As symbolized by the 3 Amigos, the macro backdrop is riding on to its destiny. That forward destiny is a top in stocks vs. gold (Amigo 1), a rise in long-term interest rates to potential if not probable limits (Amigo 2) and an end to the yield curve’s flattening trend (Amigo 3).

When our zany friends complete the journey, big changes are likely in the macro markets.

Let’s take a checkup on each Amigo and consider some implications as well.

Amigo 1: Stocks vs. Gold

Using the S&P 500 as an example, stocks/gold ratios are still trending up on the daily time frame.

The big picture allows for higher levels before this Amigo stops riding and the party crashes. Stocks vs. gold is a confidence indicator and confidence is intact and growing. In this case, confidence = mania. This is consistent with our ‘inflation trade’ theme since it is the US stock market that benefited first and most intensely from the Fed’s years of non-stop monetary fire hoses (ZIRP & QEs 1-3 with a side of Op/Twist).

Amigo 2: Long-term Interest Rates

Again sticking with the US for the example, 10yr and now even 30yr yields are gaining more attention out there among market analysts and media. This is 100% on track with our theme that by the time the 10yr hits 2.9% and the 30yr 3.3%, the sound of “BOND BEAR MARKET!!!!” will be deafening.

Here is the bullish 10yr yield. The daily pattern targets 2.9% and…

We have a handy cross reference by the long-term monthly chart. TNX is creeping through potential limiter #1, which is the EMA 110 (solid red line) with the EMA 140 out ahead around 2.9%. I like the target confluence by these two different time frames and views. If the 10yr is to move higher, that would come with ever increasing media noise about the new age of rising yields (and inflation).

Even the 30yr, which as been lagging, has been making a move of late and is in a bottoming pattern similar to the one that the 10yr has broken out of.

But the pattern above has not yet broken out like the 10yr and so, this is either a negative divergence or the 30 is going to play some catch up if it is going to go for its limiter at the monthly EMA 100. The question is, has Bill Gross already made a serious contrary indicator signal or is he going to be anointed the “Bond King” as the 30yr rises to the limiter? See: A Gross Signal Upcoming. His media-bellowed call was incredibly unfortunate in early 2011. Maybe this time he gets to look like a genius temporarily.

Amigo 3: The Yield Curve

The daily view of the 10yr-2yr is in a downtrend and flattening.

The flattening goes with the macro boom that is taking place. The curve is far from inversion, but contrary to popular belief, it is under no obligation to invert before the macro turns. Then again, a downtrend is a downtrend as long as it is in force… and in force it certainly is.

Bottom Line

Amigo 1 (Stocks vs. Gold): Stocks continue to trend upward vs. gold and this implies ongoing confidence in the boom. The last thing on players’ minds right now is playing defense. Insofar as gold has been strong, which we’d anticipated for this time frame for all the reasons (seasonal, CoT, ‘inflation trade’, etc.) belabored to this point, it’s real bull market will feature an end to the party in the risk ‘on’ stuff. Right now, it’s still party on Garth.

Amigo 2 (Long-Term Interest Rates): The rising interest rates story is gaining traction in the wider media. We have expected long-term yields to rise with the dynamic ending phase of the boom. The noise could become intense and set up a great contrary play as the 10yr and 30yr yields come to their long-term limits (if decades of uninterrupted history as a good guide) and Bill Gross – the Bond King – reclaims his throne.

Amigo 3 (10yr-2yr Yield Curve): It’s simple, it declines with a boom and it rises with a bust. We are in a boom. Risk is high and rising every week, but the trend is the trend for now.

How to play it? I am sticking to a regimen of deploying capital on opportunity, making sure to take ample profits, staying balanced (for example, currently balancing gold sector vs. broad market and favored commodity areas) and always being aware of cash levels. We discuss these aspects quite a bit in NFTRH, even as speculation continues. You can manage risk and still enjoy a bubble. You just need to remain conscious of the macro and conscious of your parameters and disciplines.

NFTRH.com and Biiwii.com

1. How Regular Canadians Would Benefit From Slashed Taxes

by Michael Campbell

The evidence is in. The significant drop in Corporate Tax rates in the US is going to generate more tax revenue, jobs, capital investment and employee bonuses.

….continue HERE

2. Recipe Calls for a Broad Commodities Rally in 2018

With US Dollar breaking to multi-year lows and the 37 Year old Bull Market in Bonds set to go bearish there is going to be dramatic changes in where money flows. Based on previous booms and busts, the S&P GSCI Total Return Index-to-S&P 500 Index ratio above is now at its lowest point since the dotcom bubble, meaning commodities and mining companies are highly undervalued relative to large-cap stocks.

…read more HERE

3.Optimum Entry Point for Gold and Silver Stocks

So with the “everything bubble” getting closer to bursting, leading to universal mess and mayhem, there could not be a better time to look at the long-term picture for gold and silver,

….read it all HERE

5 Predictions for Robotics & Artificial Intelligence for 2018

Bill Studebaker, President of ROBO Global, the first company to track the robotics, automation, and artificial intelligence (RAAI) sectors through an investable ETF, ROBO, tells FS Insider that companies exposed to these areas are seeing strong growth and that we are still just in the early stages, he believes. Bill and FS Insider host Cris Sheridan also go through their five predictions for robotics and AI in 2018 on today’s podcast.

The liquidity will flow into commodities causing inflation…just like it did in 2008. This time the bubble will be in the precious metals market instead of the energy markets though. The metals have held up much better than the rest of the commodity sector. Big money has been accumulating all last year in preparation for what happens when the stock bubble pops. This is why stocks and gold have gone up together for two years. Gold will continue to rise as the bubble in stocks becomes more mature and more and more liquidity starts to move over to the metals in preparation for the stock market implosion that is coming later this year.

Commodity Research Bureau Index below:

https://blog.smartmoneytrackerpremium.com/

Tuesday January 16, 2018 3:00pm Pacific.

DOW – 10 on 968 net declines

NASDAQ COMP – 37 on 1002 net declines

SHORT TERM TREND Bullish

INTERMEDIATE TERM Bullish

STOCKS: Today we had a reversal day on relatively high volume. The Dow was up 282 points shortly after the opening and then gave it all back and then some.

That type of activity can mark a significant top, but not normally. Usually it’s just a temporary interruption in the current trend. The extreme overbought condition was most likely the culprit. It would actually be good to have a multi day retreat, but I doubt we’ll get it.

GOLD: Gold was up $4. Another new low for the greenback helped push up the yellow metal.

CHART: The Volatility index (VIX) moved up 15% today. Any move of over 7% has a tendency to foreshadow near term strength.

BOTTOM LINE:  (Trading)

Our intermediate term system is on a buy.

System 7 We are long the SSO from 110.59. Keep your stop at 115.59

System 9 On a buy signal from Dec. 29.  

NEWS AND FUNDAMENTALS: There were no important releases on Tuesday. On Wednesday we get industrial production, the housing market index and the Fed Beige Book.

INTERESTING STUFF: Reason obeys itself; and ignorance submits to whatever is dictated to it. ——Thomas Paine

TORONTO EXCHANGE: Toronto lost 73.

BONDS: Bonds were higher.

THE REST: The dollar keeps sinking. Crude oil lost ground.

Bonds –Bearish as of Jan. 9.  

U.S. dollar – Change to bearish as of Jan 12.

Euro — Change to bullish as of Jan 12.

Gold —-Change to bullish as of Jan 12.

Silver—- Change to bullish as of Jan 12.

Crude oil —-Bullish as of Dec. 26.

Toronto Stock Exchange—- Bullish as of September 20, 2017.

We are on a long term buy signal for the markets of the U.S., Canada, Britain, Germany and France.   

Monetary conditions (+2 means the Fed is actively dropping rates; +1 means a bias toward easing. 0 means neutral, -1 means a bias toward tightening, -2 means actively raising rates). RSI (30 or below is oversold, 80 or above is overbought). McClellan Oscillator ( minus 100 is oversold. Plus 100 is overbought). Composite Gauge (5 or below is negative, 13 or above is positive). Composite Gauge five day m.a. (8.0 or below is overbought. 13.0 or above is oversold). CBOE Put Call Ratio ( .80 or below is a negative. 1.00 or above is a positive). Volatility Index, VIX (low teens bearish, high twenties bullish), VIX % single day change. + 5 or greater bullish. -5 or less, bearish. VIX % change 5 day m.a. +3.0 or above bullish, -3.0 or below, bearish. Advances minus declines three day m.a.( +500 is bearish. – 500 is bullish). Supply Demand 5 day m.a. (.45 or below is a positive. .80 or above is a negative). Trading Index (TRIN) 1.40 or above bullish. No level for bearish.

  No guarantees are made. Traders can and do lose money. The publisher may take positions in recommended securities.

www.toddmarketforecast.com