Apologies in advance for some of the possibly confusing content to follow. But if this were easy anyone could do it, eh?
There are a lot of balls in the air; balls known as inflation vs. deflation and most of all time frames.
The media present inflation as this guy picking out higher priced fruit. Wait til he gets to the meat department! You can click here for the article at CNBC.
Meanwhile, the Biden administration’s Minister of (financial) Information, Janet Yellen, informs us that all that cost-pushed inflation about to be shoved into the economy is actually going to be anti-inflationary as it actually lowers some costs (in Wonderland anything is possible).
Okay, those are noble goals. But Janet please, in order to be completely transparent you must rephrase thusly…
And speaking of a boxed in Fed, let’s remember two things:
Here is the first inkling that the cool down was coming last spring, unwittingly provided by Zero Hedge.
That indicator, as usual in the NFTRH financial world view, is the simple monthly chart of the 30yr Treasury yield Continuum. The brief history of our analysis for 2021 with respect to this chart has been as follows…
And here we are with a theoretical Inverted Head & Shoulders pattern in the making that would set the yield up for a test of the EMA 100 and/or 120 (red lines), which have limited all such inflationary phases over several decades. But we are also at a new and much more abrupt cool down point. This cool down point may well serve to temporarily back the Fed off a bit from its turn toward being sterner on inflation in recent weeks.
Assuming a continuation of the inflationary macro in the near-term (see chart below for the support area to that notion), at the red limiters on the chart above there is a decision with these possibilities (listed in order of probability, with 1 & 2 at nearly even odds in my opinion).
‘But Gary, that is just one chart of one long-term Treasury yield you are trying to use as a one size fits all macro projection!’
Right you are dear imaginary critic.
So let’s note just one of several other ways of gauging inflation. Today, on let’s call it Inflation Hysterics Friday, the Inflation Expectations ETF is tanking to an important support area. The monthly chart above is all well and good for the big picture view, but this picture tells us that the inflation trades are intact but getting a hell of a good test, conveniently with FOMC meeting next week. I have long viewed the Fed as a cynical and self-conscious entity with respect to the inflation it routinely manufactures. This pullback could help the committee maintain some appearance of credibility.
If you think that is just a chart with limited meaning for your inflation trades, think again. As we note nearly every week in NFTRH, RINF and the CRB index go in lockstep. There is no one without the other.
Here is the chart that often appears in the Commodities segment for your consideration. It ain’t broke ’til it’s broke, but right minded market participants are staying open to all possibilities from here on and hopefully tuning out the media as well. I look forward to managing the process ever more closely each week in NFTRH. It’s what separates effective speculators and risk managers from the herd.
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Gary Tanashian of nftrh.com successfully owned and operated a progressive medical device/equipment/component manufacturing company for 21 years, keeping the company’s fundamentals in alignment with global economic realities through various economic cycles. The natural progression from this experience is an understanding of and appreciation for global macro-economics as it relates to individual markets and sectors.
Biiwii.com was created in 2004 as a way to help communicate a message about deeply rooted problems with too much debt and leverage within the inflated financial system. Our concerns were confirmed and our message justified in 2007 as the system began to purge these distortions, resulting in a climactic washout extending from October, 2008 to March, 2009. But one manifestation of the boom/bust cycles hard wired into a Keynesian monetary/economic system.
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