Amigos 1 And 2 Arrive, No. 3 Still Out There (As Yield Curve Flattens)

The 3 Amigos were a blogger’s way of not boring himself to death while fleshing out important macro indicators month after month.

Amigo #1 (SPX/Gold ratio) got home and dropped from target. What’s more, it has taken back the ratio’s equivalent of the entire Trump rally and that is an eventuality we are very open to on nominal SPX as well.

The gaps are interesting and among several possibilities for 2019 we could see fear, loathing and a fill of the lower gap (a greed gap of sorts) prior to a filling of the upper gap, which could blow out the stock bull in manic fashion one day. Relax, it’s just one of several possible road maps. For now, we simply state that SPX/Gold reached a very viable target and dutifully dropped with the market stress.

spx/gold ratio

Amigo #2 (30yr Treasury yield AKA the Continuum) got the bond bears on the wrong side of the boat and kept them there for a couple of months before the big reversal (back below the monthly EMA 100) that came along with the risk ‘off’ rush amid Q4 2018’s market stress.

A breakout was going to change everything. A failure, as has come about, keeps the macro orderly and keeps the Fed sitting pretty. I continue to recommend not personalizing Jerome Powell (as our dear and “fantastic” leader has done). Powell has done exactly what I’d have done were I the Fed Chairman. Ha ha ha.

[edit] A reader’s question causes me to clarify. He questioned whether I think the Fed deliberately engineered a market correction to push yields lower and I answered thusly…

“Well, I try not to wear a tin foil hat but I don’t think the Fed or its agenda would have benefited from a secular change in yield dynamics. So I don’t think Powell minds that pressure came upon over heated markets with inflation expectations previously elevated. In other words, I don’t think a little market stress was going to see him flip so easily because the fiscal reflation was overlaid on top of the Fed’s already existing monetary inflation.”

1 2
View single page >> |

Subscribe to NFTRH Premium for your 40-55 page weekly report, interim updates and NFTRH+ chart and trade ideas ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.