Business

Now that the massive USO-driven squeeze appears to be over (congratulations to whoever managed to sell equity and their secured lenders) the bad news can return. First, it was Goldman slamming the "unsustainable rally, and then just a few hours ago, the EIA released its latest monthly short-term outlook report in which it brought even more bad news for long-suffering bulls who thought the pain was finally over.

As global stock markets have soared in recent weeks, accelerating most recently after the dud of the G-20 meeting, gold has also rallied, strongly suggesting there is anything but confidence in this ramp.

So Gold Is Screaming, but as ConvergEx's Nick Colas asks, What Is It Saying?

Gold is up 19% so far in 2016, with prices making new one-year highs just in the past week.  That shouldn’t be happening. 

The Fed is rapidly losing control.

Core inflation has already broken above 2%.

This happened when OIL was imploding.

As well as commodities in general.

Why does this matter?

Because core inflation is ABOVE 2% at a time when commodity prices were FALLING. The Government HAS TO adjust its models to account for this so that ANY RISE in commodity prices will PUSH inflation to the upside.

Speaking of which, since bottoming in February, Oil is up over 22%. Industrial metals are up 8%.

Authored by Michael Shuman, originally posted at BloombergView.com,

Call me old fashioned, but I still think prices matter. I vividly recall the first time I studied those simple supply-and-demand graphs as a college freshman, and today, far too many years later, their basic logic remains undeniable. When prices are right, money flows to the most productive endeavors and economies work efficiently. When prices are wrong, crazy things eventually happen, with potentially dire consequences.

The trend is still your friend (for now)...

S&P futures bounced perfectly off the short-squeeze ramp trendline today...at 1980

The question is, can it hold for the rest of the day, as bond yields collapse to the day's lows, credit decouples and oil is weak?