Filed under: Trader Dan Norcini
Dear CIGAs,
The US long bond market has been rocked back and forth by opposing forces but since breaking down through an important layer of chart support three weeks ago, they have tried, but have been unable to climb back above that level near 129^15. Today’s breach of additional downside chart support opens up the potential for a move towards the 121 region.
This chart action confirms what Monty and Tony have stated in today’s investment letter where they commented that it would not be long because of the focus on the inflationary implications associated with the Fed’s QE and now the same policy being implemented by the ECB.
“Money printing” is going to result in the inevitable currency induced inflationary pressures which are already being seen in the food sector and soon to be seen in the energy sector.
Bonds are reacting to this unprecedented wave of liquidity creation by ignoring the short term benefits that accrue to Treasuries when the Fed purchases them when engaging it one of its round of QE and are instead looking past that to the inflationary aspects of this policy.
Please review the Gold/Bond ratio chart that was posted last evening where you will observe how gold is already anticipating this wave of inflationary pressures and in particular how it is becoming the “go to” asset of choice for many seeking shelter from the depredations of the Western Central Banks as they move in to practice their craft of debauching their respective currencies.
Jim has already remarked about the character of the price action in the gold market as it pauses near a round number ($1400) to collect itself for the next leg higher. It could very well be that a weekly close in crude oil above 90 will be the catalyst that kicks gold above $1400 and keeps it there. Remember, each step higher in a bull market consists of a push to a new high, followed by a period of consolidation and then a push past that previous high that STAYS ABOVE THAT LEVEL as it consolidates once again.
Food has already moved higher; energy is the only thing that has not really taken off to the upside. Keep in mind that those nations who sell crude oil are going to be carefully monitoring the price action of the currencies in which they are getting paid. They will not continue to indefinitely accept deteriorating paper currencies in exchange for a limited resource but will move to push price higher by curtailing production levels if in their judgment that is the best way to keep from getting the short end of the bargain.
Bernanke is more than likely going to get his wish but at what cost for the rest of us?
DAN'S CHARTS:
http://jsmineset.com/wp-content/uploads/2010/12/December0110LongBond.pdf
http://jsmineset.com/wp-content/uploads/2010/12/December0110Crude.pdf
The US long bond market has been rocked back and forth by opposing forces but since breaking down through an important layer of chart support three weeks ago, they have tried, but have been unable to climb back above that level near 129^15. Today’s breach of additional downside chart support opens up the potential for a move towards the 121 region.
This chart action confirms what Monty and Tony have stated in today’s investment letter where they commented that it would not be long because of the focus on the inflationary implications associated with the Fed’s QE and now the same policy being implemented by the ECB.
“Money printing” is going to result in the inevitable currency induced inflationary pressures which are already being seen in the food sector and soon to be seen in the energy sector.
Bonds are reacting to this unprecedented wave of liquidity creation by ignoring the short term benefits that accrue to Treasuries when the Fed purchases them when engaging it one of its round of QE and are instead looking past that to the inflationary aspects of this policy.
Please review the Gold/Bond ratio chart that was posted last evening where you will observe how gold is already anticipating this wave of inflationary pressures and in particular how it is becoming the “go to” asset of choice for many seeking shelter from the depredations of the Western Central Banks as they move in to practice their craft of debauching their respective currencies.
Jim has already remarked about the character of the price action in the gold market as it pauses near a round number ($1400) to collect itself for the next leg higher. It could very well be that a weekly close in crude oil above 90 will be the catalyst that kicks gold above $1400 and keeps it there. Remember, each step higher in a bull market consists of a push to a new high, followed by a period of consolidation and then a push past that previous high that STAYS ABOVE THAT LEVEL as it consolidates once again.
Food has already moved higher; energy is the only thing that has not really taken off to the upside. Keep in mind that those nations who sell crude oil are going to be carefully monitoring the price action of the currencies in which they are getting paid. They will not continue to indefinitely accept deteriorating paper currencies in exchange for a limited resource but will move to push price higher by curtailing production levels if in their judgment that is the best way to keep from getting the short end of the bargain.
Bernanke is more than likely going to get his wish but at what cost for the rest of us?
DAN'S CHARTS:
http://jsmineset.com/wp-content/uploads/2010/12/December0110LongBond.pdf
http://jsmineset.com/wp-content/uploads/2010/12/December0110Crude.pdf
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