disregard the strength of inflation

Hi,

 

Already talked about this before, <here>.

 

Today we got to know, so really the only indicator which fears the FED and Janet Yellen. This indicator is so terrible that even during the last speech not say about this indicator. If it never existed. Even Ratios calculated the same issues (PPI - Producer Price Index, CPI - Consumer Price Index) were completely ignored.

 

In the chart below clearly shows a high correlation between these indicators and groundless is a disregard others and focusing on just one. (I mean PCE - Personal Consumption Expenditures).

 

chart 1. Correlation between CPI and PCE; 2014-06-26

 

The one indicator that the Fed really focuses on (or has said it does until now) - the PCE Deflator - just surged to 1.8% - its highest since October 2012 and nearing the FED's 2% mandate-stumping level.

 

chart 2. PCE Deflator Y/Y; 2014-06-26

 

The increase of PCE and a weak reading for the first quarter of GDP in the United States have shown that the market for U.S. Treasuries observe a systematic increase in 2-year yields with the decline in yields of securities with longer maturities.

 

Yields of 10 and 30-year at the same time directed to the south, causing a flattening of the yield curve.

 

The yield curve becomes flatter when investors begin to expect to raise interest rates (a direct impact on the increase in yields at the short end) and takes on the shape of the curve when rising concerns about weaker economic growth (after yesterday's data, at least once, it has been confirmed).

 

chart 3. Yields of U.S. Bonds; source: Bloomberg; 2014-06-26

 

In addition, flatten the curve usually affects more negative on the stock market, which may indicate that the wave of growth in the U.S. stock market time to slowdown and higher in price and time correction.

 

link to my technical analysis of U.S. and German stock markets, <here>.

 

 

 

regards,

oscarjp

 

 

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