NFTRH+; the state of things

Today the market is supposedly negative due to election uncertainty. But whatever way it goes, the historical post-election data suggest out performance compared to the 2022 run up to the election at worst, and a rally at best. The media think that if Republicans take congress it would be positive and negative if the Democrats do. Historical averages say it probably will not matter much after the noise shakes out. Those averages are positive.

However, on the other side of the ledger is the tanking True Money Supply (TMS) that we have periodically reviewed. That is a gauge of falling market liquidity and forward disinflation/deflation.

Complicating matters even more, per this update the Gold/Silver ratio has been dropping with an implication of renewed market liquidity, for a phase at least, which is all we have been looking for to this point, for Q4-Q1. Not a new bull market.

Want more complication? Well, tomorrow is CPI day (release at 8:30 ET). The backward looking comps can still alarm market players obsessed with a would-be easing Fed. Forward indicators like the TMS and 5 & 10 year inflation breakevens are easing, but that is not what the Fed or jittery markets care about. They instead look at still-firm employment (another backward looking economic indicator) and headlines like tomorrow’s CPI. So there is still a chance that we could get another negative inflation hype blast as the comps will not start materially easing until well into 2023.

Bottom Line

It’s a mixed bag. It seems a little premature for relief from tax loss selling season. Depending on how the elections shake out that will either be perceived as positive and a reason for markets to eventually rally (Republicans take the house) or negative (Democrats take it), at least according the the rationale of the article linked above. All in all, the period after the mid-terms should be a tailwind.

I am staying aware of personal cash levels until the seasonal shakes out some more. One thing to note is that gold has been bouncing hard vs. commodities (including oil) and stocks, which is a sign of negative market liquidity but positive gold mining fundamentals if it continues. Today the Gold/Silver ratio reversed a bit into a bounce. A dropping GSR has been a relief signal of late but if it were to ramp up again along with USD (also shown in the linked update above) the signals would flip negative again, at least on an interim basis.

Cash, baby. Let’s let the election and CPI shake out and tax loss season mature some more. Then we’ll see if the market has a party up its sleeve.