NFTRH+; A Signal We’ve Been Waiting For [w/ 2 edits]

[edit 2] Here is a link to the CDNX components, if you want to get a look at what is driving the index (I have not looked yet, but plan to shortly).

[edit] Here is CDNX/TSX early in today’s trading. Up another 1.7%, fyi.

First, let’s review this chart showing the ratio of Canada’s TSX-V to TSX (CDNX/TSX), an indicator we have shown in the past to run in positive correlation over time with inflation expectations and commodities in general. We have noted in the past that the 2016 rally in gold stocks was very shortly joined by the greater inflation trades, including commodities and stocks (green shaded).

In 2016, as commodities like oil and base metals began to out perform gold and the US economy began to regenerate new positive signals we noted the erosion of the fundamentals for gold. The dynamic rally in gold stocks was doomed before 2016 hit its mid-point. You can see below that the CDNX/TSX ratio rallied right along with the gold miners. On the most recent bull phase in gold stocks you can see the opposite has been true (red shaded). That is indicative of the proper backdrop for gold miner fundamentals, without cyclical inflation in the mix.

cdnx/tsx and hui

We have been noting for quite some time now that the ‘V’ has been rallying hard. A real bull phase in this index would make it hard for us not to be able to make fabulous gains in the various cow pasture speculations up north. However, CDNX remains in a downtrend by both its 50 and 200 day moving averages. The SMA 200 currently at 530 looks like a logical target and potential termination point.

cdnx, tsx-v

That’s all well and good. But now it gets more complicated. Here is the current snapshot of the TSX-V vs. its daddy, the TSX. Yesterday it jumped the creek, i.e. it took out the 200 day average. The trends in this macro inflation/speculation gauge are still down but if this is not a false breakout we would be officially on watch for a future inflation trade, regardless of whether the broad markets take an interim correction or not.

cdnx vs. tsx

As for the gold miners, it is not yet time to worry about inflation as it was in 2016. That event was a microcosm as everything happened quickly. The above – if it remains in play – is a hidden indicator beneath the surface. With the way inflationists tend to respond it could actually be beneficial for an extended period of time (ref. the 2003-2008 time frame of increasing inflationary pressure and gold stocks rising against their proper fundamentals).

Right now this is just to point out something notable. It could be real or false. But notable it surely is.