Our script was “to or through the election” for the broad bull, with a Goldilocks (disinflationary) flavor to it indicated by a counter-trend pullback in bond yields. In an NFTRH+ update on October 14 we noted that 20+ year Treasury bond fund TLT had dropped to a decision point, and…
If TLT breaks below support our current view of an ongoing but interim disinflationary phase will come under a lot of pressure, as the indicator could start to look more like the next inflationary phase is coming sooner rather than later. For now, it’s an undecided macro indication as the disinflation and pro-bond view attemps to hold the support area.
Here is the chart this morning. It is oversold and not quite yet broken. But it sure is putting on a test of its intact status as it loses the 200 day moving average.
And by the same token, the US dollar is ramming through its SMA 200 and putting on a laser show.
The implication, if not reality, of it is that we are back on the script that saw a rise in inflation expectations spur a rise in Fed hawk fears as the Fed was compelled to raise rates and market players fell right in line, in subservience to the great and powerful monetary regulator. *
In short, we may have an echo of the 2022 phase when most asset markets came under pressure and the US dollar index, which had been rising in anticipation of a Fed hawk regime, continued rising. Here we have to continue to keep in mind that, given the daily chart’s move shown above, the big picture monthly shows an intact bull market from 2008 and this weekly chart shows long-term support having held.
We are in essence to the time target (with all its mushy +/- factored) and risk has been very high, across the board. I will never sound alarms on things I am speculating about, but there is a possibility, if not probability, that the next phase of the inflation era indicated by this chart is upon us sooner than originally expected. That “should” be USD-negative, theoretically. But it played out bullish for USD in 2022 and could do so again.
It is possible that USD will fail at some point if inflation makes a comeback and it is possible that this bout of inflationary macro could precede a mother of a deflationary event (which would send USD much higher in an asset market liquidity event). On that note, let’s see how the Gold/Silver ratio – USD’s would-be partner in such an event – is looking today. In declining, it has heretofore been negatively diverging USD.
Logically, it is up hard today too. As noted in the Trade Log and on X, I sold my silver price tracker yesterday because I felt that things were getting a little too pumpy in silver bug land (and we had hit the 35 target). Regardless of the inflation/deflation/disinflation question, we will do well to watch the combo of USD and the Gold/Silver ratio going forward. If they both rise/continue to rise, it’s likely time to get out of the pool (with speculators shorting if/as they will, as I began doing yesterday per the TL as well).
* How humans have not rejected and lost confidence in the Fed as an authority, and machines have not been reprogrammed away from utter submission to the Fed’s every whim, I have no clue. But to this day, it appears that full Fed obsession is intact among market participants.
