Confirmation Week Coming Up

First I will repeat a more complete version of what I posted last midweek.

It would appear that a new phase in the markets is beginning. But this change is in a very early stage as the CNBC cheerleaders do not acknowledge anything new developing.

The thought that this brings to mind…

Contrarianism, ie. bucking the trend, is not easy, most of the time you will be working with valid insights but the trend is too powerful to overcome. But with patience you generally can see the benefit of the Macro approach.

  • Moving on to todays title subject. Over the past weekend I have been musing over a number of topics so I am a little late today in posting some thoughts.

All through the bubble period, which I define as commencing on February 24, 2021, we have seen stocks breaking away from other aspects of the markets and economy.

Currently there are signs that a major change is developing as the Dollar and now Gold are setting up in opposition to stocks and bonds. We are now at the stage where this move will be confirmed or not.

Here are two charts that illustrate what we are seeing:

This first chart shows a combination of an index with a Long position in the Dollar and Gold and a Short position in the S&P, Nasdaq 100, 20 year bonds, and 10 year bonds. It made a new low just a few days ago but has turned up strongly in just the past four days. Does this suggest that it is time to be long Gold and the Dollar and short the rest of the market, quite possibly.

This next chart shows the outer limits of the Bubble, what I call a chart between what the market Hates and Loves. It is a chart that shows the combination of an index with a Long position in the Dollar and Gold and a short position in the FANG+MSFT stocks. It may be turning also, but the market is trying to hang on to Tech. We will see.

  • And then there is the Wall Street back story to think about.
  • Wall street has always been about stories, stories to get investor money. The current supply chain story is has some holes in my view.
  • How at the same time can we have 1) Full warehouses, 2) waiting container ships at ports, 3) shortages, 4) and strong retail goods sales.
  • Is this really a tale of building inventories for the new normal, not shortages?
  • To me it suggests that the probable major cause of current inflation is the frantic effort to corral resources to supply the perceived old normal demand. This has led to abnormal shipping demand. Result is full warehouses and full containers waiting to be off loaded at docks. In reality the final result is large inventories of unsold merchandise.
  • Yes, Covid is a factor, people over 55, vaccinated or not, who are 21 % of the population, are not embracing exuberance to any extent. They are being careful and reluctant to embrace the risk taking and exuberance of the under 55 crowd.
  • And maybe, the economic conundrum is really developing between the forces of: What is, What should be, and What will be

posted at 10:20 AM CST

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