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Many discuss the potential for much higher inflation, due to the action of the Central Bankers (excess printing of money). The MS Commodity Index (CRX) and the yield on the 30-Year bond (TYX) are two indicators that are sensitive to inflation or the threat of inflation.
Since early 2011, these two indicators have created a series of lower highs along line (1), reflecting little inflationary concerns. Both have rallied over the past several months, bringing them back to the top of the falling channel.
We will know the outcome of the BCS national Championship game tonight, yet the more important outcome (will inflation take off?), will be determined by what happens to the CRX index and the yield on the 30-year bond at the top of their channels.
What happens at these key resistance lines will have a large impact on portfolio construction for Stocks, Bonds and Commodities.
Resistance is Resistance until broken and Resistance has to be taken out, before inflation will become a concern!
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