Friday Outlook: On the Brink of Stagflation?

Thursday was an interesting but sloppy day. Interesting since both Wal-Mart (WMT) and Cisco (CSCO) disappointed “big-time” but so-called value buyers pumped them higher in the afternoon. Sloppy? Well just look at the SPY chart below.











Market internals showed impressive volume but breadth was just better than okay.



I’m not going to post a lot of charts today since things were inconclusive but let’s look at what caught my eye anyway.

The 30-year treasury auction went badly as demand weakened and long-term treasuries suffered their biggest point loss since 2004. Foreign central banks only purchased 10% of the issue. Primary dealers bought the rest and will suffer a loss since they’ll be unloading them at a loss.

Fed Governor Fisher stated the Fed is facing inflation pressure from rapidly rising commodity prices, which of course is bad for bonds. Who knew?

We’ve been pointing-out for months that historically bond prices followed commodity price indexes inversely with roughly a six-month lag. That’s where we are and it spells only one thing--stagflation.

































I could post many other charts but I’ll save that for next week. Importantly, posted today on my website [free without registration, etc.] is our quarterly interview podcast with Emerging Markets Monitor [London] who gives us the scoop on conditions overseas. You’ll want to listen since they’re a sharp group.

Have a pleasant day.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in SH, SHY, IEF and GLD.

Comments

[flow5]

And we will never extract ourselves from an increasing vicious level of stagflation within the confines of a free capitalistic society.