The inflation hysteria – despite the actual mechanics of inflation, like True Money Supply and Fed policy that bloated it – are in the rear view mirror. What is so exciting (and scary) right now is that the Fed is fighting the last war and the bond market continues to play ball, guiding them higher.
Here is the 30yr Treasury yield ticking a new high and if our 4% upside (Continuum) target is correct, then it is coming within hailing distance of that big time marker. Let’s get it over with sooner, rather than later. I anticipate that that level will have the potential to finally reverse the inflation picture that the Fed and Main Street are looking at.
While the precious metals are getting slammed this morning (silver has stabbed below its SMA 50 after having sported a constructive look, and that is a caution on the metal), the recent leadership of silver to gold is intact. The SGR is nesting right on short-term support. Any lower would break it down. Holding here and turning back up would obviously be positive for the precious metals complex.
More importantly to the big macro picture, Gold/SPX (GC/ES) maintains the pattern and technical standing we noted in yesterday’s update.
Bottom Line
Why, it’s bearish out there!
Okay Captain Obvious, we get it. But the macro is shifting in favor of a positive view for gold over other assets/markets. Bearing in mind that silver is cracking the SMA 50 and gold is breaking to a new low through that shabby support level…
…with a weekly chart targeting the 62% Fib at 1519…
The recent silver leadership may still mean something, or it may have been another lame promotion that put a blip in the charts by whatever #silversqueeze pumpers are still out there infecting Twitter and Reddit. But either way, it will very likely be the precious metals that eventually lead the way out of this bear market as the Fed takes ‘wax off’ after previously layering way too much of it on.
The idea is that the tardy Fed, trying desperately to eliminate those backward looking inflation indicators while fighting the last war, is going to keep hawking until something breaks. The thing they are breaking is the inflated monster they created. Here is where we may see a final running of the inflationist gold bugs. It’s tradition in the sector. When the investor base is cleaned and nicely sanitized, the next phase could be epic.
As for broad stocks, the initial SPX target is 3100 to 3200, interim bounce or not. I’d rather get it over with sooner, not later.
As a side note, the USD is (in my opinion) doing what bond yields are doing. It is blowing off to the upside. Yields due to latter stage inflation hysteria and Uncle Buck due to the fact that Fed policy and bonds fetching higher interest rates are supportive to the currency.
The situation remains, as of this morning, still ‘cash baby, cash’.
