Commodities and the 30 Year Treasury Yield

Commodities and the 30 year Treasury Yield ‘Continuum’

Commodities are usually well aligned with inflation signaling from the bond market (nominal yields, yield curves, inflation expectations, etc.). My current views are that if the Continuum rises anew it will sow the seeds of its (and inflation’s) own demise. In other words, the next major event is deflationary.

But first we have been watching for a potentially quite tradable rally in the commodity complex, with a target established, pending CRB daily chart technical confirmation and USD remaining in its currently bearish short-term state (it’s long-term state: bull market).

What do we see in this big picture chart? We see the Continuum in a flag that could well resolve to the upside. We see CRB index and crude oil attempting flag breaks of their own. We see industrial metals dealing with the gross distortions put into the market at the beginning of the Russia/Ukraine war. We see the Ags still in consolidation, and last but never least…

We see the deeply inverted yield curve (10-2) potentially making a secondary inversion (retest). Personally, I think it is going to resolve into a new steepener. Taking it further, I think that the new steepener may start out as inflationary (nominal long-term yields start to rise harder than short-term yields) and then with potentially great violence and mass confusion, morph deflationary (curves can steepen under inflationary or deflationary pressure). That’s what I think. And the thesis fits many other market views we’ve got going like a bunch of tops spinning in unison on a table.

Just another confusing post by your friends at Confusing, but with elements that are oh so necessary to get right on the big picture macro. This is not a market for easy analysis. *

* Or biased, dogmatic… or worse, AI generated robo-analysis.

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