June ADP Report Booms, Yields Rise, Inflation Trades to Follow?

The June ADP report doubled expectations, yields respond, Hazel never to wipe that smile off her face?

As this article says, Leisure and Hospitality led the way as the Good Ship Lollipop sails on and on and on… Despite what gold bugs, bears and even the Fed itself may want, the economy refuses to buckle under (to my surprise, as I thought we’d be seeing cracks at least, by now) and thus the economy created by inflationary operations remains a threat to rekindle inflationary problems.

may payrolls report

Further buttressing Hazel’s employment, Construction – which is a tag along to the services economy, not a productive segment – came in second in the ADP report.

It seems a foregone conclusion now that the next leg in long-term Treasury yields will be up. Here is the 30 year Treasury yield holding the uptrending daily chart moving averages and turning up.

On the larger macro, the ‘Continuum’ view (monthly chart) of the yield looks like it wants to break the flag upward after holding support at 3.4%.

The question now is… have commodities corrected long and hard enough so as to participate in an inflationary resurgence or will we get a replay of 2022, when the hawking Fed held sway and obedient markets played ball every step of the way, bending and breaking to every hawkish utterance from the Fed’s collective orifice? You know, the same credible Fed that was way too tardy in recognizing the inflation problem to begin with.

It’s a valid question at this time, in my opinion. Commodities are positively correlated to the economy, after all.

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This Post Has 2 Comments

  1. Mike Cortopassi

    You are seeing the good ship continuing to sail and yields are headed up. Slope is ranting about how much gold sucks and how his GDX puts are doing fabulously (yes, I still read…). Reddit users are crowing how their $1000 investment in Apple in 2003 is now worth over 600k….

    Feels like time for a turn.

    1. Gary

      Well, whatever. For my part, I hold the miner bear DUST as a hedge. I’ll get rid of it if GDX/HUI look to hold the March lows and I’ll get rid of some of my few miners if the March low is lost. Gold miner fundamentals have gone from good to questionable to very recently, bad with the breakdown in Gold/SPX, the new upshoot in real yields and other unfriendly indicators. Suffice it to say that Hoye’s post-bubble contraction has not materialized. As for TK, the squirrel finds his nut once in a while.

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