Crushing Effects of Deflation
The macro deflationary forces continue to show their effect. It seems that the Fed has come to realize that QE 3 was basically ineffectual at fighting deflation.
So the next attempt at fighting deflation by the FED seems to be to try and force the dollar down. No doubt there is some behind the scenes maneuvering between the major central bankers to make this happen, to raise the Euro and crush the dollar, and feed money into Euro assets. That will go on for a while but the fact is that Europe is a weaker economy than the US.
We outlined back in February that T-Bonds had reached their macro chart price objective of 166. Today we are sitting at 158. Recently we got some good company with Bill Gross saying that shorting bonds was going to be the play of a lifetime, if you get your timing right.
From a short term trading standpoint, look for bonds to trade in a 156 to 165 range with a swing point of 160.50. With the FED pressing on the dollar it to will be in a short term trading range, maybe 94 to 101 with a swing point of 97.50.
Stocks continue to meander around in a rolling top, the Macro sell signals that are outlined in the piece on our home page on March 11, 2015, have yet to be triggered.
Over the next couple of weeks we will be providing material on our update of the 17.6 year Macro Cycle and its relevance to the deflationary forces that exist.