What’s this? The color I see in the market futures is not green? What is the meaning of this?!?
Here are this morning’s Bloomberg headlines…
In sum these headlines are talking about the 3 Amigos, as Gundlach predicts SPX will go down (SPX vs. Gold), long-term interest rates are rising (bonds dropping), and in a microcosm at least, long-term yields are rising relative to short-term yields (yield curve).
The trends are constructive in yields, still bullish in SPX/Gold and down in the yield curve so in theory at least, the signals are still positive for risk ‘on’ markets. But given the extremes in play I want to take the pulse of things whenever the market even looks at us funny, because there is no rule that SPX/Gold has to do the full retrace or that the yield curve has to invert.
But for now, the rising interest rates situation seem to be spinning an inflationary tale as TIP/IEF continues to rise and TIP/TLT bounces hard. Risk may not be going ‘off’ this morning so much as shifting further toward ‘inflation trade’ items as oil, gold and silver are in the green along with interest rates. Bonds are red, and they are the traditional recipient of a risk ‘off’ bid.
Commodities & Precious Metals
If the signaling remains inflationary, commodities could weaken with any broad market selling squalls, but should do better relative to broad stocks as we grind forward. My main interest here continues to be in the industrial metals and materials.
As for the precious metals, gold and silver had modest pullbacks and the formerly overbought miners did what we asked them to do in NFTRH 481…
“Huey could test the SMA 200 (black) and fill the gap (blue shaded oval above) and possibly test the green dashed support line before another leg up if another leg up is coming.”
Here is the updated chart…
Yesterday it just about ticked the green dashed line and this morning the metals are firm. This is a good illustration of why I am using precious metals positions as a counter balance to broad market positions. This is the sector that will be ready to rock after the big macro party blows out. It is, in my opinion, a sector in waiting.
You may have noticed in the Trade Log that I added WPM back after selling it last week. It took a good smash to the SMA 50, and that is what the sector needed. It needed a bit of a spook to cure the over confidence that was developing.
I don’t want to get too talky with one red morning in the futures. But it is a change of character so I thought it was worth a note.