First, for all you right minded wording detectives out
there, you are absolutely rightÂ
inflation is not
rising prices and deflation is not dropping prices. Also, deflation is
not two measures of a heavily manipulated bond market (chart 1) dropping
impulsively. But for the sake of argument, letÂs realize that Main Street does indeed call $4 regular at the pump
Âinflation and every
several years when a scare crops up they call dropping stocks and house
prices ÂdeflationÂ.
Here are some pictures of an over sold Âinflation story, which put another way,
is an over bought Âdeflation story.
TIP vs. TLT
(inflation protected vs. regular long-term Treasuries), the indicator that
did indeed give us the heads up on a coming implosion of inflation
expectations long ago, is burrowing southward in what looks like a Waterfall
decline (the opposite of a parabolic blow off ala Silver 2011, at the height
of the last inflationary blow out).
TodayÂs headline grabber, Crude
Oil (USO) is tanking big time. Pun not intended, and buy reco
not intended either (yet). Still, we appear to be in extremis on the
dying inflation story.
Commodities of all kinds (DBC) are going
to hell in a hand basket.
Dialing out to weekly charts, commodity currencies from
Canada and Australia have kept us away from commodities because aside from
the big technical breakdowns in CCI and CRB, these two have been the most
bearish things I have seen over the last year. NFTRH updates them every
week and every week they have flat out stunk.
Still a point of support could be upcoming for the Canada
Dollar before too long. Indeed, our measured target is and has
been 85 off of the massive topping pattern.
The Aussie Dollar is also coming to a
support point that should be watched.
Finally, there continues to be an initial inkling in play
over in the precious metals, which usually spawn the first moves, amidst
pervasive deflation anxiety. Both gold and silver have firmed despite
the destruction in commodities and the inflation story.
With silver leading gold for the last few weeks and the Silver-Gold
ratio sneaking above the 50 day moving average, the first hint is
still in play. Silver is more inflation dependent than gold.
HereÂs the daily viewÂ
Bottom Line
We have expected and protected against a hard decline in
commodities and the inflation story in general. While the Âinflation markets most people watch are
water falling southward, we can combine coming target measurements (to
support) in commodity currencies with the hint in silver vs. gold to cobble
together a plan for a counter trend rally in the Âinflatables and a counter trend correction in the US dollar.
With the FOMC meeting next week, one wonders if they will
be the next mole to pop up in our macro game of Whack-a-Mole. The last
time the Yen (another anti-market, like the US dollar) tried to bounce, out
popped the BoJ. Is it the FedÂs turn, with
perhaps the ECB out in early 2015 after a Euro rebound?
Or maybe the trigger will just be exhaustion of the
current extreme trends prior to a counter trend bounce. Regardless, Âinflation is getting over sold.
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