NFTRH+; If I were forced to make a prediction, this would be it

I don’t make predictions because I think they are the stuff of promoters and/or egomaniacs. But I want to put up a post with the cop out “if I were forced to…” because a few things are actually rhyming toward an eventual outcome.

10yr & 30yr Treasury yields are looking short-term toppy, right in line with the recent media hysterics about the public being all-in (well, 77% in anyway) on inflation. The long bond’s yield ticked the underside of the 2.5% to 2.7% caution zone and wouldn’t you know, it’s pulling back a bit.

Further evidence that the inflation hype coincided with a top of some kind in the inflation trades is provided by Tucker Carlson interviewing Mr. Gold/Inflation himself, Peter Schiff (I’ll do a public post on that later) for the masses to consume. Perfect. On cue inflation expectations took a hit.

A pullback in the yield and inflation expectations should offer relief to gold as well as Tech stocks relative to reflation sensitive stocks and commodities. I am looking for the yield above to pull back to the SMA 50, at least (around 2.2%). Gold is on a counter-trend bounce (until proven otherwise) and since our view is for the yield above to eventually ding 2.7% and the Continuum’s limiter that would again be a headwind working against gold as the rising yield has been since last summer. The timing could be as short as a couple weeks before gold would stall in the face of a renewed rise in yields.

But as the yield pulls back currently, gold (futures shown here) has a chance to take out resistance and possibly hit or once again poke through the downtrend channel. The SMA 200 would be the ultimate decider. But if the macro is setting up as expected (i.e. inflation expectations eventually resume higher) then I would plan for another down leg in gold (that is the trend, after all). As part of that planning I’d probably sell recently added gold stock positions, assuming the downtrend is still in place.

The alternate (and not favored) view would be that the inflation is failing now and gold would be ready to receive the risk ‘off’ running herds (maybe after USD and Treasury bonds do). The inflation will eventually fail, somehow (deflation) or some way (morph to a more virulent Stagflation). But for now it appears we are on a counter-trend move in yields at an opportune time as the public became concerned about inflation to much fanfare recently.

In short, the inflation trade side of the boat got over-crowded and the gold side of the boat barely populated. It’s time for counter-trend moves due to sentiment, but not fundamentals.