The Keystone Speculator's Inflation-Deflation Indicator; NEUTRAL

by K E Stone (Keystone)

The Bidenflation caused by Bidenomics remains a hot-button issue. Sleepy Joe's war on America's oil and gas industry, along with obscene monetary (Fed) stimulus and fiscal (Congress) stimulus, create the elevated inflation over the last four years. In addition, America's privileged elite, and their upper middle class sycophants, made filthy rich from the 14 years of money-printing, create a huge demand for services after the COVID-19 pandemic driving inflation strongly higher. The battle between services inflation and goods inflation (represented in the chart) continues.

America is the land of the have's and have not's. If you are in the elite or upper middle class that own the vast majority of stocks and made out like a bandit from the Fed's money-printing, you are traveling, taking vacations, getting your hair done, eating out at restaurants, and attending fun events. Keep in mind that one-half of Americans do not own a single share of stock. They be the have not's.

The Fed has been printing money since the 2008-2009 financial crisis sending stocks to the moon rewarding the bastard wealthy, that created the mess in the first place, with riches beyond their wildest dreams. Isn't that enough to make you puke? These have's need the rest of America to wash their sheets, clean their toilets, cook their vacation meals, style their hair, tailor their clothes, drive them around, carry their bags, and wait on them hand and foot. Such is crony America now unfixable within the current structure and regime; it is rotted to the core.

Americans are too corrupt and greedy nowadays to do what is right for the nation. Instead, they pledge allegiance to their corrupt and crony political tribes placing that narrative and agenda ahead of what is best for the country. You are watching the collapse of the crony capitalism system. It does not matter who wins the presidency in November; both of the top two candidates are corrupt to the core. Understand that if you vote for either Trump or Biden, you are voting to place a criminal in charge of the United States and Free World. As long as you understand what you are doing, that's cool.

The prior peaks in inflation are May and June of 2022. You are probably not that vocal about inflation and higher prices than you were during the summer of 2022. However, inflation remains in the daily zeitgeist as food and gasoline prices, the main staples, remain stubbornly elevated.

Inflationists and deflationists battle each day spewing talking points and cherry-picking data to try and bolster their narratives. You can clearly see in the chart above why analysts are having a hard time at assessing inflation. There are many fits and starts and reversals in direction over the last couple years. Look at how smooth the chart indicator line is in prior years but after the jump into inflation, and now back into a sideways pattern of neutrality, over the last few years, the line is erratic, up, down, with wild moves. A lot of the wild gyrations are pivots from Fed decisions or guidance, or inflation data, as the crony capitalism system sputters along. Up, down, down, up, baby what you want me to do, as Jimmy sings.

The Keystone Speculator's Inflation-Deflation Indicator sits at 2.92 at NEUTRAL TERRITORY. The United States has not seen disinflation since 2021.

President Biden and Congress pass massive COVID-19 spending bills in 2021 throwing money out to Americans like a fireman tossing candy to children during a parade. Trump was also greasing the skids in 2020.

At the same time, in 2020 and 2021, the Federal Reserve turned up the money-printing dial from from heinous to disgraceful. The money-printing was so obscene it would make Caligula blush. The Fed turns the money-printing dial to 11 a la Spinal Tap. Chairman Powell and Treasury Secretary Yellen toss money to Americans from a helicopter piloted by former Fed Chairman Bernanke.

Worse, creating the trifecta of the inflationary backdrop, is Biden's stupid misguided climate change agenda hacking the vital oil, gas and coal industries to death while promoting windmills, solar cells and glorified golf carts (EV's) that do not work in natural disasters and cause more ecological waste (mining and battery disposal) than regular gas-powered cars. EV's are also heavier vehicles causing more human injuries in accidents.

Piling on, the wealthy elite and upper middle class that own stocks and were given vast effortless wealth courtesy of the Fed's money printing are enjoying their easy money demanding services further fueling inflation.

The factors above are the inflation fuel and the pent-up demand for goods and services after the lows of the pandemic lights the fuse. Higher oil, gasoline and fuel drives up the costs of all goods and services.

The chart above generally reflects goods inflation rather than services inflation. For decades this did not matter since both moved in unison. In recent years, however, due to obscene central banker money printing that has destroyed price discovery, and the disruptions of supply lines due to the pandemic, the goods and services inflations have not been in sync.

The thinking was that services inflation would roll over and come down to join the lower goods inflation, however, what may occur is goods inflation floating higher to join services inflation. Last year, the indicator had the look that it wanted to venture up into inflation again but that move reversed. Commodity prices have been strong and they are in the numerator of the indicator sending the number higher.

The oil, coal and natural gas industries are the energy backbone of the United States. It takes a high degree of stupidity, and corruption, to purposely crash these industries, adding to the already out of control inflation due to the Congressional spending spree (fiscal stimulus) and the Fed's money-printing (monetary stimulus). The so-called green energies are not ready for primetime so Biden sells America down the rabbit hole of despair. At the same time, Russia's dirtbag dictator Putin continues the Ukraine War further exacerbating worldwide inflation.

The 10-year Treasury note 'price' is used for the denominator (bottom number) of The Keystone Speculator Inflation-Deflation Indicator. The 10-year Treasury price is 99.03 with a yield at 4.50%.

Commodities are in the numerator (top number). The CRB Commodity Index is at 289.47.

The Keystone Speculator Inflation-Deflation Indicator

CRB/10-Year Price = 289.47/99.03 = 2.92

Above 4.20 = Hyperinflation

Between 3.1 and 4.2 = Inflation

Between 2.5 and 3.1 = Neutral; Inflationists and Deflationists Battle

Between 2.1 and 2.5 = Disinflation

Below 2.1 = Deflation

Granted, the calculation above is focused on goods inflation rather than services inflation. For many decades, you could track commodities, with the CRB, or GTX, and the goods inflation and deflation dictated the overall economy's direction. As the US politicians screwed America over the last five decades, sending jobs overseas and destroying the middle class so stock prices could move higher on the foreign slave labor, the goods production went to foreign nations while the US focused more on services as the major part of the economy.

The debate between inflationists and deflationists over the last few years has been the discussion of goods versus services inflation. The pundits looking for inflation said goods would inflate and catch-up to the rising services sector while the talking heads preaching deflation said the services inflation would drop to join the goods disinflation and deflation as the economy slumps. All bets were off and both sides ended up being correct as the COVID-19 pandemic hit knocking the world on its arse.

The deflationists were correct in 2019 and 2020. Services inflation drops to become more compatible with the goods deflation. Of course, the China Virus pandemic wiped out the airlines, hotels, travel, restaurants and hospitality and leisure industries. Services are knee-capped falling to the ground joining the goods deflation. Men turned into bush people letting their hair grow wildly outward as they avoided the barber for fear of catching covid.

Then the central banker cavalry arrives March 2020 promising to print money forever. Greenspan, Bernanke and Yellen (former Fed chairs) were already in the basement of the Eccles Building running the printing presses like mad. Helicopter Ben loaded-up his chopper with freshly printed Benjamin's dropping the money from the sky into the investment banker's hands on Wall Street.

President Biden provides way too much stimulus creating a lazy workforce that would rather sit home than work. The staffing shortages are a headache for employers that want to get back to normal but cannot since there are not enough workers to fill positions. Wages rise sending inflation higher. These behaviors, and the obscene amounts of Congressional (fiscal) and Federal Reserve (monetary) stimulus, send inflation to the moon.

When the Fed and Congress tag-teamed in March and April 2020 with trillions in stimulus, billions went into the US stock market pumping it to record highs. A few hundred thousand workers left the workforce either retiring or caring for loved ones after the pandemic, creating a massive labor shortage as the pent-up demand hit in 2021 and 2022.

Rising wages create inflation. The lack of inflation and ongoing persistent deflation for many years was due to the stagnant wage growth. Inflation cannot exist without wage inflation which had not occurred for many years until 2021 and 2022. 

Interestingly, as economic activity slows in the US, and some companies begin layoffs  in 2022, the wages are starting to stagnate again, helping create the current top in inflation since June 2022. This behavior continues into 2024 with wages steady and layoffs in the news. Wages are moderating which will keep inflation at bay.

The inflation in recent years is mainly due to energy, food and rent/utility costs. People notice higher gasoline and food prices more than other price changes. 

Oil will have a big impact on the path forward. Everybody and his bro called for oil above $100 per barrel a couple years ago but that typically means it will not get there and it did not.  Inflation will eventually run far higher in the years forward and bring on hyperinflation but is now the time? It does not appear so especially since the recent inflation has never overtaken the 2011 inflation but that hyperinflation scenario will occur at some point forward.

Just think, perhaps in a few years, the chart above will be way up there in the hyperinflation zone. That is when the Dow will be over 50K, the SPX will be 10K or more, a gallon of gasoline will be $10 and more, a loaf of bread will be $10. The stock market will be hugely higher, however, the US dollar will be toilet paper. That will be a whole new set of challenges when the velocity of money (money on reserve at the banks that suddenly floods into circulation) kicks in.

Inflation in 2022 ran higher to try and match the 2011 highs. Back then, traders were convinced that rates would continue higher but instead the peak was in. Time will tell if the inflation peak in May/June 2022 will hold; so far it has 2 years later.

Watch the indicator closely over the next month to see which side of neutral it favors. It would not be surprising to see it roll over as oil and commodities retreat and the economy softens. It would be a big deal falling into disinflation again since that would then open the door to deflation. If we start on the path lower to disinflation and deflation, that would likely occur with the US stock market selling off in force a la 2008/2009 and 2022 (crash).

The answer to the inflation-deflation debate is both sides are right and both are wrong since the indicator sits at neutral. The path to disinflation is more likely if the economy sours. People would lose jobs and the stock market would drop. The people propping up the economy right now are the upper middle class and wealthy because the Fed's easy money made them rich beyond their wildest expectations driving stock prices to the moon (at the expense of the rest of society).

The chart has to make a decision on what direction to move out of the neutral territory. A move higher with more inflation and higher prices means the wealthy class keeps spending money, mainly on services, to keep the economy afloat, or, a move to disinflation occurs if the economy begins falling apart, stocks deteriorate and layoffs rise. 

NVDA NVIDIA Monthly Chart; Negative Divergence Developing; Overbot; Rising Wedge; Upper Band Violation; NVDA Is Placing a Multi-Month Top

NVIDIA is the Artificial Intelligence poster child and CEO Jensen is considered, especially if you ask him, the Second Coming. Jesus walked on water and Jensen wants to do a little bit of that walkin' too as Charlie Daniels sings. Humans are fun to watch. AI, schmy. It's more over-hyped stuff as overpaid programmers and techies try to develop new technology and software to keep their jobs. Keystone has one thousand books in his library that are pre-1910 the oldest are over 200 years old. None of this information is on the internet so how can AI be all-knowing? It's not.

AI is an instant aggregator of internet information mainly geared around language models and will help a bit with productivity but are we at the point where the cost of the improvements are not worth the money? It takes a lot of power and electricity to run those servers. The Law of Diminishing Returns.

NVDA is the stock darling on Wall Street these days. Analysts and television talking heads tell you that if you don't own NVIDIA, you don't know Jack. Joe Sucka, Jane Winedrinker and Frankie Sixpack want to know Jack so they are tripping over each other buying NVDA stock with both fists knowing that it will go up forever because Prophet Jensen said so. As always, never believe what human animals say; instead look at what they do in the charts.

The late 2022 top is worth a look. The red rising wedge pattern was bearish. The RSI was overbot and negatively diverged, ditto the stochastics and money flow, and the histogram is neggie d; all these indicators are bearish calling out a top. However, the MACD line was still long and strong as price made its matching or higher high. Thus, you knew NVDA is topping-out on the monthly basis and headed for sogginess for a few months but then would recover for a higher price high again.

The negative divergence spanks price lower to start 2022 and the bottom fell out in April 2022 extending the duration of the downside. Positive divergence was setting up in late 2022 but still had a ways to go; a legitimate bottom would have likely set up to begin 2023. Instead, the stock market in general begins rallying and the AI hype starts to take shape and NVDA never looks back. The AI orgy is on with Silicon Valley techies dancing on conference tables only wearing their fleece vests.

Note how the volume trails off in recent years. As price makes new highs, volume should be strong and robust but it is not which hints that conviction for more upside is not in play. If you bring up the weekly chart, you can see distribution taking place in recent months (smart money pushing shares off to the dumb money).

Currently, there are three matching price tops so the chart indicators can be assessed to see if negative divergence exists and a potential top call at hand. The RSI is clearly overbot and neggie d; bearish. In addition, the RSI is neggie d over the last 3 years. The histogram is neggie d; bearish. The stoch's are overbot and neggie d like the RSI; ditto the money flow. Folks, that is a bag of sh*t. However, the MACD line remains long and strong extended way up and past nose-bleed territory into the stratosphere. The MACD line wants to see another higher high in price after price receives a spankdown on the monthly basis.

The ADX shows that price has been in a strong trend higher for the last few years above 30, however, the current high at 59 with price making a way bigger high, is not higher than the prior high in late 2021; negative divergence. In other words, the strong trend higher in price for the current rally is not as strong as during the prior peak in price.

The Aroon green line is overbot and the red line is oversold which means the bulls are nearly entirely convinced that NVDA stock will keep going up forever. At the same time, bears are nearly completely convinced that NVDA stock will go up forever and there is no point to short it. This is a contrarian indicator that tells you the sentiment for the stock remains off the charts bullish. The bears have all left town.

There are two scenarios. The MACD (some call it the mac-dee) is at perhaps the highest level ever seen for a stock; it is special stuff. Therefore, it would not be surprising if the MACD simply reversed and started falling like a rock without warning. This would only occur this month if price started to collapse lower. This would be the purple arrow scenario where NVDA receives a multi-month spandkown beginning anytime.

Typically, the MACD line is not in the stratosphere, it may instead be at a more reasonable sub 100 number, and need to form neggie d to call the multi-month top. This is the maroon arrow scenario where NVDA will be soggy for a month but then recover for a matching or higher price high, say in late June or early July, with the MACD then going neggie d to join the other indicators, and that would be the multi-month top.

Either scenario, NVIDIA is topping-out on the monthly basis (long-term basis) anytime between now and July. Isn't it funny that all the sucka's buying NVDA believe that they will hold on to it forever and be fabulously wealthy? Or parents that buy NVDA stock for their kids believing that it is a long-term winner.

When she begins rolling over, price will seek the middle band since the upper band has been violated for the last year. The middle band is at 454 and the lower band is down at 32. No, don't worry about 32 but the 120 to 300 landing zone is a real likelihood a few years out. Do not be surprised if NVDA drops to 350-500 over the next year.

The only thing that can stop the topping process would be more AI hype. It is hard to imagine there would be more hype available in the rabbit's hat but you never know. A good news spurt in price would only serve to reset the entire discussion above again only right-translated a couple months.

Looking at the weekly chart, price is at 899 not quite up to the prior weekly high. You cannot have negative divergence until price makes a matching or higher high (price is moving up while the chart indicators are negatively diverging (sloping down)). The chart indicators are weaker than the green tea that Nurse Goodbody is serving. Benny Hill. The 950-ish level is the prior high area so that would be a go signal to short the stock (but only for speculators and gamblers). It is extra crazy to go against a ticker with such uphill power. Keystone does not own NVDA long or short currently but will likely play it short if it tags 950+.

The answers are always in the charts. The monthly chart is topping-out anytime between now and July and will begin a multi-month down move. In the mean time, do not expect any great moves higher in the stock above its prior highs. The weekly chart is trying to return to prior high levels. If a short-seller, that is ideal. If price tags 950, check out the weekly chart and if all the chart indicators remains neggie d, the top is in on the weekly basis and the stock can be shorted going forward.

When this occurs, you can see how this gels with the monthly chart to see if the multi-month top is in place, or, if, as discussed above, the downside will only be a few weeks (a month), then back up for the price to place the long-term top as the MACD on the monthly chart goes neggie d. Remember, the MACD on the monthly is at such an obscene level that it can reverse now and does not necessarily have to throw off neggie d. So you don't have to guess. Watch the weekly chart and see if price hits 950+ and you will know when to short.

If you are a long-term holder of NVIDIA and made boat loads of money, scaling-out would be a prudent approach. Sell one-third of the position now then one-third in June and the final third in July or even tighter if the monthly chart tops-out as explained. It's Your Call as the up and coming Ghost Club band from Da Burgh sings with its Springsteen influence. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

The Keystone Speculator's Unemployment Rate Chart; US LABOR RECESSION STARTED 9/8/23 NOW 8 MONTHS ALONG AND COUNTING

THE UNITED STATES LABOR RECESSION STARTED ON 9/8/23 AND IS 8 MONTHS ALONG AND COUNTING. Analysts will say the markets are 'different this time' which never turns out to be true and the statement has become a meme to mean things will actually not be different this time. Well, this time things are truly different.

After over a decade of obscene Federal Reserve money printing and then Congressional fiscal stimulus during the pandemic, we are in uncharted waters. The US remains in a housing recession over the last year. Ditto the manufacturing recession. The chart above shows that the US labor recession is 8 months along and worsening again. This triumphant of gloom guarantees a recession; until now. It is truly different this time.

Japan and UK had stated that their economies were in recession. The Richmond Fed Mfg Survey called out a one-year recession. The JOLTS job openings report lists a soggy quits rate in recent months disappointing Fed Chairman Powell (a quits rate moving higher indicates that people are comfortable moving on from their jobs either to a new job or to start a business but a lower quits rate indicates that people are hunkering down at work worried about losing their current jobs not liking the prospects of finding a new job nor starting a biz). The quits rate is a favorite statistic of Treasury Secretary Yellen, that previously held Powell's job, and now the number is a Jay fave.

It is mind-boggling that housing, manufacturing and labor are in recession but the overall economy is not. Huh? Whazzat? It does not make sense but the truth is always in the numbers. The housing market is not normal since first-time buyers are muscled-out of the way by hedge funds, foreign interests and even cartels buying up every available home raising prices. What a sick America the Fed and both corrupt political parties have created.

The chart above is self-explanatory. The blue line is the US unemployment rate and the red line is a proprietary Keystone indicator. The economy and employment is fantastic when the blue rate line is below the red line. Blue above red signals trouble ahead. The redheads are always feisty and hard to handle.

The labor recession started 9/8/23 and note that from December through February 2024 it looked like the recession would end as soon as it started (blue line heading lower ready to cross back under the red line). But boiinnnggg, the blue line is now rising again and diverging up and away from the red line indication that labor conditions are worsening and the 8-month labor recession continues.

For months, traders, investors and analysts cheered the happy jobs numbers proclaiming that the economy is growing and that is the path forward with a soft landing on tap. After the Friday Jobs Report, traders are cheering the weaker than expected 175K jobs number since that means the Fed will lower rates faster. People are trained well under the cruddy crony capitalism system. They are front-running the goosing that the Fed will do. Sick stuff. The funny part is that the SPX has ran higher from about 4K to 5.2K expecting six rate cuts and traders now treat this huge move higher as if it did not happen. Like Pavlov's dog trained with a bell, modern-day traders are cheering for and happy to see weak data since that means the Fed will print more money and stocks will go higher to further enrich the wealthy class. It is the moral hazard many of us talked about over a decade ago. Crony capitalism is on its last legs.

People do not think an overall economic recession is possible since the Fed will always ride in on the pale green horse to save the day and protect the wealthy. People reporting business news and the analysts, traders and investors involved in the markets and economy daily are all millionaires or near-millionaires. The media does not provide the perspective and viewpoint of the common American. Crony capitalism created the land of the have's and have not's. Once you understand that capitalism does not exist, everything will make a lot more sense to you. La-la-la. Vault of Heaven.

Even though housing, manufacturing and labor are circling the drain, the overall economy holds up; like a drunk leaning on a lamppost but still standing nonetheless. One of the reasons things are different this time are chips. Most every product made nowadays has a computer chip. Semiconductors and technology are a new game in town that help create buoyancy in the markets and economy despite gloom elsewhere. Remember, before 1980, there was no computer technology in use, and weakness in the housing and auto industries would forecast an overall recession guaranteed. Not anymore.

In the job stats, there are lots of part-time jobs. People are working two jobs to make ends meet due to Biden's war on the US energy complex (oil and gas) that has created the heavy inflation burden placed on the backs of common folks. Rich folks do not care about inflation because their rich. Biden's open southern border problem allowing a mass migration also manipulates the jobs data. A lot of the new jobs over the last few months are the lesser-skilled jobs. Rich folks want to travel again after the pandemic so leisure and hospitality jobs increase. Workers are needed to carry bags, drive taxis and Ubers, cook meals and clean rooms for the wealthy class.

Education and health jobs increase. These are migrants or Americans working a second job cleaning bedpans and vomit off sheets at nursing homes. Hold your hand out for the American dream. Here's a bedpan that needs cleaned and don't forget to change the soiled sheets in Room 222. Retail jobs increase. This is an American needing a second job standing in the men's suit department helping customers pick socks or smelling feet as they help a wealthy dude pick out a new pair of Prada's.

Leisure and hospitality jobs increase. Migrants need to cook meals, carry bags, turn sheets, put out new towels and clean those dirty toilets. Welcome to your American dream; now get to work. Manufacturing jobs have been in decline or trying to hold steady but do show a minor increase on Friday along with construction jobs. This is migrants and others handed a broom and told to sweep the warehouse floor, or keep the construction yard free of debris, and don't forget to clean the toilets.

Most common Americans laugh nowadays when they hear the words, 'American dream', and someone typically counters with, 'yes, the American joke'. The only people still spouting the American dream blather are the uneducated and ill-informed foreign migrants or the US elite class and their upper middle class sycophants sitting on bags of money since they control the crony game and all own stocks that the Federal Reserve goosed higher over the last 15 years. The wealthy elite controlling America's rigged crony capitalism system keeps the masses at bay by making it sound like everyone has a chance. The rich played that card for the last five decades but the public now understands the game.

Thus, mathematicians say thus a lot, the US labor recession continues and is a harbinger of bad times ahead. What is likely is that Pope Powell has waited too long to cut rates so the bottom will probably fall out of the market and economy. Consumer spending will lessen sending many things down the rabbit hole and this slows when people worry about losing their jobs. Stocks and real estate will drop. Commercial real estate is already in trouble. As the bottom falls out, the banks will be in immediate trouble due to bad loans defaulting. The US is overbanked by 3K or 5K banks so some day these need to go away.

As credit conditions deteriorate quickly, banks will limit credit and this is already occurring. It is comical that the only people that can get a loan during a recession are people that do not need a loan (young people take notice since you have not seen a recession in your lives except for the goofy pandemic period where the US government saved the day misguiding-ly handing everyone and his bro mountains of printed money; if you have equity in a home, get a home equity line of credit immediately; do not use it but have it there in case you or your partner, or both of you, lose your jobs over the coming weeks and months; if you do not have equity in a home, you better put on your beggin' pads, kneel, and start kissing the boss's *ss). Common folks are drowning in debt and it all falls apart when the recession hits. The Fed will then cut rates quickly like madmen leading to the dis-inverting of the yield curve (2-10 spread) which then locks in the overall US recession going forward.

For next month's Jobs Report on 6/7/24, an unemployment rate of 3.7%, 3.8% or the current 3.9%, or higher, all signal that the labor recession continues. The game would change and the labor recession would end if a 3.6% unemployment rate or lower is reported on 6/7/24 (unlikely).

It will be interesting to see if communist China's economy can get back on track but it is not looking good since they have a property bubble bursting that is like the US 2008-2009 bubble.

Analysts have not only written-off a US recession but they do not even consider that the entire world may be on the precipice of a major global recession/depression. I Can't Believe We're Here. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Keybot the Quant Turns Bullish

The Keybot the Quant algo flips to the bull side after the Jobs Report at SPX 5126. Friday was an orgy party for the bulls. Bulls need RTH 201.80 to continue the stock market rally while bears need negativity in chips, banks, commodities and/or higher volatility that will stall the stock market rally. The whipsaw slop continues.

Keybot the Quant

Keybot the Quant Turns Bearish

Keybot the Quant algo flips to the bear side yesterday at SPX 5032 where it is playing around this morning. Chips are sh*tting the bed creating a pall on the stock market. Ditto banks but commodities are helping bulls. Bears win big if GTX loses 3634. Bulls win big if XLF moves above 40.42.

Keybot the Quant