Keystone's Inflation-Deflation Indicator Signals DISINFLATION

Last Thursday we saw the indicator drop below 3 signaling that the economy is stumbling into Disinflation. Taking a look at the numbers to start the new trading week;

CRB/10-Year Price = 297.15/101.281 = 2.93

Over 4 = Inflation
Between 3 and 4 = Neutral; inflationists and deflationists fight it out
Between 2.9 and 3.0 = Disinflation
Under 2.90 = Deflation

Thus, the indicator has dropped a few more ticks now only three ticks away from falling into Deflation, Chairman Bernanke's number one fear.  The last time inflation existed, with the indicator over 4, was the top in the commodities bubble during the summer of 2008. Over the last year, the 3.5 to 3.6 area was tagged but it did not last; the inflation was transitory in nature just as Bernanke says it is, one of the few things that Keystone and Bernanke agree on. Deflation, readings under 2.9, occurred in early 2009 which necessitated QE1 and during summer 2010 when the markets were going over the falls causing Bernanke to step in with QE2.

Use the CRB 300 level as a signal that the economy is falling into Disinflation. The economy will be falling into Deflation once the CRB starts falling under 290. Bernanke will announce QE3 when the CRB prints in the range of 250 to 280-ish. The oil price is tumbling lower, copper falling, the global recovery is stalling or has stalled. Continue watching this indicator moving forward. The real makret turmoil and nervousness occurs when Keystone's indicator drops under 2.9 which is Deflation. This corresponds to the CRB dropping into and thru the low 290's.