Keystone's Inflation-Deflation Indicator Signals DEFLATION

Keystone's indicator now shows an economy mired in Deflation. The CRB (Commodities Index) continues to drop. Taking a look at the numbers;

CRB/10-Year Price = 281.95/100.281 = 2.81

Over 4 = Inflation
Between 3 and 4 = Neutral; inflationists and deflationists fight it out
Between 2.90 and 3.00 = Disinflation
Under 2.90 = Deflation

The U.S. 10-year Treasury yield is at 1.72%. Chairman Bernanke will announce QE3 when the CRB prints in the range of 250 to 280-ish. The CRB is now printing 282. The commodities markets are bouncing higher today so a relief rally may be on tap for the equities markets. Nonetheless, the economy is in trouble currently.  The CRB needs to fall further before Bernanke will announce QE3 and the move will likely be in coordination with other global central bankers such as the ECB announcing LTRO3. Global leaders are likely working behind the scenes now developing a global intervention program.  The global recovery is stalling or has stalled. China starts a cash for clunkers program and promises more stimulus measures but they are already backing off the stimulus talk to tamp down expectations.

Market turmoil and nervousness is ongoing since Keystone's indicator is under 2.9 with a deflationary spiral a serious theat moving forward. Interestingly, middle range automobile sales are showing that buyers are hesitant willing to wait a week or two, or more, since prices will probably be lower.  This is what happens in deflation and what scares Bernanke. Consumers stop spending since anything you buy will be cheaper next week, the essence of a deflationary spiral.