Buy TLT now as TLT:SPY has X the 10 wkma today. SPY down and TLT is up! It appears as a power move with the angle of attack.
The market is now realizing flight to quality/safety. Core inflation is an uptrend and as long as it remains in an uptrend TLT will be a hold. I will watch closely to see if the ccpi trend reverses.
We have a power move..see here:
Cross Today
Core inflation now has an uptrend which is bullish for TLT. TLT:SPY X should occur within 2-3 weeks. I will wait for Sep 18 before buying as taper announcement will give a buying opportunity on that day.
From Mar (reported Apr)-Jun (reported Jul) was the downtrend for ccpi and also TLT.
However, July (reported Aug 15) shows an uptrend and TLT has now stabilized and will begin uptrend next month. As Q4 was weak last year, ccpi should rise from Sep-Dec.
65% of economists predict taper to start in September. The employment goals have been met but growth is weak. Ccpi is rising now and should rise through December. The OEX internals of stock market show downtrend now. I think Fed is concerned with bond market and wants to stop the fall. The gun needs to be reloaded on SPY by letting it fall.
If it starts in Sep, they will follow with Oct and a twist to start with Dec meeting.
It would have been better to be 2.1 or 2.2. CCPI for July was 1.70 which is a rise but also on low side.
I consider it unlikely that GCPI will maintain 2.0 on Sep 17. Therefore it’s a wait and see for Sep 18 to see if Fed pushes ahead with taper anyway because unemployment will have met their goal. Most likely it will be another shot in the arm for September-early October. Oct 30 taper will be followed by the usual November fall see 2009, 2010, 2011, and 2012! Oct, Nov and Dec had very weak cpi last year (0.17%, -0.24%, and 0.03%) so it will be easy to maintain 2.0 through this period.
Oct 30 taper would most likely be followed by a twist on Dec 18 due to stock market correction in November. I just read Bullard’s comments see below. This is Fedspeak saying taper is Oct 30 as I predict above.
PADUCAH, Kentucky |
(Reuters) – The Federal Reserve could increase the risk that the U.S. economy suffers a damaging bout of deflation if it tapers its bond buying too aggressively, a senior central banker said on Wednesday.
St. Louis Fed President James Bullard also said that he had not yet made up his mind if next month’s Fed policy meeting was too soon to opt to start scaling back purchases, from a current $85 billion monthly pace.
“It is possible if you pull back too quickly you put more downward pressure on inflation and end up with inflation running below 1 percent. And then I think at that point, deflation possibilities would start to arise,” he told reporters.
“We’re not in that situation right now, but that is one scenario that I would worry about,” he said, after delivering a speech.
Labor markets have improved substantially since September, when the Fed’s current campaign of quantitative easing was announced, he noted. But growth is not strong and inflation is only around 1 percent, or half the Fed’s 2 percent target.
(Reporting By Alister Bull)
August is too early an entry as I suspect cpi will also be strong in August reported Sep 17. Notice Fed meeting ends on Sep 18. I noticed in Apr 2010, Apr 2011, Apr 2012, Oct 2012 and March 2013 that the TLT:SPY chart must show a flattening or slope leveling off before entry. March 2013 was followed by April 2013 where ccpi went from 2.0 to 1.9 and gcpi fell from 2.0 to 1.5! Hence this trend lasted only 1 month.
As August inflation looks to be fairly strong with gas buddy holding up so far, I think there will be a taper starting Sep 18. By then the TLT:SPY chart should show a leveling off. The policy of the Fed switches from QE to Twist and Twist to QE. Call this policy Q-ternity. Next transition is from QE to Twist. The good news about Q-ternity is that you have strong trends up and down which is ideal for trading.
It’s a good sign that the TLT:SPY level is at 0.623. It’s a loaded spring ready to go as at the peak hits 0.95+ in the transition. I see a taper in September followed by Twist in October or December. CCPI should be at 2.0 in Dec. However, you cannot wait for the Twist announcement as the market will have anticipated it starting 2 months before. I think it will be a 2 month run from Sep-Nov possibly Dec. this year. Why 2 months run only? In 2011 core inflation started at 1.1 whereas in Sep it will start at 1.8 thereby requiring a shorter time to achieve 2.0. When the Twist is announced, you can sell TLT the same day.
As expected, inflation still too low so another round of stimulus continues until inflation hits 2.0. A large stock market bubble has been created with record leverage and will create a big mess when it pops.
TLT:SPY took another downturn so looks like the X will be in September when economists expect the taper to occur. GCPI should be 2.0+ and CCPI around 1.9 when Fed meets in Sep. Rising interest rates will also cause a stock market crash. This year there may be an Oct crash after the taper…first one in a long time.
Cash is best until the bubble pops.
Gas buddy has turned down again but cpi was up a respectable 0.5 in June. July should be similar. I sense the TLT:SPY will occur in 3rd week of August. Gross CPI (reported Aug 15) should be 2.2+ above the Fed’s 2.0.
Below cpi data for 2011 is seen. Gross cpi crosses 2.0 in February creating an uptrend in TLT. Later in August, core cpi crosses 1.94 and the twist is implemented. Notice both trends are up.
Unfortunately, core inflation is still falling. Last month it rose 0.08% and 0.1% in May. Q2 should be weak.
Q3 shows signs of picking up however. If July is very strong as Feb this year, 2.0 is still possible for July.
For now, cash. When it comes time to buy TLT at the transition (Sep but maybe Aug), the timing is good.
From July 9 Lance Roberts-
“What is important to notice is that there have only been a few times in history that rates have gotten to 4-standard deviations above the long-term moving average. Every single time, as noted by the vertical red dashed lines, such extreme movements in rates has been a peak in rates for the intermediate term. Most recently these extreme spikes were witnessed prior to the recession following the “technology bubble” in 2000 and the “housing bubble / financial crisis” in 2008. ”
Gas Buddy rising still at 2c per day. This is a very significant rise in inflation and makes 2.0 a possibility for July (July 2012 was 0.01%) report will be Aug 15. The economy stalls and stocks fall after gas buddy exceeds 3.80. While the Fed will stay the course on July 31, minutes of the meeting on Aug 21 will reflect comments about bubbles and inflation.
Gas buddy has turned quickly after the Fed minutes. This means core cpi 2.0 will be possible in mid-Aug. Even though Fed will do nothing at end of July, there will be talk of bubbles in the minutes on Aug 21. The Fed has also upset the mortgage market hitting real estate hard – not their intention.
In addition, July inflation will become a problem now limiting upside to risk markets in August. July inflation was very weak last year and this year clearly strong making YoY comparisons push inflation to 2.0. Transition to risk off could occur the 3rd week of August (based on 10wkma crossing for TLT and TLT:SPY). The first taper would be Sep 19 if core cpi 2.0 is achieved in mid-Aug. Even a weak August inflation would keep YoY core inflation at 2.0. All have seen the effects of taper which will be bad for stocks/risk assets but healing for the mortgage market.
Gas buddy keeps falling probably to 3.30 level. TLT (gas buddy falling) and SPY (anti-taper sentiment) will rise for a while on continued anti-taper sentiment. This sentiment is highly volatile so not a good bet.
However, this is another ‘loading the gun’ analogy with regards to real economy. Consumer metrics talks about low gas prices freeing up spending power so you get an economic burst thereafter. You can see January-February this year. It looks like August will be the burst month – it can easily burst 10% in 1 month from 3.32 to 3.66. When gas buddy bursts again, TLT will fall or go sideways. The inflation surge will cause a burst of inflation which should bring core to 2.0.
If at mid-Sep cpi core reports at 2.0, the Fed can taper Sep 19. Perhaps we have taper (Sep), taper(Oct), then twist in Dec! November and December were very weak last year making YoY cpi comparisons look strong.
TLT:SPY may even X at a low level but go sideways.
We also need-
1) TLT to get near 40wkma (it should X to get a new bull market)
2) Definite cpi core at 2.0
Markets are confused as the Fed talks of taper but the economy and inflation argue for more QE. There is no clear trend. When there is no clear trend, wait in cash.
Some economists talk about September to December time frame for the economy to stabilize after the sequester/fiscal cliff. If inflation keeps falling, more QE will be called for. The VIX may rise until the market crashes and a clear trend is established.
Credit Flow Investor 