Nifty Gold Uptrend in Question

The Nifty has been in a continuous uptrend against gold (in dollars). Gold has been falling on deflationary fears. As the deflationary theme plays out and eventually spreads to risky assets like stocks a catch up to the downside is likely for stock market indices like the Nifty. A pull back thus seems to appear on the charts with Nifty under performance vis a vis gold in a deflationary context.Chart courtesy StockCharts.com.

Nifty Over Extended Vs the Dollar

The Nifty has been even out performing even the strong dollar off late.  The dollar has been strengthening significantly this year and has virtually out performed a whole host of asset classes. The Nifty and few other stock indices like the S and P 500 and the German Dax have outperformed the dollar. A bit of under performance vs the dollar has begun and is overdue for the Nifty. Chart courtesy StockCharts.com.

Baltic Dry Index still near life lows

Check out this chart from StockCharts.com for the baltic dry index, which is close to its life lows and down over 95% from the highs set in 2008. Obviously the massive influx of liquidity form QE's in the US, Europe and Japan hasn't really helped the global economy.

Behind the tantrums of QE withdrawal lies a very grave deflationary threat

Last week most risk assets sold of on the prospects of QE withdrawal following strong job numbers out of the U.S. Here's how things shaped up:
The S & P 500 was down well over 1%
Gold  was down close to 1%
Oil was down close to 10%
Copper was up about 2.5%
Emerging markets were down close to 3%
The clear winner was the dollar which surged nearly 2%

If markets were really bothered about inflation, gold and oil would be going through the roof instead they have absolutely collapsed over the past year:



In addition the flight to quality trade that surfaced during the recession of 2008 into the dollar seems to have emerged with a vengeance:

While one may want to brush aside the emergence of deflation which has already started to surface in recent PPI and CPI numbers, let's not forget what it did to Japan since the early 90's. Despite the all out war to contain deflation in Japan interest rates are still negative and the stock market which has rallied off late is still down over 50% from the highs it set in 1989.

Warning Signs for Global Financial Markets in 2015-16

There are two major warning signs that are developing for risk assets in 2015:

First we have significant #dollar strength despite a recent bounce in the euro, with the dollar index hitting multi-year highs. This is on the back of the potential end to the quantitative easing by the fed but also due to weakening fundamentals in the# Euro Zone which is mired in a deep recession and is unlikely to come out of it any time soon despite huge dosages of QE from the ECB.



Even after another bailout for Greece, which is tantamount to throwing good money after bad dollar strength is all set to continue and would result in a serious bout of carry trade liquidation that could take down commodities, emerging market currencies and eventually global stock markets:





The second major development is the potential upsurge in volatility. The #Vix index has not made new lows on each of the recent new highs for the S and P 500 in well over a year and is holding support in a multi year rounding bottom formation. This has resolved into higher prices for the Vix over the 50 level in August and lower prices for risk assets across the board. The Vix is incidentally well above it's 52 week low of 10.28.

Both these trends are set to continue into 2016 which could result in significant under performance of financial markets across the globe.

Warning signs for risk assets in 2015-16 http://t.co/SC6JzKADnp pic.twitter.com/JlxRFU9vxy

— samuelR (@RajveerRawlin) September 7, 2015

Down goes the Baltic Dry Index yet again

Another 28 year low for the baltic dry index, now down over 95% from it's all time highs, questioning the so called economic recovery these last 5 years and confirming that QE forever policies in the US, Japan and the Euro Zone are destined for failure. Eventually the weak economy globally should translate into lower asset prices across the globe.

The dominoes keep falling one after another

Lets take a look at a few charts courtesy yahoo finance and market watch.com. First we started with the well over 95% crash in the Baltic dry index (#bdi).

Then we had a over 40% plunge in #gold and #silver prices as symbolized by the respective ETF's:




This was matched by over a 40% plunge in base metals:



Followed by the dramatic over 50% plunge in #oil:


This has translated into a rout in the junk bond market:

Which will most certainly nail banks which have exposure to this toxic stuff:


No surprise then at the flight to quality bid emerging in US treasuries and the #dollar:




And carry trade liquidation should start any moment with a bid for the Japanese #Yen:


All in all we have sown the seeds for the great depression of the 21 st century and the U.S Fed and its fellow central banks can do absolutely nothing about it.

The dominoes Keep falling one by one http://t.co/lfL8gIu1o2 pic.twitter.com/wAkJpkNixp

— samuelR (@RajveerRawlin) September 8, 2015

Deflation to trigger junk bond rout?

The deflationary collapse of oil is clearly threatening to take down other risky asset classes with it, most notably of late the junk bond market


the makings of a brand new financial crisis!

Collapsing Oil price flat out deflationary

The recent 40% decline in oil the past 6 months is flat out deflationary. Look at the popularly traded oil ETF. This taken together with the collapse in other industrial commodities has generated a major deflationary signal. The collapse in the Euro also lends further support to the deflationary theme emerging.




The last time oil approached it's cost of production was just before the financial crisis of 2008. Just a matter of time before the collapse in gold, silver, copper, oil and other industrially sensitive commodities spreads to other risky asset classes like stocks.

Vix is warning trouble ahead?

While the S&P is at new highs


The Vix is not making new lows, on the other hand it is threatening to break out significantly higher

 This suggests the upcoming market sell off will be far worse than the October pull back.

long bonds signalling onset of deflation?

30 yr long bond yields about to break below 3% in the U.S despite all the QE withdrawal talk confirming the onset of deflation. Chart courtesy yahoo finance.