NFTRH+; A message from the futures

After ‘Flation Friday’s inflationary headlines USD (DXY) continues to recover, taking back the daily SMA 50 this morning.

Its fellow disinflationary rider Gold/Silver ratio continues to recover while nominal gold and silver are each down.

Meanwhile, here is part of what the media is serving to the public this morning.

The big inflation report coming up is the CPI, to go with last week’s PPI. One of the articles tries to sooth nerves, reminding readers that “slowing economic growth isn’t no growth”, yet the CESI continues to grossly diverge the stock market, painting that as a lame rationale.

However, ES (along with headline US market indexes) is intact, technically. DJIA is the most suspect with ES/SPX an uptrending robot, NDX getting clubbed on Friday but still trending up and SOX still firmly trending up as well.

Bottom Line

Patience. There is an order to things. Copper is easing a bit, although commodities are generally firm. CPI could well come in and push inflationary expectations over the top when coupled with PPI or it could surprise negatively. Or it and PPI could simply be lagging a turn toward disinflation that the GSR may already see. Or… inflationary angst could create fear of ‘the taper’ and an excuse for a market correction. Too many alternatives as yet to get caught guessing.

But CPI is embedded inflation, the result of all that inflationary activity over all those decades. It never goes down for extended periods because by the time it starts to pull back the Fed is already in balls out inflation mode. That is our fine system of Inflation onDemand.

There is a lot of hype in the headlines, including ‘the taper’, Delta Variant, inflation, etc. A lot of noise. It’s time to be calm and read the indicators beneath the surface. When USD and GSR ride together the precious metals tend to get hit first, then commodities and inflation/reflation sensitive markets could be vulnerable. Then the USS Good Ship Lollipop would finally get the corrective memo, assuming we’re not going Goldilocks (ref. circa 2013-2019).

Alternately, if inflation/reflation is going to be the play imminently, USD and GSR should come under pressure and long-term Treasury yields would probably rise. Let’s keep an eye on the Bank sector and its relationship to the broad market. As yet, there is no signal there. If L/T yields were to resume rising (and the Continuum’s right side shoulder fully forms) we’d expect this ratio to pick up on it early.