Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Brexit!!! Silver!!! Bonds!!! Deflation!!!

Stock-Markets / Financial Markets 2016 Jul 05, 2016 - 03:58 AM GMT

By: Gary_Tanashian

Stock-Markets

It’s a funny title for a segment, but it is appropriate. I don’t want to be too flippant with dismissals of inflammatory market events like ‘Brexit’ as simply hype. There is very real macro fundamental shifting going on behind the hype. But in market management, macro fundamentals play out over long stretches of time and nobody knows exactly how all the moving parts are going to affect the subject of the hype (in this case Britain and the EU), let alone the asset markets we are tasked to invest in, trade or avoid.


This is where market psychology comes into play, hence the ‘!!!’ title. As already noted, I get the feeling that the Brexit drama was an exclamation point on the global deflationary phase that has been in play since 2011, when the acute phase of the ‘Euro Crisis’ first erupted (sending gold to 1900+ an ounce). You may recall that silver and commodities had already blown off and blown out but gold pulled in the risk ‘off’ bid amid a developing deflationary force. It then blew out and global deflation ensued.

The US and its world’s reserve currency got off easy, with a Goldilocks environment pulling capital into its markets, enriching its services sectors while impairing manufacturing in general and exporters in particular. But here we consider the old (albeit true) cliché that the US is predominantly a service economy.

I have had input from people telling me that there is no inflation and the crisis in Europe will panic capital into US markets and drive the US dollar upward. But my question to them is this; have we not had that environment since 2011? Is the Brexit drama not just an alarming symptom of something that began in the Euro crisis’s acute phase in 2011? Do markets sometimes ‘sell the news’ if it is good and ‘buy the news’ if it is bad?

I am not saying to buy Europe. I am however, buying the news about Brexit and its global deflationary implications by putting forth and buying the ‘inflation trade’ we have been projecting, gauging and managing for some time now. As you know, I got a little over excited last week when silver rammed upward vs. gold, advancing the view.

The reason I say over excited is because it is exciting when my tools provide rare signals. It can be boring writing ‘status quo’ reports every week and really, that had been the case since the silver-gold ratio turned down in 2011, until 2015 when we began the Macrocosm theme, last July. The implication had been global deflation and a bearish view for many global markets, commodities and of course, the precious metals.

Still, I may be too deliberate for excitement seekers, but I can only be me. Being me meant fleshing out said Macrocosm theme and the potential changes forthcoming as gold asserted leadership over commodities. We looked ahead to a time when gold would lead currencies and importantly to the gold mining case, stock markets. Well it’s , & with a bonus in the form of our recently added ‘gold vs. US and global bonds’ ratios. We will update the whole cavalcade in the now-standard ‘Gold vs.’ segment below.

But to close this segment, let’s consider one of the most sensitive ‘gold vs.’ of all, gold vs. silver. On the first chart below, it is the only item that has broken down (i.e. silver vs. gold has broken upward, which we have been watching for like a hawk; no pun intended).   While I am as concerned about the next guy about the speculation in silver, I’ll be damned if I am going to abandon a thesis that is working perfectly because I am afraid of the wild speculation, momentum and what looks like short covering currently in play. We will abandon the thesis only if Silver-Gold is head faking and bull trapping.

Treasury bonds are screaming higher as capital flies into US markets (potentially a blow off to the ‘global capital flees to the safety of US Treasuries’ story) but it is also fleeing to the precious metals… only with silver now leading. That implies that next play is risk ‘on’ relative to 2011’s risk ‘off’. People chasing the Euro Crisis trade now may have already missed it, forming a large counter party to a developing risk ‘on’ scenario.

One variation of an inflationary scenario could see the US Fed jerk back to hawk mode once the market gets a load of underlying strength in the Semiconductor Equipment sector, its implications for Semi manufacturing and for general US manufacturing (ref. again the persistently firm ‘prices paid’ components by US manufacturers).

The market could initially punish silver and gold if it gets wind of hawkish Fed rumblings, but the silver-gold ratio and commodities may have already painted the Fed as being behind the curve. They may not be able to raise rates fast enough, one day.

The above is not analysis.  It is a viewpoint.  This market is in motion and the thrust of it is ‘e’motion.  NFTRH 402 spent 40+ pages (lots of graphics and easier to read than it sounds) subsequent to this opening segment fleshing out where markets are at, post-Brexit.  We focused on the speculation going on in silver and defined the danger out ahead for when this blow off of Stage 2 of the precious metals ‘launch’ phase* flames out.  We are defining danger with a lower case ‘d‘ compared to 2011’s terminal blow off ‘D!!!‘.  Meanwhile, the markets move forward and danger or not, the miners (HUI) have now taken out our target of 251 and new objectives have been set.

* As defined on March 4:  Launch!

Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates (including Key ETF charts) and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2016 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in