US Dollar and the Bond Continuum ©

The US currency is up this morning and surprise surprise, gold, among other things is down (gold bugs should not be in worry mode, they should be in general preparation mode… and I don’t mean canned goods and Uni bomber shacks).

Meanwhile, the USD would not be disruptive for US stocks unless/until it gets impulsive and attends a flight to the risk ‘off’ side of the boat. Short of that, a rise in the dollar puts stocks on notice, but doesn’t croak them in real time (as evidenced by the 2014 up phase). Meanwhile, logical rotation is the theme.

If USD goes on to do what I think it will do, the declining black line AKA the 200 day moving average, is the target. So far, so good as Unc is making good progress at turning the MA 50 into support. I am very long pro-USD vehicles.

us dollar

As for bonds, a couple things; first off, I fixed the Bill Gross hysterics indicator (and it sure was an indicator back then in real time; it indicated that the inflation play was O.V.E.R.) to point to Spring of 2011. I had mistakenly put it on the late 2013 surge, which was actually the old ‘Great Rotation’ hype fest that the financial media concocted.

By the way, I love this cartoon and need to start having more fun with charts like I used to in the old days. It’s just that now work comes first, fun second. But look at those mugs, will ya? Volcker as ‘the Don’ or Godfather, Greenspan as the 60’s intellectual conservative gold bug anti-monetarist turned financial engineering Maestro, big brained Bernanke going Greenspan on steroids and finally the woman to the right, peering out at us with a look of apprehension like “WTF have I inherited?” both in terms of the continuum that came before her and the president under whose watch she toils.


On a related matter, we did a lot of work in NFTRH 467 that indicated a CoT and sentiment backdrop that implies a steepening of the yield curve. Now, we all know how fickle and clumsy those things are from a timing standpoint (exhibit a: my dollar rally view), but new Biiwii contributor Callum Thomas (and thank you to the NFTRH subscriber who linked me to his site) has a survey that sees people as over bearish on bonds – the opposite of what the latest CoT and Sentiment data imply at Sentimentrader.

Our Sentimentrader view does show an over bearish sentiment profile for 2yr bonds, but the opposite for 30yr; hence the curve steepening implication. Anyway, here’s Callum’s graph of very over bearish bond fundamentalists. I am going to stay open minded all around (what else is new lately?).


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