Per the Trade Log yesterday as I was doing some selling…
Frankly, I am not in love with market risk at this time and wondering if maybe some of these Reddit style events going on (ref. AMC, etc.) are ending stages stuff.
Also, yesterday’s update highlighted some negative signs by risk ‘on’ markets’ ratios to gold.
Of course, the anti-market to most of the world’s heretofore bullish asset markets is the US dollar, which has been floundering around at a potential double bottom to the January low as it continues to hold the paper thin support of the February low.
Trends are down and USD has a ton of upside resistance. What it has going for it is the look of daily RSI and MACD, which are above the EMA 20 and triggered up, respectively.
The current price area also has longer-term support from the early 2018 cluster, as highlighted on the weekly view. Weekly RSI and MACD stink, by the way. But the daily chart above is operative when thinking about the potential for a bounce.
The big picture monthly chart shows that current support is the doorway to stronger long-term support at a 50% Fib retrace level just above 88. Then more strong long-term support is at and around 83.
If/as the inflation resumes (ref. the 30yr yield Continuum, which I think has further to go on the upside) I’d expect USD to test one of these long-term support areas (it has already in essence probed the beginning of the upper one at the 50% Fib).
But another of our themes is that in order to continue the inflation the Fed needs cover. It needs to have the public NOT alarmed about inflation and that is what this cooling off period has been all about, as the Continuum cobbles its right side inverted shoulder…
Inflation expectations can cool further in the short-term. This would refuel the inflating Fed and the munny spending government to get back about their macro-manipulative business. The US dollar is bearish and probably still ultimately targets lower levels, but a macro market cool down could logically see USD’s daily chart put on a double bottom bounce.
It’s a process and whether by divine intervention or some behind the scenes wizardry from the Fed, it would be poetic for Uncle Buck to bounce, the Continuum to continue putting in its right side shoulder and for heretofore greedy inflation traders to get knocked upside the head, even if temporarily. Summer slack season is upcoming, after all.
If this cool down plays out per this scenario, the final act of the inflation trades – maybe resuming in the fall – could be epic. It’s one favored road map forward and we’ll revise if/as needed. But I am going to be ready to raise already high (by many peoples’ standards) cash levels further, and be ready to buy peoples’ angst (ref. the recent Bitcoin crash, which may have been a leader in this macro process).
As for gold, silver and the miners, I am keeping an open mind. They did a lot of good work being contrary to the inflated party and only when the party started to wind down did they rally. So they could well bull during continued making of the right side shoulder and inflationary cool down (the technicals remain intact, after all, and the macro funda have ticked in a positive direction over the last month). But the old story is one where all too often the gold stocks at least temporarily get pressured with the broad markets.