As you know, NFTRH 756 put its thinking cap on right in the middle of yesterday’s report. This resulted in a potential change of tack going forward from the disinflation/deflationary view to potential global inflation trades if the markets use a weak USD as the foil to global liquidity in the absence of a dovish US Federal Reserve.
USD has not broken down but that could be the trigger, if it does.
It’s still just a theory, but with the Continuum’s daily chart version doing this today, it’s a theory that carries some weight. If this were a stock I would probably buy it, which means I’d probably short long-term Treasury bonds (hello TBT?). But trading off of it directly is not the meaning of this update.
If the setup above manifests in the Continuum breaking its flag upward, it might well come with a weakening USD, as yields in the US would rise to support the weak currency. It’s still speculation at this point, but I’d rather be speculating than sitting on my butt doing the autopilot thing.
On last year’s cycle the yield rose hard in a fight against inflation. The USD also rose because it got the ‘hawkish Fed’ bid. But that is not always how it goes, historically. Yields also rise when the currency is weak, as if to defend said currency; in this case USD.
We have noted the ‘bull flag’ look of the monthly continuum, and maybe this is why. Maybe it is a bull flag. It’s another component for us to factor in the analysis begun yesterday.
If the dollar breaks down to such degree, a lot of money can be made in a very short period of time. Few to nothing of that is currently priced in. It’s a possibility that I did not really consider before Gary brought it up. But looking at the charts, such outcome cannot be ruled out and perhaps even deserves a better premium.