‘Inflation Trade’ Update

A brief update as I am on a mini getaway in NYC and will be hitting the road shortly.

TIP-TLT has continued upward and broken above the MA 50.  The ‘inflation trade’ bounce play has gained a little traction.

tip.tlt

This coming as long-term Treasury yields rise, which is square with rising inflation expectations.

tyx

Why is gold under pressure then?  Look no further than yield spreads, which show that long-term yields like the one above have been rising less than short-term yields.

10.2

Interestingly, the gold stocks we noted in the ‘bullish flags’ update last week have held up well.  While it looks like HUI is going to get down to the preferred 180 level or lower, these individual miners have been okay on a relative basis.  But gold sector players should remain patient and realize that fundamentals are not yet baked, CoT data are bearish and general sector technicals are pointing lower in the short-term.

kgi

lsg

akg

ar

pg

The Uranium ETF popped the MA 50 yesterday and bears watching to see if it can hold that moving average.

ura

The outliers, like Lithium and REE’s, which we have noted in potential bottoming stances, are breaking upward with the commodity bounce theme.  As with oil’s first hard bounce, it is probably not a good idea to chase the initial momentum (if not already positioned).  If this is real and sustainable, there would be time for Lithium and REE heads to position on consolidations.

lit

remx

Copper miners are now 2 days over the MA 50 as copper itself bounces toward massive resistance at 2.80 to 3.00/lb by the monthly chart below.  At the least the monthly view gives cautious big picture perspective for those who want to try to bull copper stocks on the short-term.

copx

copper

Crude oil gave 2 downside opportunities on consolidation after its initial burst off the bottom.  It is settling down nicely and just now attempting to get above the MA 50.

wtci

Finally, a look at the XLE chart that was used in an NFTRH+ update.  It is still above resistance and would benefit from continued firming in oil prices as well as a continued firm broad stock market.

xle

Bottom Line

The ‘inflation trade’ bounce we have speculated upon seems to be finally engaging.  Note the word “bounce”, because that is all that this is, likely in sympathy to weakness in the USD.  The Fed Minutes could provide some ripples today, either positive or negative, as the Jawbone effect kicks in.  But that could be a short-term disturbance.  The USD has been overdue for a correction of some kind and if that comes about it would provide a boost to most everything that has been anti-USD since last summer.  That does not include the precious metals, which bounced as commodities continued to decline.