alice

NFTRH; ‘Inflation Trade’, Precious Metals & Stock Market

I believe that one of these is lying.  Either the current move in the Silver-Gold ratio (which we noted during the trading day on Wed.) is false (and with this morning’s pre-market activity, it is being propelled higher) or the US dollar is conspicuous in its post-Brexit strength and due to drop.

usd.gsr

I see no reason to abandon our primary theme, which has been the coming of an ‘inflation trade’ while the world huddles in the opposite condition, owning government bonds and fearing deflation.  Brexit was a punctuation of some kind.

A public post was put up last night showing the progress of Silver vs. Gold. We are using this “metallic credit spread” (hat tip: Hoye) as an early indicator to an inflationary environment.

A reminder to keep an eye out for public posts as well as subscriber updates, because they often dovetail and/or fill in detail to our updates.  You can follow all posts (public and private) by signing up for email or RSS syndication at the site.

In the most recent precious metals update on Tuesday we noted that HUI was in a bullish looking pattern.  It is still there and barring an epic reversal in the precious metals today it looks like it will get through the neckline to the pattern.  If so, our pattern target was 275 if I recall correctly.

hui

The bottom line on the ‘inflation trade’ scenario is that with this signal, investment/speculation would spread from gold and silver stocks to a wider commodity complex and global stock market view (i.e. Emerging Markets and other areas that would benefit from a weak USD and/or strong commodities).

Moving on to US stocks, the snap back has been awesome.  The indexes (except for NDX) broke above the parameters we laid out on Wednesday.  Here are the updated charts.

spx

indu

ndx

sox

SPX and Dow need to hold the 50 day averages to keep further near-term upside in play, but they are being diverged by the NDX and the Transports (not shown).  If they fail the MA 50’s, the next support is former resistance (still colored red here).  This is once again a mixed market, thanks to the Brexit disturbance and its bearish and bullish (yes, bullish) inputs.

But it is the SOX that I am most interested in because of our fundamental information regarding the Semi Equipment sector.  This one can play into the ‘inflationary growth‘ sub-theme.  Not surprisingly, this has been the strongest index, which never made a lower low.  After taking protective action when I dropped my market short positions, this was the segment I bought back quickly (AMAT was held, but LRCX, CCMP, etc. were bought back).

In the absence of any dynamic market goings on today, I’ll see you on Sunday with NFTRH 402.  Happy 4th of July to my American friends.