Darkest Before Dawn? Charts Start Screaming Inflation Again

Is there a similar pattern elsewhere? Yes, in December 2017. XME had formed a small base and then broke out to the upside. It would go higher in January, then chop sideways before falling with the market in the autumn, continuing its slide into the March 2020 low.

My outlook is the same: the broader stock market is in bad shape no matter which way this chart resolves. XME is 40 percent steel, 14 percent aluminum and 18 percent coal and consumable fuels. Gold and silver are only about 17 percent of the fund. This is an industrial ETF sensitive to the economy.

Below is GDX divided by XME. QE has been negative for gold relative to industrial commodities, while the end of QE and has often marked a relative low.

The fact that gold has been looking relatively strong of late tells us what "the market" is starting to price in: another bout of monetary volatility. The pattern since 2008 has been inflationary melt-up followed by deflationary bust and a new round of monetary stimulus. The direction of XME in the coming month or two will tell us if that pattern holds or not.