CPI came out and it was a humdinger! Okay, that hype aside, the play is for a top in inflation hysteria and while the signals have been waning for well over a month now, the public is treated to another big inflation headline.
With respect to yesterday’s update and the add-on posted just after, it looks like today is a reversal day of some kind. A buy the news sort of thing. Here is what the second update had to say on this possibility…
A scenario that was not mentioned in the previous update is that gold stocks (and other sectors, including the inflation stuff) could rally off of CPI, but that the big buy signal could still be at or after FOMC.
What I mean is that there could be an oversold sentiment bounce at any time, especially from long-term support. But such a bounce could fail prior to FOMC, still marking that July 27th event as pivotal.
There are other scenarios, obviously. But I am leaning pretty heavy toward a contrary event coming soon. I’d like to see it come with a much anticipated .75% rate hike and the US dollar up there on its moonshot and quite possibly, the anti-dollar trades tanking badly. It feels like a watershed event will happen in July or August.
Okay, enough complexities from me for one day.
Gold stocks have reversed today along with commodities and related stocks. But also, Goldilocks is buying the news as well. That’s the growth/tech type stuff.
Points of interest:
- Major inflation headline hits the tape reaffirming the sternly hawkish Fed policy to follow on July 27.
- USD popped and dropped, selling the news.
- Treasury yields popped and dropped, selling the news (bonds are buying the news).
- Vastly different markets are doing the contrary bounce thing.
- So many markets, including gold stocks, were candidates to bounce due to oversold conditions and bleak sentiment.
- Precious & non-precious metals alike also had CoT going for them and the PMs are in a seasonal bottom window.
- But the PM sector is rallying with everything else just as it had been going down with everything else. So that is still a potential vulnerability along with the broken daily technicals. So bounce away, but the trend is down.
Using GDX as an example of many markets in downtrends, there is a contrary bounce today that has thus far held below the first trend marker, the very short-term daily EMA 10. If the bounce continues look for the EMA 20 (28.52 and declining) and the SMA 50 (30.83) and also declining. The sector is not nearly out of the woods (aside from a bounce) unless the SMA 50 is taken out and after that, the SMA 200 (32.71).
So there was a possibility, if not probability, that a bounce would hit financial markets on a burning hot CPI number (which could well be the peak of the hysteria). Play a bounce if/as you will. Today could in hindsight turn out to be THE turning point. But I would continue to view it as a ‘bounce only’, until further progress is made. And that obviously goes for more than just gold stocks.
Can you comment on this statement that I ran across Gary ?…… Someone selling may not understand what US bonds are telling the market. It’s the reason gold made a $40 turn around from premarket this morning. The entire curve except the 20yr, is inverted from 1y to 30yr. Notably the 10yr yield is currently red right now.. The low for gold looks like it’s in or very close, by the way bonds are acting. Thanks for all you do ! I learn a little more everyday….Mike
Hi Mike, I’d interpret that as meaning that inversion is an economic danger. But it’s the steepener that follows an inversion that brings on either an inflationary surge or deflationary pressure. So if your source is saying that inverted curves leave little wiggle room prior to a steepening, I agree.
It’s one of several macro considerations that appear to be lining up for gold. The main holdout is the lousy daily technical situation. But that’s just one vantage point for viewing the situation. But generally, I agree that bond yields are played to the upside and reversal of that would be gold-positive.