Reviewing the Macro ‘Play’

There are signs in the recent jobs and ISM reports that the previously inflated economy is decelerating. Late last week, the clown running JP Morgan said stupid things about the smart [read: talented] people he has running his high risk trading operations. Europe is of course front and center as it continues to fall apart, with Gilts and Bunds rising on ‘safe haven’ buying and the bonds (debt) of Greece and other Euro basket cases declining toward their value, which is less than zero.

The precious metals appear to be watching for signs of outwardly promoted QE policy. But NFTRH has remained cautious on the timing of this pending a crack in the US stock market, so let’s review the big index.

People have gotten into trouble by failing to see that there would be little likelihood of policy maker ‘QE’ action with the broad US market flying around up there near post-2009 recovery highs. Our view has been that at the least, SPX must break down and test some support levels that were created out of the most recent downside turmoil, which was last summer’s acute phase of the Euro crisis. Otherwise, the Fed sits back and does little more than monitor the situation.

Well, the SPX is now testing a very important support level. If 1360 fails, the objective becomes 1300 strictly based on the measurement of the topping pattern. But it is more likely that the support zone in the 1260 to 1280 range would be tested as that is where visual support and standard retrace levels out of last summer’s bottom start coming into play.

The JPM noise reminds the public of the rotten scoundrels that wrecked the system in 2008 and it and any coming similar noise can only be supportive of policy makers laying in wait to inflate. ‘Laying in Wait to Inflate’… sounds like the title of a future public article. :-)

The Fed is among other things, a political animal. I believe this animal becomes sensitive to calls for auditing its operations and austerity of policy with the public’s money. I also believe the Fed is boxed into a corner with an unofficial ‘inflate or die’ mandate because deflation scholar Ben Bernanke knows full well what would happen if the whole stinking inflated mess were to implode in a falling macro soufflé of debt, derivatives and leverage.

It is an election year and thus, we are on watch for the right conditions that would draw out policy from the inflators. SPX at 1420 is not gonna do it. SPX at 1260 just might, if it comes along with further signs of erosion in the economy. Every ‘jobs’ report going forward becomes a potential flash point.

NFTRH187 goes on to update technical and fundamental analysis of the gold sector, which would be an important first mover to any coming inflationary policy, if applicable. 187 discusses our long-held theme of deflation as a 'lever' that is necessary to future inflationary actions. We look at seasonals within elections years and review the entire outline of the favored plan for the balance of 2012.