Bull and Bear Blog

CCI Shows Different Than CRB But Deflation Message Is Clear – As Central Banks Continue To Pump Stock Markets

The CRB vs SPX commentary we posted last week showed a somewhat different picture than this week’s CCI vs SPX brief.

The CRB has much heavier weighting for WTI Oil and varying weights for the 19 commodities that make up this index.  The CCI balances all 17 commodities included in its index (includes WTI Oil) equally.  But as you can clearly see, after the fall in mid 2011, commodities continued sideways down and the S&P500 DOUBLED.

And this is what central banks have built with QE – creating cash, not wealth, out of thin air to pump markets higher in a feeble attempt to fool the masses into believing the economy is fine.  Corporations are continuing to buy back their shares at all time highs through near zero interest bond issuance (ie: debt).  EPS reports have been buoyant for years.  Quarterly reports are often “adjusted”.  Very coordinated.  Very deliberate. Central banks are buying up US bonds at ultra low coupon rates to keep bank rates low.  The three month T-Bill rate is near zero and has been since 2009 – the rate the Federal Reserve FOLLOWS.

As deflation ramps up, commodities will continue to decline in the face of central banks trying to directly or indirectly buy up anything that moves down.  The central banks will lose this “buying war” badly.  Central banks can influence markets higher as they have done and at enormous cost, but only for so long.  The US government just cracked $18T in debt.  Europe and Japan are indebted well beyond their own GDP’s.  China’s data is so suspect that one can only assume that their collapse is pending too – unless of course China can build some more empty cities soon – yes this is a facetious comment.

So what to do?  Many things.  Lots of resources online about deflationary markets and their impact.  The key is cash and debt avoidance.  And as we have forecast for some time, the US Dollar, not gold, is taking on the roll of safe haven.

 

CCI 20141206 CCI Shows Different Than CRB But Deflation Message Is Clear   As Central Banks Continue To Pump Stock Markets

PENDING STOCK MARKET TRAIN WRECK AS – DEFLATION – PICKS UP MOMENTUM – And Central Banks Are Out Of Ideas

The CRB Index – the Commodity Research Bureau’s index of commodities – has been struggling to stay up since 2011.  Notice the collapse in 2008.  This index is comprised of energies, metals, softs and agricultural commodity prices.  This index is a true reflection of the health of the US economy.  As the CRB rises, the economy tends to be in “good shape”.  As the CRB falls, the economy tends to slow.

The first observation is the CRB “blow off” in 2007 – the final inflationary move before collapse.  The second CRB observation is that since 2008, the CRB hasn’t come close to it’s all time high in 2008 unlike our beloved stock markets.  Why the difference?  Well we can start with the Fed’s / Yellen’s near $5T balance sheet (at 10% move in today’s S&P500 is about $650B).

The elephant in the living room is the S&P500’s complete detachment from the CRB – THE PENDING STOCK MARKET TRAIN WRECK.  Commodities are the fuel for all companies in the S&P500 and that’s why they correlate well – or they used to until central banks thought they could manipulate a recovery.  And what a horrible mess deflation will leave behind.

The collapse of WTI oil, which originated back in the summer of this year is only part of a much larger deflationary move.  The MSM is doing their best to convince the masses of a recovery, and below, in one chart, are the facts behind why the US stock markets will collapse before any recovery will occur.

We will speak about the CCI (Continuous Commodity Index) next week and how it correlates to the CRB.  Not a good time to be long.

CRB SPX 20141128 PENDING STOCK MARKET TRAIN WRECK AS    DEFLATION   PICKS UP MOMENTUM   And Central Banks Are Out Of Ideas

UPDATED: SPX Inverted Relationship With The USD – With USD Up Sharply – SPX Ready To Tank

We posted the same on September 30.  Here we are almost two months later with no give.  Each day, the currencies traded in the USD amount to about $5.3T – yes, that’s each day.  A 10% move in the S&P500 represents about $500B.  And now we know why it is so each for Yellen and her Fed cronies to push this market around.  For how long?   Probably until it breaks.

USD SPX 20141124 UPDATED:  SPX Inverted Relationship With The USD – With USD Up Sharply – SPX Ready To Tank

 

NASDAQ100 Will Determine The Price And Direction Of Apple

We’ve endured six years of Fed interference and here we are today – approaching all time highs in the indexes and all time highs in Apple.  We overlaid Apple on the NDX on April 21, 2012 and August 30, 2012.  Notice the correlation?  And when markets tank after Yellen’s rambling tomorrow at 200p, we should expect markets to rocket and roll over by Friday or Monday of next week – and guess what?  You can expect Apple to do the same.Click to Read More →

SPX Inverted Relationship With The USD – With USD Up Sharply – SPX Ready To Tank

We have mentioned this inverted relationship a number of times over the months.  This is not a “mechanical relationship”.  There is often a lead or lag period.  Now that the USD has turned up sharply, the question becomes, “how long will it take the SPX to invert and move  downward?”.  Now that Yellen has chosen to exit POMO and has limited capabilities using reverse REPO (RRP), our guess is that a severe market reversal is not far off and in the order of greater than ten percent before any signs of consolidation or retracement.  Thanks Vincent.
Click to Read More →

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