from the nearly universally hated Tyler Durden at
(snip)Months of hope that the economy could finally start a 'virtuous cycle' were once dashed in a puff of smoke, after the jobs report came and cemented that the economy is now rolling over and picking up speed to the downside. Only this time, in a very ominous development for the permabulls, the MORE QE IS COMING, BUY ON DIPS crowd was nowhere to be seen. Why? Because for QE to be unleashed everything has to tumble first. And in a harbinger of what is coming to the US, just look at Europe: the EuroSTOXX 50 just turned negative for the year.
Details:
ES [ S&P 500 Futures Contract price - sic ] has now retraced the entire QE hope rally:
(snip)But most importantly, for the first time in along while, gold has finally recoupled from the risk trade. If this is indicative of the future, watch out gold bears:
Bottom line: unreality is once again recoupling with reality... Just like it did back in 2011, and 2010, only for the central planners to step in and put everyone in their place. Will they do it again? Does the pope no longer bank with JPM?(snip)
The author's basic observation is that, nearing the end of the US Fed's previous QE / Operation Twist programs, and with EuroLand's failure to announce additional ECB 'bailout' spending, both of which vastly reduce associated 'money printing', stock markets everywhere are now heading south big time. This is particularly true of the S&P 500 ( and associated futures contracts ES and ESM2 ), which has a heavy component of big international banks.
The author's second, and perhaps far more important, observation is that the interaction between gold prices and stock prices has recently appeared to have reversed direction. Or viewed another way, up until very recently, gold prices and stock market prices basically both increased or both decreased in lockstep ... arguably attributable to newly printed money going into both precious metals / commodity markets as well as stock markets. However, as of this week, gold prices have moved up while stocks, oil etc. have moved down. Admittedly a few points worth of trend data doesn't confirm a new trend, but it's certainly noteworthy. Gold prices moving in the opposite direction of stock and commodity prices is indicative of investors seeking to get out of 'risky' stocks and commodities investments in favor of the 'safety' of gold.
And for anybody who follows such things, looking in the proverbial 'rear view mirror' i.e. , the 'Ides of March' pretty much turned out to be the 'top' for US stock market valuations.
Also, as the author points out without much additional explanation, the 'decoupling' of gold prices that also briefly occurred in 2010 and 2011, by 'pure coincidence', preceded the announcement of (re)new(ed) FED 'liquidity injection' programs ( QE Lite, QE 2, Operation Twist ). The result of those 'liquidity injection' programs, i.e. the de-facto printing up of massive amounts of additional US dollars, was to levitate stock and commodity market price levels ... but also to create upward pressure on US dollar denominated food and energy prices. It thus remains to be seen whether or not the FED dares to initiate another round of QE with food and energy prices already at 'painfully' high levels, with domestic US producers already facing reduced profit margins due to rising 'input' costs of energy and commodities, etc.





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