Reward

a $25 gift certificate to the first person to properly explain the *real* reason the joke on the last post is so funny. Or at least tell me why I think it's so funny.

Boston Joke

So a Czech and Chechen, they walk into an Irish bar down in Dorchester. the barkeep, he whips out his shotgun from underneath, one-two, takes off both their fuckin' heads. The police come down to question the bartender, 'say Paddy, why did'ya go and kill both them fellows? We only needed the one.' the barkeeper looks over at body of the dead Czech and shrugs, 'well, the other one ain't exactly Catholic lookin himself, ya ask me.'

A Forecast from Above for North Dakota

Spring shall avoid this land
'til thy People repent
against laws enacted
as though from Heaven sent

The Jewish Chamber of Commerce

I searched for it as a joke, the name just sounded hilarious to my past-bedtime mind.

turns out it exists!

http://jewish-chamber.com/about-the-jewish-chamber-of-commerce/

Core CPI Curve

when the Company Store introduced the lastest queasy money scheme a couple months ago, I recall a number of pundits arguing that the dual mandate was unworkable and the Fed's defense of employment should be dropped. controlling inflation, they say, should be the sole mandate.

well, I submit they would have taken the same action even if inflation were their only business. earlier in the year, I devised an easy way to visualize trends in the Core CPI (though it'll work with most indexes or indicators). it is essentially a yield curve graph (like you see for interest rates) applied to the index. here's one that incorporates the latest (October) CPI values:

each bar represents the annualized rate of change for the index over different periods. so from September to October the Core CPI rose at a rate of nearly 2.2 percent (annualized). then the curve goes back proportionally to about seven years (86 months). I used these 15 points (which you may notice are Padovan numbers) deliberately, because not only is the median interval 12 months (the popular year-on-year rate), but the geometric average of all the intervals is also very close to 12 months. 

so the curve above shows the inflation rate being pressured higher over the past couple months, back into the two percent range, which is what the Company Store's always jawboning about. now let's see what the curve looked like in the month prior:

this graph shows a notable uptick from August to September, but still below the two percent target. 

lastly, let's look at the curve as it looked from the August report, which was the last month of CPI data available when the Fed introduced its latest QE initiative:

now look at that chart, it is this trend of lower inflation readings that Fed had been fretting over when it unveiled the new policy accommodation at the September meeting. furthermore, there had been only two intervals (21 and 16 months) across the entire curve with an annualized rate above two percent, and those just barely. 

we will continue to monitor these inflation curves as the CPI updates each month. but from the standpoint of Fed's own internal logic, it will be naive to expect any reversal of policy (tightening) until we see a curve graph with an ascending trajectory from left to right and an average interval value well above two percent. conversely, the Fed is unlikely to unveil new or expanded accommodation until the curve renews a downward slope like we saw a few months back. 

Copper Triangle

that's a lovely triangle, practically a year in the making. if it breaks lower, we'll look for a test of 2.77. but it'll already have broken that lanky neckline that runs back to 2009 (see Greg Schnell), so really a breakdown here ultimately targets a nice, round integer -- like, ah, '2'.

Value Line Geometric

seems like I should be writing a post here every six months or so, at least that's been the tendency. and today felt like a good day, with our new kitten "Mr Jefferson" on my lap, and it being a bit cold and windy to go bird hunting with "Richard Padovan," GSP. candycane Brutus swept through the prairie this weekend, dropping as much snow as we probably got last winter in its entirety. not at all a life-threatening storm, but perhaps enough of an event to make the riff-raff think a moment about staying/coming up here.

I had been about to write something on the Value Line Geometric Index ($XVG) and its persistant divergence from the more widely followed market indexes, however right prior to composition, I did a quick search and found someone had already done the work for me:

http://www.marketoracle.co.uk/Article35189.html

while the piece was written this summer, the implication remains valid today. I feel silly postulating bearish after a downswing has already ensued, but no one pays me for market timing these days, except my own account. besides, the potential of the $XVG divergence is of such major importance that a preceding five or 10 percent decline in the market will eventually look quite minor. 

the following chart is perhaps more newsworthy in the near term:

we see that on a log-scale chart $XVG has violated (finally) its .618 speedline. I drew this setup who-knows-how-long ago and it's been sitting in a stale chart book ever since. but it looks relevant now. 

based on this setup, we should look for a fairly sharp decline over the next couple months. perhaps we'll find some tradable support again around 280? whatever the level, I won't be stepping over to the long side of the equities market without seeing something constructive happen with my main indicator, codenamed "Column AN":