Tag: Notes From The Rabbit Hole (NFTRH)

Inflationary Wonderland

Posted on by Gary Tanashian

Inflation has permeated the macro markets; where to from here?

Apologies in advance for some of the possibly confusing content to follow. But if this were easy anyone could do it, eh? There are a lot of balls in the air; balls known as inflation vs. deflation and most of all time frames.

The media present inflation as this guy picking out higher-priced fruit. Wait till he gets to the meat department! You can click the graphic for the article at CNBC.

Meanwhile, the Biden administration’s Minister of (financial) Information, Janet Yellen, informs us that all that cost-pushed inflation about to be shoved into the economy is actually going to be anti-inflationary as it actually lowers some costs (in Wonderland anything is possible). Continue reading "Inflationary Wonderland" →

Gold; A Thing Of Beauty...

Posted on by Gary Tanashian

Gold calmly continues cobbling its Handle; Miners lay in wait.

You see, there is all this noise out there. It comes mostly from inflationists touting gold in the same breath as copper, as oil, and as commodities of all flavors (and aside from gold and, to a degree, silver, those flavors are cyclical).

But you also see, gold is counter-cyclical in its best suit. You see on this monthly chart that gold has been forming its Handle to the bullish Cup ever since the inflation trades came to the fore in the summer of 2020. Therefore, you see that those touting gold and inflation together have been wrong for over a year now (and counting).

For those dealing in reality instead of dogma, gold is a candidate to break the Handle at any time. Then it would be off to the target at 3000+ over the course of a year or more. But reality holds another option as well, and that is to finish the Handle making lower.

So why not tune out the perma-pompoms in real-time, realize that the thing is bullish, but the trigger is either coming sooner or later? We are doing that more focused work in NFTRH and associated updates every week and will be on the spot when the proper signals engage.

This chart was created in 2020 as gold spiked to an all-time high and reversed (into the then-projected Handle). Continue reading "Gold; A Thing Of Beauty..." →

US Dollar On Plan, Attended By Gold/Silver Ratio

Posted on by Gary Tanashian

US dollar (DXY) has activated its Inverted H&S, Gold/Silver maintains its uptrend, watch silver going forward…

I do not make predictions because I do not pretend to be a guru.* But NFTRH has been tracking what has been an uptrend in the US dollar for all of 2021, keeping us well aware of the potentials being realized from late summer into the fall. A higher low was made in May and now a higher high, completing an Inverted Head & Shoulders pattern that we’ve been projecting since USD put in the theoretical right side shoulder last spring.

Until recently it was a projection. Now it is active after testing the (dashed) neckline, holding the (blue) 50-day average and busting to a new high for the cycle. Simple, no predictions but a heck of a lot of attention and respect for the process.

You can see the three targets we’ve had laid out for the world’s reserve currency, which has logically caused market stress of late. It’s as simple as ‘you live (pump markets) by devaluing the currency, you die (markets correct) when it rebels. Now if the rebellion does not become something more than moderate and should end at target #1, we’ll probably go back to our regularly scheduled programming of pervasive inflation problems on the macro.

As you can see, the three targets are Fibonacci retrace levels. All doable depending on how aggressively risk goes off and man and machine seek liquidity (as opposed to market speculation) in the near term. Of note, the pattern itself has a theoretical measured target of 97. Again, not a prediction but now that the pattern is active a viable objective.

us dollar (dxy)

And speaking of liquidity, the issue is compounded when USD’s fellow Horseman (of the Apocalypse) is riding alongside. Continue reading "US Dollar On Plan, Attended By Gold/Silver Ratio" →

When The Tight Economic Rope Slackens

Posted on by Gary Tanashian

[edit] It’s probably best to read the article first and then circle back to this edit.

Upon completing the article I realized that no forward look at the economy and financial markets from an inflationary/deflationary point of view would be complete without consideration of the Yield Curve. Here is its status at the time of writing. It is making a steepening hint this week along with the rise in bond yields. That signaling is inflationary, at least for now. But in 2008 the curve morphed from an inflationary steepener to a deflationary one and that’s an important distinction.

You’ll notice that a blessed Goldilocks economy is mentioned below as a less favored option for 2022. She runs with a flattening curve like the one during the 2013-2019 phase. If it steepens forget about Goldilocks and prepare for either an inflationary or deflationary steepener.

inflation

Stagflation and/or eventual Deflationary liquidation likely in 2022

We all know that the post-pandemic world is currently rife with supply bottlenecks and frustrated demand. We also know that the Federal Reserve and its fellow central banks sprang into heroic action (you know that is sarcasm) to fight the good fight against the dreaded liquidity event that came upon the macro markets and economies early in 2020. The combination of tight supply and printed money has obviously increased prices for materials, commodities, labor, and so on. Continue reading "When The Tight Economic Rope Slackens" →

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" →