Uncle Buck, Post-FOMC

Approximately 15 seconds after FOMC whispered its latest sweet nothings to the asset markets it is propping, I posted the statement at Biiwii.  In it they conceded that the economy was showing positive signs (ah, if we were on the economic bump theme months ago why are these professional policy setters only now becoming aware?  There was data then, after all) and babbled a bit about employment.

But most of the talking was about inflation or rather, the lack of it in the form of their 2% target.  Never mind producer costs, healthcare costs, services costs of all kinds… whatever prices the government cherry picks for CPI are not yet registering.  And they made a point of it.  That point was on the tip of an arrow shot right at Uncle Buck’s heart.

usd

It appears the market (AKA the amalgam of quant machines, black boxes, trader hot shots, casino patrons, momos and substance abusers) is buying less and less that these clowns have any agenda other than asset market pumpage.  Hey, that’s the market talking, not me.  Though as you know, I have my own personal opinions as well.

clowncar

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Final Profit Taken on Semi Sector iShares, SOXX

I decided that it was time to take the rest of the reward for having taken the risk (and advising same in NFTRH) when it seemed most did not want to.  I sold the balance of my SOXX shares this morning, but am still in the Semi game through individual names.

soxx

Some bearish writers (and their followers) who missed the entire broad post-Brexit rally are writing about Black Swans, CB stock buying and the big crash to come.  I don’t rule it out, but it smacks of desperation; ‘if I can just hold out to my thesis long enough I’ll eventually be right and damn, I’ll tell ’em so…’.  Meanwhile, big market moves were there for all to see if they only wanted to see.  Others meanwhile, have shifted from manic bearish to manic bullish.  The herd and all that greed and fear that fuels it, is manic.

Meanwhile, the stock market, led by the Semis is over bullish.  As we noted last weekend in NFTRH 405, the sector at the other end of the spectrum is none other than the gold sector, in a bi-polar swing to over bearish.

This is the kind of market you’ve got a remain flexible in and for crying out loud, avoid the consensus and its herding impulses in.  What was the consensus post-Brexit?  What is the consensus now?  Eh, Bueller?

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Earnings Giveth & Taketh Away

Two earnings reports, two directional moves on things I hold.  Luckily, Thing 1 is moving more than Thing 2 and other items are positive to boot.

cry.gild.png

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More Semi Profit Taking

It was hard to be bullish the Semi sector a couple months ago (unless you looked at the Equipment booking data).  Today it is easy; real easy… too easy.  Therefore, I took more profits, selling a partial position in the SOXX iShares to go along with the AMAT sale, among others.  In addition to the top two items on this chart I still hold another Semi Equipment company that we spotlighted over the weekend and have my eye on several other items.  But think about the herd and what drives it.

soxx

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NFTRH 405 Out Now

A funny thing happened on the journey through this week’s sentiment analysis.  First, the Semi sector, which as I recall we were among the few to be publicly bullish on, has shot to the top of the list of over bullish sectors.  Funny how markets work, where most participants seem to need the confirmation of price momentum in order to get bullish.  The herd is always the herd, folks.

Another sector surprised me in the opposite direction.  It has my full attention.

Aside from sentiment, which was just one component of the report, #405 does a good job of preparing us for FOMC week across all markets and indicators.  I feel that it helped me personally once again to feel in control (to the degree one can in the modern casino financial market).

nftrh 405

Semi Equipment Book-to-Bill for June

For those who don’t watch this stuff as obsessively as I do, here’s the June Semi.org b2b data.  Oh no, b2b dropped and so did bookings!

As an economic indicator b2b is not what matters, the bookings are.  They dropped a teeny and are still very elevated.  The equipment sector is healthy.  What’s more, the billing data imply that AMAT, LRCX and friends should have a solid reporting season.

b2b.june2016

Taking it a step further, go look at Palladium vs. Gold as a cross reference on the economy.  It’s not activated but it’s on the way.  I realize that writing positive things on the economy is not in style these days (what with all the backward looking info for people to focus on) and just as soon as the indicators tell me to stop writing them, I will.  But… not yet.

[edit] for more detail, see here.

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S&P 500 Weekly Chart

I am expecting a pullback in the near-term due to over bought daily charts and over bullish sentiment, but the fact is that SPX is in blue sky and measures to 2410 based on the pattern breakout.

If it fails, it fails.  HUI failed a blue sky break back in 2011.  Nothing is ever assured, and this is after all, a suck in of some kind.  But even a suck in can be lucrative if you’re early and you routinely take profits and re-seed positions.

This can be considered an informal NFTRH+ trade idea on SPY, with any pullback to or toward the equivalent of 2100 a buying opportunity.  Stop losses should be used to suit risk tolerance beginning below 2090.

Caveats:  <insert here> myriad arguments about valuations, monetary policy variables and declining summer volumes.  But I am going against my own monetarily conservative nature and conceding that momentum, fueled by dumb and desperate money, is a play.  Modern investment has been financially engineered into a casino after all.

spx.wk

Subscribe to NFTRH Premium for your 25-35 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.

Gold vs. Commodities

The signals of gold vs. other assets and markets have become so important to financial markets over the last year (hello Macrocosm, July 27 2015) that I have created a standard segment in NFTRH called ‘Gold vs.‘.  The segment regularly checks up on gold vs. stock markets, currencies, bonds and of course, commodities.

Here is the state of the latter.  After the chart I’ll summarize some of the market signals.

au.crb

  • Au-CRB is in a long-term uptrend.  This uptrend has been in place since late 2014, when not coincidentally, volatile market disturbances started to erupt.  The uptrend is in place, indicating a generally counter cyclical global atmosphere.  If gold breaks down vs. cyclical CRB the ‘inflation’ play would drive hot money out to other areas beyond gold mining.  If not, the favored gold mining fundamental backdrop will have held up.
  • Au-Oil took a big hit and we have theorized that this could drag fuel intensive gold mining operations’ fundamentals for Q2’s reporting season.  Aside from that, it is a counter cyclical asset vs. cyclical one.  Au-Oil is fairly neutral but still clinging to an uptrend from 2014.
  • Au-Industrial Metals has been dinged just a teeny but remains in a firm uptrend and on a counter cyclical trend, one might assume after the ‘China build out’ hype wore down as they transition their economy.  Copper still looks to me like it’s got an outside shot at $1.50/lb. after all.
  • Au-Agricultural is near the top end of a sideways range.  Agri is a bit of an outlier and we’ll refrain from pretending much meaning can be drawn here.
  • Now it starts to get interesting, as Gold-PALL is breaking down (1.5 weeks ago NFTRH 403 went bullish on PALL).  What Beuller, may I ask was the PALL-Gold ratio to us in Q1 2013?  Anyone?  Yes, a confirming indicator of an economic up cycle to go along with the Semiconductor Equipment sector.  What has been the main recent theme here at this site and in its resident market report?  Anyone?  Yes, the Semi Equipment sector.  Maybe the world ended in June and the SEMI book-to-bill has tanked, putting the bullish view in Palookaville.  But maybe it continued strong and maybe the confirmer, PALL-Gold flipped on its head to Gold-PALL, is going to break down and join Gold-Silver in signaling market relief, if not inflation quite yet.
  • So last but never least, Au-Ag.  Gold’s breakdown vs. silver potentially signals a coming environment where inflationary effects will be taken seriously.  But another message of gold (counter cyclical) dropping vs. silver (less so) is as an early indicator on a benign atmosphere for financial markets.  How long will it last?  That’s a whole other analysis.  We have a rough blueprint but it needs to be managed weekly.  This was one indicator that helped me cover all shorts and advise bullish on the stock market when it refused to take the bait during the Brexit hysteria.  Silver continued firm vs. gold and now they are both taking the correction they have needed.  I swear if I see one gold bug trying to work people up about manipulation (it’s everywhere)… Gold-Silver is a market signal and it was there for everyone to see.

Macrocosm component Gold vs. Commodities was the first of our multi-asset, multi-index charts to signal a counter cyclical atmosphere amid global deflationary pressure.  It would also be a key to signaling future inflation issues.  This would be indicated by more gold ratios breaking down to join Gold-Silver and quite possibly, Gold-Palladium.  But in the interim the signal appears to be a gathering risk ‘on’ in the broad financial markets.  Risk ‘on’ does not mean risk-less.  Quite the contrary.  But that is a subject for another time as the process moves forward.

Subscribe to NFTRH Premium for your 25-35 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.

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