ice and impose some changes to Donald Trump’s bull in a China shop policy style.

So, for now, I see no reason to make dire proclamations beyond that key support level, as so much will depend on incoming information in 2019. At this point, even 2100-2200 is not technically in the bag because the US stock market clung to last-ditch daily chart support, as per the marginally favored short-term NFTRH view. So all of we bear callers need to remember that as ugly as the charts are, support is not broken until it is… broken.

I was going to cover this in NFTRH 530‘s Opening Notes segment, but why not make it a public post and save NFTRH’s virtual ink for more immediate issues going on with the markets? Before we dial out to a couple of simple SPX charts showing the prospective downside targets, let's review the situation with a less than simple chart. Continue reading "How Low Could The S&P 500 Go?" →

Gold Stocks Acting As They Should

Posted on by The INO.com Team

The macro has moved through a time of moderately rising inflationary concerns when economies were cycling up, many commodities were firm and risk was ‘on’. Contrary to the views of inflation-oriented gold bugs, that was not the time to buy gold stocks.

As I have belabored again and again, the right time is when the inflation view is on the outs, gold is rising vs. stock markets, the economy is in question, risks of a steepening yield curve take center stage (the flattening is so mature now that steepening will be a clear and present risk moving forward) and by extension of all of those conditions, confidence declines.

Well?…

gold stock sector

In short, the improving sector and macro fundamentals I’ve been writing about for a few months now continue to slam home as the cyclical world pivots counter-cyclical. And what do you know? Gold stocks are reacting as they should. Well, it’s about time, guys!

The technicals had already made some constructive moves as noted in an NFTRH subscriber update on December 4th. The update concluded as follows… Continue reading "Gold Stocks Acting As They Should" →