About a week or so ago Keystone's Inflation-Deflation Indicator dropped below 3 signaling that the economy is stumbling into Disinflation. The CRB (Commodities Index) continues to drop and the indicator actually fell into Deflation but now is hovering just above the critical 2.90 level. Taking a look at the numbers;
CRB/10-Year Price = 291.80/99.672 = 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
The CRB should fall further once trading begins today sending the indicator towards Deflation again. At the same time, the U.S. 10-year Treasury yield just dropped under 1.80% clearly forecasting deflationary behavior moving forward. Chairman Bernanke will announce QE3 when the CRB prints in the range of 250 to 280-ish. The CRB is now printing 291 and falling. The oil price is tumbling lower, copper collapsing, the global recovery is stalling or has stalled. The China triple R cut on the weekend does not provide a stimulus bump; Greece and Spain bad news is dominating the futures markets currently. Continue watching this indicator moving forward. The real market turmoil and nervousness now begins as Keystone's indicator is in the low 2.9's and starts to drop sub 2.9.
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