NFTRH+; another indicator that is not & has not been supportive

The TSX-V/TSX ratio continues to negatively diverge the inflation trades

With the caveat that I am still holding some inflation/reflation biased positions…

As if the inflation trades needed another negative divergence, here’s an update of the unchanged negative status of TSX-V/TSX, which has correlated with inflation expectations more often than not over the years (see last chart). If you were with NFTRH back in mid-2020 you may recall we used this indicator as a green light on the coming inflation trades. Right now it is flashing red.

Da ‘V’ remains locked in a downtrend in relation to the senior Canadian TSX index.

And it is biased to a downtrend nominally as well. Anything can happen, but technically this chart appears to be rolling over as long as it is below the moving averages.

Here’s the larger view of TSX-V/TSX. While inflation expectations have been wobbling, they are still well elevated while the ratio slopes downward.

As for the commodity-based inflation trades, here is the CRB index and RINF, undeniably well correlated. I am not trying to promote any sort of agenda or ideology. But I am trying to show you different vantage points with which to view the macro and make your decisions. CRB has an upside target of 270+. But two things…

  1. That does not need to happen right now. It could come later, after a correction and
  2. With CRB having already hit 245 (it’s positive today) I am not in love with the risk vs. reward.

I am however, quite interested in gold’s relative risk vs. reward. In my opinion we are right in the midst of a patience play, both to see how the macro resolves near-term and in anticipation of when gold finally realizes its positive risk/reward. That would probably not be during an inflationary phase.