NFTRH+; Initial signals

Below is a snapshot of the health of the speculative inflation trades and a reason I have gold on watch to bust its bearish macro trappings at any time. There is a reason gold has been on the outside looking in at the inflated macro party and that (counter-cyclical) reason will one day be to provide cover for those seeking refuge when this cyclical mess unwinds. Could happen tomorrow, could happen next year. But we should keep an eye on the macro and pay attention when certain signals even hint to go negative.

The inflated macro is burping up some initial negative signals (amid a mixed bag of positive and negative) even as commodities are playing the rotation game (today copper’s getting bid, ref. NFTRH 676’s suspicion that it was ready) while others like Energy and Agri pull back. Broad stocks continue in correction mode. It’s not a cause for alarm at this point, but we’ll track the situation going forward.

Let’s take a look at some daily charts.

30yr & 10yr Treasury yields are pulling back. Recall that the 30yr is our big picture macro guide using the monthly chart (Continuum). A failure on the daily would compromise the theory that a new inflation trade – as currently in progress – could last until the yield would hit the Continuum’s limiters at 2.7% to 2.8% (currently it is at 2%) by continuing its right side shoulder. These daily charts have obviously not failed, but they are taking a hit.

The Gold/Silver ratio and USD (GLD/SLV & UUP shown here) are also curiously weak, so this is beneficial – if strange – signaling for inflated macro party goers. Par for the course in this market (that in my opinion may actually have been driven a little berserk with the levels of funny munny policy injected since spring 2020).

The 2 Horsemen do, however, maintain their uptrends and thus their ability to croak the macro, especially the inflated/reflated stuff (cyclical, inflation-sensitive).

Inflation expectations (RINF, TIP/TLT & TIP/IEF) are backing off the recent spike, although the trend is still up. No cause for alarm at this point. But until they stop backing off we’ll keep an eye on the situation.

Speculation, as indicated by Junk bonds and junk ratios to Treasury and investment grade area all easing together. That is not good signaling for inflationary speculators or specs in general on the short-term. If this keeps up a macro risk ‘off’ signal would engage. As yet however, no terminal looking breakdowns.

Bottom Line

No cause for panic or even alarm yet. But this stuff will need to turn back up soon or risk ‘off’ and eventually a constructive phase for gold mining (which leverages gold’s standing on the macro) would start to engage.

Just keeping tabs more tightly going forward unless/until the caution clears.