Credit Flow Investor

So as a setup to a TLT run in Jan, it is expected that FXC would get OS to a small degree in Dec.  TLT:SPY also X above 10wkma last Dec 2014. The level is almost exactly the same!

DEC 2015 OS for 1 day before Fed Meeting…

BUT  you never play with only 1 week left before Fed Meeting.

For now, Fed will not raise rates as this is being driven by the employment report on Dec 4 (inflation is not 2.0 and world economy still weak). It is an indicator though of a very good Jan!

Once the Fed meets on Dec 16, SPY will rebound and TLT will sell off. Then the January effect of portfolio reorientation AND the continued speculation that the Fed will be raising rates takes over again.

FXC energy stored up for fall in January.  By Jan, 4 months flat.

By Jan 4, FXC goes OS indicating a major TLT rally…

Same as last year Oct CCPI rose but very little. Due to discounts, etc. in November, it should fall when the Fed meets in Dec. This will set aside concerns of an interest rate rise.

Europe and rest of world continues to fall apart so ECB will add QE in Jan. This will drive USD higher and TLT. Jan will have a stronger SPY downdraft than last year. 2016 will be a crash year.  As it is a presidential election year AND Fed is in tightening mode, SPY should fall considerably in the Aug-Sep and Oct-Nov period. So TLT should have 3 good runs this year.

Due to inflation being on the high side AND good employment numbers, the Fed will hold off until the last minute which is after the election before hinting at new QE.

FXC has remained in a tight range since the end of August.

Look for it to be OS (oversold) in Jan when the ECB adds QE. When OS, it’s a great time to buy TLT.  Check Jan 2014 and Jan 2015 as well as end of Feb 2013.

1. The TLT spring can be driven by Oil (down)/SPY (down) OR USD (up)/SPY (down). So the USD rising spring can exceed the oil spring.
2. Oil and gas going lower shows weak world demand and therefore more action by ECB QE in Jan thereby driving USD higher…
3. TLT has achieved the RWm requirement.
4. Unemployment claims are rising slowly…watch for 0 X…

Also added the Red requirement for TLT to the spring diagram….

Also TLT:SPY ‘spring’ at bottom of range showing same pattern as last year going sideways in November.

Even though oil has a limited downside from here, the USD also drives TLT higher with a very high ‘upside’ limit. So ECB QE in Jan will drive USD higher and also TLT higher than might be expected in oil falling.  Oil will still fall in Jan but the USD story will be a greater driver for TLT along with SPY.

I watch FXC as a proxy for USD.  When FXC is OS, that drives USD much higher and therefore TLT. SPY falling will also be a driver as SPY will have peaked in December with the ‘Christmas Rally’.

Good news TLT:SPY near bottom again…

Cycle has bottomed out and will renew an uptrend..to TLT surge in Jan.

It can still go lower/more red. AND now setup for Jan TLT rally.

And TLT:SPY shows near bottom…

The monthly change in gas prices is “less bad” therefore oil rally is close in Nov or Dec.  USD market still worried about interest rate rise. BUT core inflation will come down in Oct-Nov putting the Fed rise off the table for the Oct and Dec meetings.

When oil rallies, TLT will RWm for a week or so (SPY will retreat but only a little as VIX is now low).  This will setup the Jan rally:

1. Fed will not raise rates causing a short term oil rally
2. Draghi will increase ECB QE in Jan creating a great ‘run’ for TLT
3. SPY will be at a high in December around 208-212
4. Earnings will be dreadful as the Christmas ‘high’ comes off / January effect

January effect was strong in 2014 and stronger in 2015 for TLT.  2016 will be stronger yet!

Review:  GWm means green Williams Oscillator and RWm mean red Williams Oscillator.

Earlier I said the market will fall due to gravity not fed intervention through rate rise. Rates won’t go up as inflation will come off by the Dec Fed Mtg and of course bad economy will result in lower inflation.

From Mish, odds of rate rise keep dropping….

The Christmas rally will come from

1. realization there is no rate rise

2. retail prices will drop significantly due to record margins …sparking Dec uptick in industrial demand and pmi

It may take until Dec 16 Fed Meeting to get the rally going, however. The Fed will still be making statements about possible rate rise at the next meeting causing SPY to drop in November. BUT as with Dec 2014, SPY can quickly ‘gap up’ +1.5% after the Fed Meeting when the expected rate rise does not materialize. After this Christmas rally and drop in TLT, TLT will be engaged most likely Jan 4.

ASIDE:

When FXC gets OS, is also a great indicator to buy TLT.  See mid-Jan 2014, Jan 2015, and mid-July 2015.

VIX is also down setting up a good condition for SPY rally.

SPY has gone up BUT oil did not rise enough to cause TLT to drop into red! So wait for TLT to go red….RWm before GWm

In 2008, TLT also had to go red before green…

Monthly gas inflation has come off the bottom so this implies a SPY rally soon most likely after Dec 16 Fed Meeting.  This chart is wonderful for predicting rebounds/transitions!

This will also mean a pullback in TLT rewinding the spring (SPY up/TLT down) !

Aside: Canada votes for liberals promising new deficit spending! Conservatives losing around the world. Politics is like a flag in the breeze as each government shows to be a false hope.

The Kondratiev winter continues:

Cycles are not 20 years fixed but vary.  The character remains the same though…

https://en.wikipedia.org/wiki/Kondratiev_wave

and also…

http://kondratieffwinter.com/blog/?page_id=71

Kondratieff viewed depressions as cleansing periods that allowed the economy to readjust from the previous excesses and begin a base for future growth. The characteristic of fulfilling the the expectations of the previous period of growth is realized within the Secondary Depression or Down Grade. This is a period of incremental innovation where technologies of the past period of growth are refined, made cheaper and more widely distributed. Incremental innovation consolidates industries…..

The Growth Period is one of political stability. Staring a the peak old alliances become challenged. Through the process of the Down Grade old alliances fail and new alliances are formed. The final stages of the Down Grade is a period of coalescing or “quickening” of the alliances that will govern the next period of growth.