USD weakens again slowly.
FXC is a good leading indicator for liquidity and it started drying up in July…
Last inflation was 0.38 (core inflation 0.35). Assuming a mild acceleration and a later deceleration…
the YoY below is indicated.
As inflation picks up, it will reach 5%+ by next year.
AS inflation surges, growth dies. Recessions are built on inflation and negative growth.
As the Fed drops rates, inflation surges killing growth.
But IF THEY DONT DROP, GROWTH DIES EVEN FASTER.
THEY ARE CAUGHT BETWEEN A ROCK AND A HARD PLACE.
In a recession (very special times), bonds now disregard inflation and
respond to falling growth/recession.
IRONICALLY, inflation is now our friend.
AND stocks don’t like negative growth and rising inflation. (also wages can’t/won’t keep up).
AND monthly CPI surges big…
BUT FED has to keep dropping…see 1year Treasury below.
3.6 on 1 year factors 2 drops…or 4.3-3.66 = 0.64%
TLT now a bull with 6 days above 200dma…like June last year. MINI-RUN now complete.
AND TLT to SPY closer to cross…
This policy leads to spiraling inflation and crashing economy.
OF COURSE, the only way to crush the inflation is to have a recession and deflation.
above 200dma and last high in aug…
Case-shiller 4 months straight…
AND zillow confirms since March…
AND aside ….miles traveled as proxy for declining GDP per capita…
Despite rates being dropped, spy continues to lose upward momentum…
1 and 2 y Treasuries suck away money from SPY and then it hiccups.
The last 5 weeks of 1 year Treasuries show money being drawn away from SPY
and is the best leading indicator.
5 RHA bars on 1 year Treasury corresponds to declining momentum on SPY as seen in flat macd bars
and bi-wkly average prices losing momentum.
Above chart more clear but below 6mo SPY wkly macd (4wk) also shows it…
AND the same for TLT:SPY near a cross…
Downtrend in 1y Treasury in July last year showed the hiccup in Jul-Aug and the same with Feb-Mar.
TLT moves up and will hit 91-92 by Fed meeting.
SPY will have trouble next week…
AND TLT gains on short bond
Credit Flow Investor 