Two Cartoons and Some Words to Boot
NFTRH gives few easy answers. That is because its writer has no easy answers, although there are consistent road maps we have used for years now that have never failed to help preserve capital when necessary - which is often - and make outstanding capital gains, when appropriate.
These road maps take the form of outliers (to standard technical and fundamental analysis) like the decades long 'Continuum' in US Treasury bonds, which takes on particular significance at limiting boundaries like the upper monthly EMA 100 (red arrows), as inflation expectations get too hot. These have consistently proven to be times when inflation cultists, guru followers and momentum chasers have gotten croaked in the markets at very important turns as the Continuum pings along over the years from inflationary to deflationary (green arrows) fears.
This is my favorite 'big picture' macro indicator, but there are many more markets and ratios that help lend definition to events over the macro swings. But there is another indicator to the times that has remained remarkably consistent in its message since the bull market in the 'value' that is assigned to it began in 2000. Yes of course, I am talking about the barbarous relic.
You see it is safe to talk about gold in bullish terms now because the metal is in the grips of an ongoing correction (probably about 2/3 of the way done, time-wise) and the damage done by the massive influx of terror-struck trend followers during the Euro crisis is now near fully digested.
Above is another of those cartoonish charts that is not technical analysis but rather, a story in a picture. The story is rather self-explanatory. Read the story, have perspective and relax if you are a gold bug. If you are a US stock bull, you might be less relaxed with the awesome rally out of the October Bull Pivot running out of gas.
But then, that is what this story is all about isn't it? Gas, or fuel. In the age of Inflation on Demand, which was kicked off by Alan Greenspan and continues ever more dynamically to this day, it is all about fuel, or inflationary policy.
Recently our dear current monetary leader, Fed Chief Ben Bernanke was able to sit in front of the Senate acting as if he believed in the economic recovery, but with some reservations. I would wager he has more than just some reservations as to the sustainability of this debt ridden, levered up, inflated mess. But the thing is, the great stock rally out of October and the tepidly recovering economy have kept policy at bay. And for their part, gold bugs were never going to get the 'good stuff' (QE3) with Au flying around at $1800 to $1900 an ounce and holding the confidence of so many refugees from a failing system.
This is all about confidence my friends. Right now the Fed Chief needs you to have confidence in him; he is in control and furthermore, if anything goes wrong with the recovery, he will stand on guard to help with more policy response. Up until now, the markets have done the heavy lifting for him. He could afford to sit back and let things breathe.
But with many global markets now threatening support, the US market eroding from the Small Caps to the Semiconductors on out to an initial crack in the S&P 500, Dow and Nasdaq 100, it is all according to a plan my friends. At least it is according to the ongoing big picture macro plan NFTRH follows over the intermediate swings. The key is to have patience with it, tune down all that intellectual noise in your head and let the process play out.
If another yellow oval is to be painted on the top panel SPX chart and gold should happen to find itself at support well... you know the drill. Take your partner by the hand, swing to the right Do-Ci-Do. Think for yourself; don't let the media and certainly not official spokespeople tell you what you think. If you have operated with perspective since the Euro crisis blew out, you should be sitting comfortably right now awaiting opportunity.