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Monday, April 15, 2013

DEFLATION--Are Markets Signaling The Dreaded Scenario?

Are the markets signaling DEFLATION ahead?  Japan is trying their high-risk experiment to inflate.  While their efforts seem to be working initially with the Yen collapsing and Japanese equity markets soaring, there is growing concern that their efforts would ultimately lead to failure.

I look at multiple markets, and I'm noticing a pattern that is eerily reflective of overall markets that is concerned about deflation ahead.  Gold prices plummeting is puzzling because usually precious metals perform well under periods of deflation.  We definitely need to keep an eye out for and be mindful of potential weakness in housing and real estate sector.  Strength in these sectors have been the foundation for prospects for improving US economy and reflation of assets prices.

Average Oil Futures Price Chart:  Oil prices plunging

JJC Chart: Copper Prices plunging

XLP Chart: Consumer Staples sector outperforming
XLV Chart:  Healthcare sector outperforming
Gold Futures Price Chart:  Gold prices plunging, but this is a
tricky one because gold prices usually outperforms in periods
of deflation

XHB Chart:  Definitely need to keep an eye on home
building sector because if US home prices start to fall, that
would signal really troubling times ahead.

IYR Price Chart:  The same goes for real estate sector.  Keep
an eye out for real estate sector weakness

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