Inflationary Headwinds Increasing

Our indicator constructed from the trends in the CRB Index, gold, and yields on the 10 year Treasury is not extreme but it did rise last week suggesting that inflationary headwinds are increasing for equities.   Another push higher in gold or possibly in Treasury yields would send this indicator into extreme territory.

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Buying The Dip: Good Idea, Fraught With Consequences

Our indicator constructed from the trends in the CRB Index, gold, and yields on the 10 year Treasury has come off of the extreme readings seen several weeks ago, and within the context of a trend following strategy that I have detailed here, here, and here, this represents a buy signal for the SP500.  In essence, with prices on the SP500 above its 40 week moving average and our indicator not in the extreme zone, prices should move higher.  In other words, this is a good time to be "buying the dip"; however, this strategy is not without risks.

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Inflationary Headwinds Diminishing

The composite indicator constructed from the trends in the CRB Index, gold and yields on the 10 year Treasury is no longer extreme.  As prices on the SP500 are above the 40 week moving average, this would be a buy signal as per our strategy that combines this filter with the 40 week moving average.

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Still A Headwind

Strong and rising trends in CRB Index, gold, and yields on the 10 year Treasury persist, and collectively, this represents a headwind for equities.

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