For a sign of the end of the summer cool down – and deflationary whiff (such as it is) – yields will need to reverse upward and bonds head back down
Today the 30yr Treasury bond yield dropped and reversed. That’s all well and good, but…
…this macro picture means only everything to the inflation/reflation thesis, which I favor (by a 60% lean) to get going again either sooner or later.
Part of that plan is for the right side shoulder to the (monthly) 30yr yield’s inverted H&S to remain somewhat symmetrical to the left side. Yesterday and today it pushed the limits of that symmetry but put a tail on the candle to close the day out.
There are other factors in play, notably the duo of USD and the Gold/Silver ratio (GSR), which have bullied their way into the picture and said “not so fast, inflationistas!”
But tuning that out and going back to our original road map, the 30yr yield is still on a plan that would suggest it’s not all over for inflation. Now, whether the inflation goes Stag or remains the ‘good’ kind of inflation is another question.
I’d bet on the Stag, but first we need to see the current deflation hint (AKA our “summer cool down”) taken off the table. Let’s keep an eye on Treasury yields along with yield curves, USD, GSR and the whole indicator shootin’ match. Something’s going to shake out of this soon enough.
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