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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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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This Isn't Trivial

One of the strategies that I have frequently written about for the SP500 involves the 40 week moving average and the composite indicator constructed from the trends in crude oil, gold, and yields on the 10 year Treasury.  When these trends are strong and rising, the SP500 faces stiff headwinds.  This is data going back to 1984 and includes the 1990's as well.  In essence, using this indicator as a filter for a SP500 simple moving average strategy can increase returns by about 25% while reducing maximum draw down by 50% over buy and hold.  In other words, just stay out of the market or hedge yourself when the collective trends of gold, crude oil, and yields on the 10 year Treasury are strong and rising.

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USO: Will The ETF Catch Up?

I last looked at crude oil -- specifically West Texas Intermediate -- several weeks ago, and the technical set up was pointing to a strong price move and sustainable trend over the next year.  That set up remains in play although prices are hovering near the 200 day moving average.  In essence, the technical set up appears to be failing, but we won't know this until the end of the month.  With lower prices of WTI, the risk on this trade has been reduced significantly.  In other words, buying now at these levels is low risk.  But we just don't want to buy indiscriminately, so here is the short term technical set up that needs to play out on the road to higher prices.  

 

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GLD: Making A Bottom

The SPDR Gold Trust (symbol: GLD) is making an intermediate bottom making support and stop loss levels easily identifiable.

 

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Inflationary Pressures Are Subsiding

As this headline from the Wall Street Journal shows, inflation pressures are just beginning to be recognized by investors.

 

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We're Off!!!

As we start the new year, it is well worth repeating what I wrote on October 15, 2010: "In essence, higher yields are in the immediate future, and this should have negative ramifications for equities and commodities.  Trends in gold, crude oil, and yields on the 10 year Treasury are rising and this in aggregate will put pressure on equities."  Equities have continued to perform better than I would have thought considering the rising trends in Treasury yields, gold and crude oil.  As we start the year off, it is the same old same old.  If equities rise, then Treasury yields and crude oil will do so as well, and if I had a preference, this is where I would put my money.  Think of it as a tax on higher equity prices that eventually will result in an equity sell off.

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Inflationary Pressures Are Persistent

On November 8, 2010, our composite indicator that looks at the trends in gold, crude oil and yields on the 10 year Treasury registered  an extreme value.  At that time, I wrote: "A strategy that combines this "fundamental" filter with the 40 week moving average has given a sell signal."  With rising Treasury yields and persistence in the trends in gold and crude oil, the composite indicator remains in the extreme zone.  This is not the time to buy equities.  For those keeping a scorecard at home and for those who are buying the bullish nonsense, the SP500 has gained about 1% over the last 5 weeks.

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Nice Video On Gold

I heard this fascinating analysis this morning on the radio why gold should continue higher.  CNBC interviewed Aaron Regent, Barrick Gold president and CEO.  Barrick Gold (symbol: ABX) is the world's largest gold producer.  While not meant for market timing, there is some good common sense insight for what may be ahead for the yellow metal.

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Gold Technicals

This will be a comprehensive review of gold technicals utilizing the SPDR Gold Trust (symbol: GLD).

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Market Vectors Gold Miners ETF: Forming A Top

Figure 1 is a weekly chart of the Market Vectors Gold Miners ETF (symbol: GDX). The pink and black dots represent key pivot points or areas of support (buying) and resistance (selling). There are two bearish signs that point to GDX forming a market top.

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Gold ETF: Time To Buy?

On Thursday, the SPDR Gold Trust (symbol: GLD), which is the ETF that tracks the performance of gold, saw its worst one day performance since February, 2010. No one would deny that gold is in a bull market, but does this sell off represent a buying opportunity?

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Some Not So Deep Thoughts On Gold

From the "Department Of It's A Sure Thing", we have, once again, investors being told that an asset is a sure thing just as it is making new highs. Yes, they tell us it is different this time, but how many times do you have to hear that to realize that it is never different? The reasons to own gold at $1200 are the same reasons to own it at $1000 an ounce or $800. But like every asset, nothing goes straight up. I would rather be a buyer at lower prices (and I was) than higher.

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The Technical Take: GLD

Figure 1 is a monthly chart of the SPDR Gold Trust (symbol: GLD).

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Is It Time To Short The S&P500?

A real headwind for the markets -now and in the past - has been when the trends of gold, crude oil, and yields on the 10 year Treasury are strong and rising.

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Trends In Gold, 10 Year Treasury Yields, And Crude Oil Remain Extreme

Our composite indicator that assesses the strength in the trends of gold, 10 year Treasury yields, and crude oil will remain in the extreme zone by the end of the week. This represents a headwind for equities.

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Like Minds...I Hope!

There are several commentators on the web that I read consistently, and John Hussman of Hussman Funds is one of them. I always take great comfort when my analysis rhymes with his because like myself I know he does his homework too.

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"Danger, Danger Will Robinson"

I feel like the robot in the television show, "Lost In Space". Investor sentiment remains bullish and trends in gold, crude oil, and yields on the 10 year Treasury bond are collectively becoming extreme as well. This combination has me thinking: "Danger, Danger Will Robinson".

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Trends In Gold, 10 Year Treasury Yields, And Crude Oil

Our composite indicator that assesses the strength in the trends of gold, 10 year Treasury yields, and crude oil is likely to be back in the extreme zone by the end of the week. This represents a headwind for equities.

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