That brings me back to Scott Bessent, the market’s puppet master. Ueda’s comments came straight after the G20, while Williams and Waller have both emerged from Jackson Hole with a noticeably softer tone. Maybe it is coincidence, but it certainly feels as though policymakers have become more sensitive to the risk of a disorderly market move. And, so far, the effect has been exactly what they would have wanted: the dollar is lower, stocks have popped, bond yields have eased, and the probability of a September Fed hike has fallen to 50.2%, from 63.2% on 2 September, according to CME FedWatch.

The charts tell the same story. DXY rallied back into its declining 40- and 50-day EMAs and the 200-day EMA from below, then rejected the area almost perfectly. This latest rejection keeps the bias to the downside for the dollar, albeit it remains in the middle of its broader one-year range.

The yen move has been even more dramatic. USD/JPY has broken through its August lows and the 200-day EMA, reaching the first area of the measured-move target. With speculative positioning still heavily skewed toward yen shorts, and with Bessent and Ueda pushing in the same direction, I suspect there may still be more downside to come.

As I referenced in my last report, gold was testing a key support zone on the downside, the rising 200-day moving average, the 40- and 50-day moving averages, and a key Fibonacci retracement all converging in roughly the same area. We needed the buyers to turn up.

And they did.

Gold is now back around $4,500, roughly in the middle of its recent range. That gives us a much clearer map: key support sits around $4,300, while a break above the recent high around $4,750 would, in my view, open the door to $5,000. I still think that is a realistic target by year-end, although I doubt the path there will be straightforward.

There is also a seasonal tailwind worth keeping in mind. According to Incrementum’s latest Monthly Gold Compass, September has historically been the second-strongest month of the year for gold, with a geometric mean return of around 1.3% between 1970 and 2025. Seasonality is never a reason to own something on its own, but with gold holding support, the dollar under pressure and the Fed now looking less likely to hike, the backdrop is becoming increasingly supportive.

The next key test comes tonight with payrolls. A softer-than-expected number would add another catalyst, potentially pushing the dollar lower, further reducing the case for a September Fed hike and keeping the bid underneath precious metals.

It’s been a long week, so I’ll leave it there. Speak next week.

Have a great weekend

Stay Sharp

If you enjoy these posts, please give it a like and share it.

The Lovell Bull & Bear Report

Blending classical technicals with asymmetric risk-reward—and a macro lens that sharpens the view.

By Tom Lovell | Trader & Writer

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

Energy is moving. Long-end rates are moving. And equities are beginning to get the memo.

I will start with energy.

Oil breaks higher

Crude finally appears to have broken out. After spending the past several weeks compressing into an increasingly tight range, WTI pushed through the top of the consolidation and closed around US$91. Technically, the chart looks constructive. Price is above the 40-, 50- and 200-day moving averages, the recent downtrend has been broken, and the next obvious technical area sits around US$95–101.

That does not mean oil has to go there. But the balance of risk has shifted.

Diesel is screaming

Crude is not the most interesting energy chart. Diesel is.

The diesel crack spread is essentially the difference between the price of diesel and the crude oil used to make it. Think of it as the market’s price for turning a barrel of crude into one of the world’s most important transport and industrial fuels. When the spread rises, diesel is becoming more valuable relative to crude, usually because refinery capacity is tight, inventories are scarce, demand is strong, or some combination of the three.

The remarkable part of the current move is that the diesel crack has pushed well above the levels reached around Russia’s invasion of Ukraine. Crude itself may not look as stressed as it did in 2022, but the refining system is flashing a far tighter signal.

Diesel moves trucks, ships, mining equipment, farm machinery and construction equipment. A large part of the physical economy still runs on it. If crack spreads stay here, that is not particularly friendly for the idea that the inflation problem has quietly disappeared.

Coal is beginning to wake up

Back in May, I wrote about the way an oil shock can move through the broader energy system. The basic sequence was simple:

Oil rises → LNG and gas prices rise → utilities look for alternatives → coal becomes the backstop

We saw that dynamic during the 2021–22 energy crisis, when soaring gas prices drove utilities back towards coal and Newcastle thermal coal eventually traded above US$400 a tonne.

At the time of that note, oil had moved but natural gas and coal had largely refused to follow, perhaps because the market believed the disruption would prove temporary. Natural gas still has not joined in. Coal, however, is now doing what the May note said it would.

Newcastle coal has built what looks like a substantial multi-year base. Price is back above the 40-, 50- and 200-week moving averages and is now pressing against major horizontal resistance around US$150–152.

That is the line that matters. Coal has not broken out yet. A convincing weekly close above it would complete something much more important than a short-term momentum trade.

The stocks are moving first

The equity market appears to be smelling it. Australian coal stocks have strengthened sharply over the past week, and New Hope is a good example.

New Hope has broken out of its long-term descending channel and reclaimed the horizontal resistance area around A$5.63. The weekly structure is strong, the 40- and 50-week averages are rising beneath the market, and the next technical areas on my chart sit around A$7.24 and A$8.30.

Commodity equities often begin moving before the underlying commodity has completed its breakout. That does not guarantee coal follows, but it is another warning sign. The improvement is also broader than coal: charts across the Australian energy complex, including Santos, are beginning to behave as though investors are positioning for a tighter energy market rather than a looser one.

Rates are getting the memo

I have often said that wars are inflationary, and this one is proving no different.

Since the first week of the Iran war, the US 10-year Treasury yield has risen roughly 85 basis points, from around 3.9% to almost 4.8%. Last night it recorded its highest close since October 2023.

Oil is breaking higher. Diesel crack spreads are at extraordinary levels. The war shows little sign of ending.

Higher energy prices feed directly and indirectly into inflation. If they remain elevated, they make it much harder for the Federal Reserve to ease, precisely when the enormous supply of US government debt is already putting pressure on the long end.

war → higher energy prices → renewed inflation pressure → higher bond yields

Energy is threatening the inflation side of the equation at precisely the moment fiscal policy is threatening the supply side of the bond market.

That is a precarious combination. And equities are starting to get the memo.

Equity leadership is weakening

The Nasdaq 100 closed below its 50-day moving average last night.

To keep that in perspective, it remains only about 6.5% below its all-time high. This is hardly a bear market. But there is something else worth recognising.

During the latest push higher, the S&P 500, Dow Jones Industrials and Russell 2000 all made new highs.

The Nasdaq did not.

For much of this cycle, technology has been the unquestioned leader. When the broader market pushes to new highs but the Nasdaq fails to confirm, and then slips below its 50-day moving average, I pay attention.

None of this says equities have to fall tomorrow. But leadership is weakening at the same time that the macro backdrop is becoming less forgiving. Higher energy prices and higher bond yields are not a particularly friendly combination for long-duration growth stocks.

An old warning is flashing again

There is another non-confirmation I am watching.

Dow Theory dates back more than a century, but its central logic remains simple: if the companies producing and selling goods are making new highs, the companies moving those goods should broadly confirm the message. Goods that get made ultimately have to get shipped.

Right now, they are not.

The Industrials made a high in July and then pushed to another new high in early August. The Transports did not confirm either move. Their meaningful closing high was set earlier, around June, and the index has since turned down.

That is a classic bearish Dow Theory non-confirmation: the Industrials have made a higher high while the Transports have failed to follow.

Importantly, it is not yet a Dow Theory sell signal. A strict signal would require both averages to close below their relevant prior reaction lows. The Transports are testing theirs; the Industrials have not.

For now, this is a Dow Theory warning, not a confirmed sell signal.

If the Industrials later break an important reaction low on a closing basis, confirming the weakness already visible in the Transports, we can come back to it.

Until then, it is simply another warning sign worth respecting

Gold Next Test

I’ll come back to gold in more detail later in the week, but the pullback has now brought it back into the key area I highlighted in my last note.

Gold is sitting around $4,375, right on top of the 40- and 50-day moving averages and inside the broader $4,330–$4,400 support zone. If this move is going to develop into something more meaningful on the upside, this is roughly where you would expect buyers to show up.

The broader backdrop remains interesting. Energy prices are rising, long-term yields are pushing higher and equity markets are starting to wobble. There is one man who understands the interaction between those three things better than most, because he has already shown his hand twice over the past month: Scott Bessent.

The question now is whether we see another attempt at coordinated action to take some pressure out of the long end of the Treasury market. If we do, and long-term yields roll over as a result, I would regard that as another potentially bullish signal for gold.

But first things first.

Gold needs to hold around here.

Some weekend reading

Ray Dalio published an interesting piece in TIME called “The Bond Market’s Supply and Demand Problem.” His argument is that the danger in US government debt is increasingly not just the amount outstanding, but the price at which investors will absorb the enormous volume that must be issued and refinanced.

Dalio highlights rising debt-service costs, long-term yields rising faster than short-term rates, shorter Treasury issuance, currency weakness against gold and, eventually, central-bank monetisation as warning signs to watch.

Its a short read and worth your time

Have a great day

Stay Sharp

If you enjoy these posts, please give it a like and share it.

The Lovell Bull & Bear Report

Blending classical technicals with asymmetric risk-reward—and a macro lens that sharpens the view.

By Tom Lovell | Trader & Writer

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

A little over a week ago, in My Mum Is a Better Investor Than Warren Buffett, I said I’d design and publish The Lovell Bull Bear Portfolio, my 60/40 for a different regime.

The idea was simple: keep myself accountable to the themes I keep writing about, have a bit of fun with it, and see how it performs.

As it turns out, once I actually built the thing, 60/40 became 50/50.

So here it is.

For the last 14 months I’ve been writing about what I believe is a genuine change in the investment regime. Fiscal dominance. Financial repression. Persistent deficits. And ultimately, a rotation away from purely financial assets and towards hard ones.

I’ve made that argument from plenty of angles. But eventually there’s an obvious question.

Fine. If you believe all that, what would you actually own?

So I gave myself a constraint: build a portfolio that I can only change at the end of each quarter. No trading around it, no clever hedges when it gets uncomfortable, no changing my mind halfway through.

That’s the Lovell Bull Bear 50/50 Portfolio. Not an optimisation. Simply the portfolio I’d be prepared to be stuck with.

The 50/50 is the part that matters. Half the portfolio sits in hard assets, 25% precious metals, 25% resource equities. The other half is 21% ex-US equities, 19% developed markets (including 9% Australia) and 10% cash.

Set that against a traditional 60/40 and the argument becomes obvious. The conventional portfolio puts roughly 40% into bonds and duration. Mine holds none.

That isn’t because bonds can never rally. They obviously can, and there will be periods where owning duration makes me look foolish. But I think the asymmetry has changed. A long bond is a promise to pay a fixed number of dollars many years out. My concern isn’t whether those dollars get paid, it’s what they’ll buy when you get them back. When governments carry enormous debt loads, run persistent deficits and face growing structural commitments, inflation stops being purely a problem and starts being part of the solution.

Not runaway inflation. Just enough tolerance for nominal growth to grind down the real burden of the debt.

I’d rather own scarce assets than long-dated promises. So instead of 40% in duration, I’ve put 50% into things that come out of the ground.

What this is, and isn’t

It isn’t advice, and it isn’t a suggestion to replicate it. It’s a thought experiment made public. I don’t know your circumstances, tax position, horizon or tolerance for watching something fall 30%. The A$100,000 is notional and exists so the arithmetic is legible.

It isn’t what I do in my trading. This is deliberately slow. No shorts, no leverage, no attempt to trade every move. Think of it as the asset-allocation expression of the framework I write about weekly.

It isn’t a stock-picking service. The sleeve is the thesis; the ticker is one expression of it. I’ve used ASX-listed funds because I’m in Australia. A reader in London or Singapore could build the same allocation from entirely different securities.

The purpose is to make the macro view measurable. It’s very easy to write “I’m bullish commodities, I’m bearish duration” every week and quietly move the goalposts six months later. This makes that harder. There’s a scoreboard.

The rules

Monthly reporting. Quarterly decisions.

I publish the numbers at the end of every month, every position, including the bad ones. I don’t change anything during the quarter. At each quarter end I can change weights or replace a holding if I think the underlying thesis has changed. If I do, I’ll explain what changed and why. Then the portfolio is set for another quarter.

On distributions: the figures below are price returns, so income is currently excluded from both the portfolio and the benchmarks. That matters because the benchmark funds generally distribute more income than my portfolio, particularly compared with holdings such as physical gold and silver that pay nothing. So the price-only comparison is likely to flatter my relative result somewhat. At each quarter end I’ll add the actual distributions received by every portfolio holding and benchmark over the period and report the comparison on the same basis.

The benchmarks

I wanted real alternatives. Four, each testing something different.

VDHG- Vanguard Diversified High Growth. Would I have been better off in a conventional 90/10 growth portfolio?

VDBA -Vanguard Diversified Balanced. The cleanest philosophical test. VDBA is roughly a 50/50 portfolio of equities and defensive assets, predominantly bonds and fixed income. Mine starts from the same 50/50 idea, but gets its defence from metals, commodities and resource equities rather than duration. Same allocation question, radically different answer.

VGS -Vanguard MSCI International Shares. The opportunity cost of doing any of this. Buy developed-world equities, go to the beach. Was the macro thinking worth it?

NDQ -Betashares Nasdaq 100. The antithesis. Long-duration growth and the US mega-cap complex, the trade my thesis says capital is rotating away from. If the rotation is real, it should show up here first.

These are now the standing benchmarks and they won’t change. Each has a specific job: VDHG as the conventional high-growth alternative, VDBA as the traditional balanced portfolio, VGS as the broad global-equity opportunity cost, and NDQ as the concentrated growth trade sitting most directly opposite the hard-asset thesis.

Where it stands: 1 July – 31 August 2026

Portfolio

Return

Lovell Bull Bear 50/50 +5.50%

VDHG +1.02%

VDBA −0.20%

VGS −0.45%

NDQ −6.72%

A$100,000 became A$105,496.

Within the Lovell Bull Bear 50/50 Portfolio, the returns by sleeve were: Precious Metals +14.2%, Resource Equities +9.1%, Cash +0.4%, Developed Equities −0.1%, and Ex-US Equities −1.7%.

Half the book did all the work. The other half went sideways.

Some observations

43% of the return came from one position. GDX is 10% of the book and rose 23.6%, contributing 2.36 of the 5.50 percentage points. That is a sizeable contribution from one holding, although gold miners are also one of the clearest expressions of the portfolio’s underlying thesis.

The winners have moved the weights. Precious Metals has run from 25% to 27.1%, and hard assets from 50% to 52.9%. I’m not touching that until quarter end, but it’s worth knowing that the portfolio is now slightly more committed to the thesis than the day I built it.

Ex-US has done little so far. India, China and Latin America were meant to be the portfolio’s non-US growth expression, and the sleeve fell 1.7% over the first two months. That’s noise over a period this short. If it is still lagging in a couple of quarters, I’ll need to defend the allocation properly or change it.

NDQ’s number needs context. That −6.72% is what an Australian investor in the unhedged ASX-listed fund actually received. The AUD rose 3.6% over the period, and roughly half of NDQ’s decline is currency rather than the Nasdaq falling. In US dollar terms the index was down closer to 3.4%. The full 12-point gap is not evidence that the growth trade has collapsed.

But that headwind cut both ways. A substantial part of my own portfolio is also unhedged to the Australian dollar, including GDX, PMGOLD, ETPMAG, WIRE, NDIA, ILF and IZZ. So the stronger AUD wasn’t simply a benefit to the comparison with NDQ; it was also a meaningful drag on a large part of my own book.

These are simple returns, not risk-adjusted returns. They don’t yet tell us anything about volatility, drawdowns or how much risk each portfolio took to generate them. VDBA, for example, gets much of its defensive exposure from bonds, while this portfolio has none. And these are still price returns only, distributions haven’t yet been included, which currently flatters my relative result somewhat.

The case against my own book

This portfolio is deliberately concentrated around a hard-asset view, so there will be periods when it looks very wrong. A stronger dollar, higher real yields or a reversal in metals would all hurt. That is the trade-off for making the portfolio specific rather than neutral.

The bigger risk is that the regime itself doesn’t change in the way I expect. If disinflation returns, fiscal pressure eases and long-duration financial assets regain leadership, a conventional portfolio may simply prove to be the better answer.

And now we keep score

That’s the point of publishing it. Not to prove after two months that I’ve found the perfect allocation, I haven’t. It’s to take the arguments I make every week and force them into something measurable.

Every month, the numbers. Every quarter, a decision. And every update links back to this page, so anyone arriving six months or one year from now can see the original portfolio, the original argument and the original rules.

Because there’s a big difference between having a market view and having to live with it in public.

Let’s see how it goes.

The Lovell Bull Bear 50/50 Portfolio is an illustration of how the Lovell Bull Bear framework can be translated into a broad asset allocation. It is not financial advice or a recommendation, and it does not represent an actual investment account. Starting capital of A$100,000 is notional. Portfolio and benchmark returns are calculated from the portfolio’s inception on 1 July 2026, are reported in Australian dollars and, unless otherwise stated, exclude distributions. Investors using different securities or currencies will experience different returns.

Have a great week

Stay Sharp

If you enjoy these posts, please give it a like and share it.

The Lovell Bull & Bear Report

Blending classical technicals with asymmetric risk-reward—and a macro lens that sharpens the view.

By Tom Lovell | Trader & Writer

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.” Kevin Warsh, Jackson Hole, 28 August 2026

So the much-anticipated Jackson Hole speech has come and gone.

There has been plenty of dissecting of it over the weekend, but the market’s initial verdict was pretty simple:

Warsh talked tough.

Precious metals were hit hard, the dollar strengthened, and some of the near-term monetary-debasement premium that had crept into gold was taken back out.

Fair enough.

But before getting too carried away with one speech, I went back and reread a piece I wrote on May 23, Team America vs the Bond Market.

It is worth revisiting because it was written after Trump spoke at Warsh’s induction as Fed Chair, and the contrast with Jackson Hole is instructive.

Trump could hardly have been clearer about what he wants.

Growth.
AI infrastructure.
Reshoring.
Manufacturing.
Defence spending.
American dominance.

And buried in the speech was perhaps the most revealing line of all:

“…because we do have some debt we’d like to take care of.”

Trump knows the fiscal problem exists.

His answer is not austerity, sacrifice or deliberately slowing the economy.

His answer is to grow through it.

In that same speech he said, “We want it to boom,” and talked about lifting the military budget toward US$1.5 trillion.

That is the backdrop Warsh is operating against.

Meanwhile, Scott Bessent has now shown his hand more than once when long-term US interest rates have become uncomfortable.

Whether it is pressure on Japan, Treasury buybacks or efforts to influence the shape of the curve, the message has been pretty clear:

Team America does not particularly like long yields getting away from them.

And now Warsh has come out sounding like the adult in the room:

2% means 2%. If inflation is not heading there quickly enough, the Fed still has work to do.

That sets up the September Fed meeting as a fascinating one.

Warsh may hike.

He may keep policy tighter for longer.

He may continue to talk tough in order to establish credibility.

But here is the bigger point.

Trump, Bessent and Warsh may have different jobs, but they are all tied to the same master: the fiscal maths.

Trump wants growth and spending.

Bessent has to fund it.

Warsh has to keep inflation expectations anchored.

And sitting above all three is the bond market, setting the price of money and increasingly holding Washington to account.

That is why I still think Team America vs the Bond Market is the right framework.

Warsh can talk tough.

Bessent can try to manage the plumbing.

Trump can demand growth.

But none of them gets to repeal the arithmetic.

And that brings me back to price.

Because whatever we think about the macro story, the chart is telling us what the market thinks right now.

Starting with the USD

The dollar rallied sharply on Friday to close at 99.67 and is now working back into a fairly formidable resistance cluster: the 50% retracement of the late-July to August 20 decline, the falling 40- and 50-day moving averages, prior mid-August price congestion, and the upper end of the broad range that has contained it for much of the past ten months.

That gives us a useful line in the sand.

A daily close above 100 (61.8% retracement level) would put the reflation and debasement trade squarely on the back foot. Until then, Friday remains a rally into resistance.

And yields are just as important

The initial reaction to the speech was lower yields. That move was then reversed, and the US 10-year finished the session near the highs of the move, at the second-highest weekly close of the year, behind only last week’s.

The knee-jerk was one thing. The considered response was another. It is the second move that matters.

The US 2-year yield closed at 4.36%, its highest weekly close since January 2025, as the market repriced the prospect of tighter policy. If yields continue pushing higher it would represent another tightening of financial conditions and a significant headwind for the debasement trade in the near term.

Equities Are Holding In There

At the index level, equities continue to show broader resilience.

Despite both the dollar and yields rallying on Friday, normally an uncomfortable combination for risk assets, US and global equities are largely holding their ground.

One area of concern, however, is semiconductors.

Considering Nvidia’s strong result last week, the subsequent price action is noteworthy. The PHLX Semiconductor Index (SOXX) retraced almost exactly 50% of its June–July decline before rolling over again.

It is now back below its 50-day moving average, with the 40-day moving average close to crossing below it.

Given semiconductors’ position at the front of the technology complex, this week’s price action could tell us a great deal about whether this weakness remains contained, or begins to infect the broader equity market.

Gold

Gold’s sell-off on Friday was the mirror image of the dollar’s strength, closing at $4,504, down 3.5%.

On August 20, in Bessent Is Back, Back Again, I wrote that gold had broken higher with an initial measured-move target of roughly $4,700–$4,900.

It reached $4,755, the low end of that range, before Friday’s reversal.

The call worked. Now the question is what the reversal means.

The first area I was watching sits around $4,500–$4,550, roughly the 61.8% retracement of the move from $4,365 to $4,755.

Friday’s close has already brought us into that zone, so the first line of defence is being tested immediately.

If that fails, the more important support zone sits around $4,270–$4,400.

That is where the structure gets serious.

Prior price structure and the rising moving averages begin to converge inside that band. It is less a single level than an area where several pieces of technical support begin to stack up.

That gives me a much cleaner line in the sand.

As long as gold holds that zone, the broader debasement trade remains intact. A decisive break below $4,280 would materially damage the current technical structure and force me to reassess the thesis.

For now, I still think the broader trade is alive.

Silver and the miners

The gold/silver ratio briefly broke below my key level on Friday in Asia before reversing sharply, while silver itself printed a bearish engulfing candle on the daily chart.

The broader structure still looks constructive, but Warsh appears to have put a temporary lid on the move.

For now, it is a case of watch and wait.

GDX

GDX also printed a bearish reversal candle on Friday, closing down 3.9%.

After rallying roughly 51% from the July low to the August high, some consolidation would be entirely normal. A pullback toward $88–$92 would not surprise me and would do little damage to the broader technical picture.

Over that same move, gold is up around 20% while the miners are up 51%.

That is the operating leverage working exactly as it should.

The miners have also cleared their 200-day moving average by a wide margin.

On this leg, the equities are leading the metal.

As long as gold holds broadly within the $4,250–$4,600 zone, I still think the gold equities offer attractive value, particularly the lower-cost producers with the greatest operating leverage to these gold prices.

The week ahead

Considering Warsh is stepping back from forward guidance and letting the data, and the market, do more of the work for him, this week should tell us plenty.

In the US we have ISM Manufacturing and Services, JOLTS, ADP and weekly claims, before non-farm payrolls on Friday. The market is looking for roughly 58,000 jobs, 4.1% unemployment and 0.3% monthly wage growth.

That is an interesting setup. Last month payrolls fell by 23,000 and wage growth was just 0.1%, so the market is expecting a decent reversal. There is plenty of room for surprise in either direction.

Globally, China’s PMIs, Australian GDP, European CPI and PMIs, the RBNZ decision, Canadian employment and the Bank of Canada all land in the same window.

The obvious thing to watch is whether Friday’s move continues: higher yields, a stronger dollar and more pressure on precious metals.

But there is another combination I would be far more concerned about.

Higher Treasury yields, a falling dollar and falling equities.

We saw that during the tariff tantrum in April 2025. Normally higher US yields support the dollar. When bonds, the dollar and equities are all being sold together, something more serious is going on.

That starts to look like a confidence problem in US assets.

Ironically, that would not undermine my broader thesis. It would probably accelerate it. Its the sort of market behaviour that would get Bessent and Warsh’s attention very quickly.

The other risk is much simpler. If the data rolls over and yields fall because growth is weakening, that is not necessarily bullish for everything I own. A growth scare is very different from a debasement trade.

So this week I’ll be watching the data.

But more importantly, I’ll be watching how the market reacts to it.

Because after all the speeches and policy signalling, we still end up in the same place.

The bond market gets a vote.

Have a great week

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

The Lovell Bull & Bear Report

Blending classical technicals with asymmetric risk-reward—and a macro lens that sharpens the view.

By Tom Lovell | Trader & Writer

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

Kenny Rogers and Dolly Parton have always been two of my favourites. When I met my wife, our go-to duets became Islands in the Stream. My lifelong regret is that I never made it to Vegas to see them sing it live.

With Dolly’s passing this week, I found myself listening to those old songs. And it got me thinking: if Dolly and Kenny were writing about fiscal dominance and the rotation from paper into hard assets, this is the song

Paper in the stream,
Promises that grow,
Debts keep piling high,
While the presses roll.

Gold beneath our feet,
Oil beneath the land,
Give me something scarce,
They can’t print on demand.

Corny? Absolutely. But yesterday’s inflation numbers made the point for me.

A hot mess

Deloitte’s Stephen Smith called it “a hot mess.” He’s right, for the reason most people skipped.

Headline inflation eased to 3.5% from 3.8%, against 3.3% expected. But look at what did the easing. Electricity price growth fell from 22.4% to 6.1% , not because power got cheaper to make, but because last July’s rebate-driven jump rolled out of the twelve-month comparison, and regulated tariffs were cut.

That isn’t the economy cooling. That’s the government moving a number. And to be fair, it cut both ways: when electricity was running at 22.4% and dragging headline inflation up, that was policy too.

Strip out the wild swingers and you get the trimmed mean, the measure the RBA actually watches. It didn’t come in hotter. It refused to fall, second month running at 3.6%, when the Bank had forecast 3.3% by year end.

Now split the basket differently. Some things are priced overseas, petrol, cars, clothing, coffee. We take the world price whether we like it or not. The rest is homegrown: rent, haircuts, the plumber, dinner out, set by local wages and local demand.

In July the imported half rose 1.5%. The homegrown half rose 0.8%.

Read that last line again. The imported side ran twice as hot as the domestic side. Wages stepped up on 1 July and you can see it in restaurant prices. But the bigger push came in through the border, and the RBA has far less control over that.

What I wrote in October

Last October, in Australia’s New Normal, I argued that expensive energy plus a government unwilling to stop spending equals sticky inflation, fading growth and a bull case for real assets. More specifically, I highlighted the case for resources to outperform financials.

At the time, BHP versus CBA was trading around 0.25. It is now roughly 73% higher than when I wrote that piece, and up around 133% from last June’s low. The ratio is also back above its 200-month moving average for the first time since December 2023.

I’ll take that one.

What I wrote nine days ago

In Full Tank, Empty Trolley I wrote that higher fuel costs were already starting to squeeze the consumer.

Westpac’s spending data stopped on 18 July, and even then fuel was taking a much bigger share of the household wallet. But the last of the fuel excise relief didn’t come off until 3 August.

That matters because yesterday’s CPI only captured part of that move. The next inflation print, due on 30 September, will include a full month of August at the higher post-relief price.

And look at the order it arrives in. The Board gets the August jobs figures on 24 September. It votes on 29 September. The inflation number lands on 30 September, the day after.

So the pressure is coming from both directions. Higher fuel costs lift headline inflation, while at the same time taking money out of household budgets and weakening spending elsewhere.

Higher prices. Softer demand.

That is stagflation.

The rotation

Yesterday the banks had been trying to rally off oversold levels. Then the CPI print landed and the bid vanished, while the broader Resources ETF continued to outperform Financials.

The July CPI has forced a pretty dramatic rethink on rates. ANZ and CBA now expect a November hike, while Deutsche Bank and NAB have moved all the way to September.

If that repricing persists, we may end up looking back on August as a key month for the rotation theme.

And now the softs

The move is broadening past metals and energy, and the grains are the cleanest part of it.

Soybeans are up around 32% from their December low. Corn is up roughly 28% since late June and has now pushed above its October 2023 high. Wheat is up about 53% from last year’s lows and has closed at its highest level since January 2023.

Food is another place where commodity inflation eventually finds its way into the household budget.

Somebody always pays for it, farm inputs, feed, manufacturers, restaurants, supermarkets and ultimately households.

Meals out and takeaway were already a driver of food inflation in yesterday’s CPI print. If grains keep moving higher, food becomes one more place where the inflation pressure starts to broaden rather than fade.

I’ll leave gold and the precious metals for next week. Suffice to say, after a very strong run, both gold and the gold shares are really just treading water and taking a breather here, which makes sense with Jackson Hole this weekend and the potential for it to move bonds, the dollar and just about every major asset class.

So there is plenty still to play out.

But the message I keep coming back to is getting harder to ignore.

Inflation is proving sticky. The consumer is being squeezed. Resources are outperforming financials. BHP is outperforming CBA. Energy remains firm. And now the grains are joining in.

That doesn’t mean every hard asset goes straight up from here. Markets are never that easy.

But it does suggest the current may be changing.

Which brings me back to Dolly.

The paper keeps flowing.

The promises keep growing.

And if that continues, I still want to own a few things they can’t print on demand.

A few islands in the stream.

Stay Sharp.

P.S. If you enjoy these posts, please give it a like and share it.

The Lovell Bull & Bear Report

Blending classical technicals with asymmetric risk-reward—and a macro lens that sharpens the view.

By Tom Lovell | Trader & Writer

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

My mum was a teacher, and suddenly a single parent raising a family on her own.

A few years later, after money arrived from Dad’s life insurance policy and eventually from the sale of his business, she did something very sensible.

She paid off the mortgage first.

Then she put what was left into the Australian share market.

And then she did absolutely nothing.

Which turned out to be an excellent investment strategy.

She bought into the CSL float in 1994 at $2.30 a share, about 77 cents on a split-adjusted basis. She bought Commonwealth Bank below $10, NAB around $6, Westpac around $8. Some BHP at ridiculous levels, Some Woolworths. A handful of other blue chips picked up along the way.

And she never sold anything.

Not after CSL doubled. Not after it went up tenfold. Not through the Asian Financial Crisis, the dot-com crash, the GFC, the European debt crisis, COVID, or any of the other occasions when the financial press told us the world was ending.

Strip it back and Mum’s strategy for three decades was this:

Own CSL. Own the banks. Own BHP. Don’t sell anything.

By the time I took over her portfolio in May 2024, CSL was roughly a third of the account. The major banks were another third.

She had no Bloomberg terminal. No investment committee. No economists. No quarterly strategy meetings.

And certainly no charts with 40-week moving averages on them.

Berkshire Hathaway’s Class B shares launched in 1996 at roughly US$22.20 on a split-adjusted basis. At around US$496 today, that is roughly 22 times your money.

Mum’s CSL did considerably better. From 77 cents split-adjusted, that is more than two hundred times your money, and that is after CSL has halved.

I am not claiming she beat Warren Buffett over his career.

But over the period since Berkshire’s B shares have existed, buying CSL and doing nothing beat Buffett.

Mum Had One Hell of a Tailwind

Here is the part that actually matters.

When Mum started investing in the early 1990s, Australian 10-year bond yields were still around 8–10%. A few years earlier they had been above 13%.

From there, for almost thirty years, the direction was down.

She started investing near the beginning of one of the greatest bond bull markets in history.

Every time yields fell, the discount rate applied to financial assets fell with them.

Borrowing became cheaper. Asset prices rose. Long-duration growth companies, companies exactly like CSL, benefited enormously.

And every time the economy got into trouble, central banks had room to cut.

Asian Financial Crisis. Dot-com bust. GFC. European debt crisis. COVID.

Different crisis, similar response.

Equities fell. Central banks eased. Bonds rallied.

For thirty years, falling rates provided an enormous tailwind to financial assets.

There is a danger in confusing a successful investment strategy with the economic regime that made it successful.

That, to me, is the real lesson.

Why I Sold

When I took over Mums account in May 2024, I sold a third of the CSL position at around $306 and another 1/3 around 230.

While I wasn’t in love with CSL at $300, it wasn’t really a market call.

First, nobody should have a third of their portfolio in a single stock. That is a position-sizing problem regardless of how good the company is.

Second, the portfolio yielded about 2%. Perfectly fine while the objective was capital growth.

Mum needs income now.

Third, she owned virtually no hard assets. Too many banks, I trimmed some of those too. No gold. No gold equities. No meaningful real-asset exposure beyond BHP.

The portfolio was still positioned for the world we were leaving behind.

That the sale happened to land near the high was luck.

But the timing is not the point.

The mandate had changed. The regime had changed. The portfolio had not.

Mum Isn’t a Person. She’s a Category.

This is where it stops being a family story.

Mum’s portfolio is not particularly unusual.

In fact, it looks remarkably similar to the portfolio owned by a generation of Australians who accumulated wealth through the same period.

Banks. BHP. WOW. A few blue-chip industrials.

Very little offshore exposure.

Almost no direct commodity exposure.

No gold.

And, very often, a house worth many multiples of what they originally paid for it.

It made enormous sense.

Those assets had spent decades being rewarded by the same underlying forces: falling interest rates, expanding credit, rising house prices, globalisation and disinflation.

Australian investors did not merely live through that regime.

Their portfolios were built by it.

Which raises the question that matters.

What happens if the next 10 years do not look like the last thirty?

If the economic regime changes, the portfolio that benefits from it eventually changes too.

Long-term bond yields are proving harder to suppress. Government debt loads are larger. Inflation is more entrenched. Globalisation is currently in the dustbin. And tangible assets, energy, metals, infrastructure and gold, matter in a way they did not during the great disinflationary period.

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade (see full disclaimer at the end, if you make it that far!)

That does not mean the old winners are finished.

It means I would no longer build a portfolio on the assumption that the forces which powered them for thirty years will simply repeat.

But there is something about Mum’s approach that I need to learn from and carry into the next regime.

She bought CSL at $2.30.

She bought the banks cheaply.

Then she went back to teaching.

She did not rebalance every quarter. She did not worry about whether something was 5% overbought. She did not sell because a strategist told her the market looked expensive.

She simply gave good assets time to compound.

And investors massively underestimate how difficult that is.

Everyone says they want to own a hundred-bagger.

But at 2x they take some profit.

At 5x it looks expensive.

At 10x the position is too large.

At 20x someone tells them they are irresponsible for not diversifying.

Somewhere along the way, almost everyone sells.

Mum didn’t.

Perhaps that is the lesson.

The portfolio may need to change. The behaviour probably doesn’t.

So here is what I am going to do. I’ll design and publish The Lovell Bull Bear Portfolio, my 60/40 for a different regime. It is a way of keeping myself accountable to the themes I keep writing about, have a bit of fun with it, and seeing how it performs against a few global benchmarks. The idea is largely set and forget, Mum’s approach, applied to a different set of assets.

More details on that in early September.

Maybe Warren Buffett isn’t the benchmark I should be trying to beat after all.

Maybe it’s Mum.

Have a great week

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

But first, I need to get this out before the market opens.

One quick caveat: the weekly charts below still have one trading day to go, so the breakouts aren’t confirmed until tonight’s close.

With that said, the message from the charts is becoming pretty clear.

For those who didn’t read Full Tank, Empty Trolley, the basic point was simple: Westpac’s own spending data was showing the pressure higher fuel prices are putting on the consumer.

That matters for the banks.

But it also means portfolios need a counterweight.

Resources were the obvious one.

Since the late-July lows, BHP has outperformed CBA by around 26%.

It is not just BHP.

QRE has outperformed QFN by around 21% over the same period, with the resources-versus-financials ratio now breaking to a new high for the move.

The energy stocks are confirming it.

Santos is attempting to break out of a four-year congestion zone around $8.10–8.25. If that breakout sticks, the weekly chart opens up considerably.

Woodside also continues to improve.

As long-time readers know, I like looking at how key stocks are performing relative to the broader index, because that is often where changes in leadership show up first.

Against the ASX 200, Woodside spent more than a year building a base, broke higher, held that breakout on the recent pullback, and is now pushing back above its 200-week moving average.

Woodside isn’t just rising, it is starting to outperform the broder market.

In simple terms: The rotation remains on course, resources beating the banks, and energy is starting to beat the market.

And it isn’t just energy.

On August 11 I wrote about soft commodities and the MOO ETF, which I am long. Since then MOO has had a decent run, but this still feels like a space that is only beginning to get going.

The charts of wheat and soybeans are improving, and there are some genuine fundamental tailwinds behind them.

Jeff Currie makes three points that caught my attention . (click here for his thread)

First, diesel is the cost base of agriculture. Higher energy prices feed directly into tractors, transport, fertiliser and ultimately food prices.

Second, Black Sea grain exports are being disrupted, while US corn yield and ending-stock estimates have been cut.

And third, sitting behind all of that is El Niño, adding another layer of weather risk to planting, yields and global supply chains.

As Currie puts it, the system has very little redundancy left.

Every additional shock increasingly goes straight to price.

Not everyone will agree with all of Currie’s predictions, but one line from his recent thread particularly resonated with me:

“Scarcity in the physical world. Repression in the financial.”

That neatly captures something I have been writing about for some time.

The charts are now beginning to say the same thing.

Resources are leading, energy is breaking out, and agriculture is starting to wake up.

Have a great weekend

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

Yesterday Treasury announced it will at least double its liquidity-support buybacks of long-dated Treasuries, from $2 billion to at least $4 billion per operation, from September 9.

The size isn’t the story. The timing is.

The announcement came outside the quarterly refunding process, after a sell-off that pushed the 30-year yield to around 5.34%, its highest in nearly two decades.

And it came just hours before Treasury was due to sell $16 billion of 20-year debt into an already weak long-end market.

Treasury was about to ask investors to absorb more duration at precisely the moment the market was struggling with duration.

So it announced it would become a bigger buyer first.

Yields fell immediately. The 10-year dropped towards 4.65%, while the 30-year fell back towards 5.20%.

Bessent moved before the auction.

This isn’t QE

Treasury doesn’t create reserves. The Fed does. Treasury funds these buybacks from its cash balance, ultimately replenished through taxes and new debt issuance.

So this isn’t QE: no new money is being created.

But markets don’t trade mechanics.

They trade reaction functions.

And yesterday Treasury showed us one.

Not a defended level. A put with an unstated strike.

By keeping coupon issuance broadly steady, funding more through bills and increasing long-end buybacks, Treasury is effectively reducing some of the duration the private market has to absorb.

Why it matters

On Tuesday, US gross federal debt crossed $40 trillion.

The next day, Treasury doubled the maximum size of its long-end buybacks.

As I wrote in Every Dollar Is Spoken For, there is almost no fiscal flexibility left.

And the debt is not just rising. Each additional trillion is arriving faster than the last.

Higher long-term yields therefore matter enormously.

More issuance → higher term premium → higher yields → higher borrowing costs → worse fiscal arithmetic.

Someone eventually has an incentive to lean against that loop.

Yesterday, Treasury appeared to.

Could this simply be plumbing?

Absolutely.

The facility already existed; the buybacks are cash-neutral and yields only moved around nine basis points.

But my suspicion is that we have just discovered the beginnings of a Treasury put under the long end.

We don’t know the strike yet.

But we now know the put exists.

And if Washington is going to protect the bond market, the adjustment has to go somewhere else.

It went to the currency.

The dollar fell more than 1% overnight, which makes the broader setup even more significant. The DXY tried to break out of its year-long range in June, but that move has now clearly failed. It is back below its 200-day moving average, with the shorter-term averages rolling over.

Bessent, the Fed and Trump all have reasons to prefer a weaker dollar. Right now, they are getting one.

If that continues, it should remain an important tailwind for commodities, particularly precious metals.

None of this was lost on gold which rallied around 3% over night and gold stocks rallying 8%.

I’ve highlighted $4,400 as the key level for months. Gold broke above it, consolidated for a week and, despite a brief pullback, never really threatened to break back down.

I was hoping for a deeper retracement. We never got it.

Instead, gold simply went sideways and has now broken higher again as markets receive another signal that the authorities are increasingly sensitive to higher long-term rates.

Technically, the picture continues to improve. Gold is comfortably above its 200-day moving average, the 50-day is rising, and the 40-day is now crossing back above it.

The tape is confirming the thesis. Gold looks bullish, with an initial measured-move target of roughly $4,700–$4,900 on this breakout.

Silver also looks constructive, but I’m still waiting for confirmation from the gold/silver ratio.

The ratio has tested 67.2 three times over the past week and held. That remains the key level.

A close below 67.2 would be my final signal that we have a full green light across the precious metals complex. Given the strength already evident in gold and the miners, I’d expect silver to play catch-up quickly if that level gives way.

It’s a good day for the true believers.

I certainly wouldn’t want to be short precious metals heading into the weekend.

Have a great day

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

It tracks consumer spending through Westpac card data, and over the twenty weeks to 18 July the message was pretty clear: discretionary spending growth eased from 6.4% to 5.9%, while non-discretionary spending excluding fuel slowed from 7.1% to 5.5%.

Fuel went the other way.

Spending growth jumped from -0.3% to +13.6%.

That is a remarkable swing. Households were being forced to allocate more of their spending towards fuel and less towards everything else. More at the bowser means less for the new dishwasher, the television, dinner out or the weekend away.

And then I noticed the date.

Westpac’s data stops on 18 July. The full fuel excise came back on 2 August.

That gap is the story.

The numbers already show fuel taking a bigger share of the household wallet, and they do not yet include the return of the full fuel excise.

From 3 August, the full excise and road-user charge returned. In the following week, national petrol and diesel prices rose by roughly 12–13 cents per litre. By the week ending 9 August, national petrol was averaging around 207 cents and diesel around 248 cents.

I paid $2.55 a litre for diesel in the mean streets of Mosman on the weekend.

And here is the part that matters: oil is roughly the same price today as it was on 18 July.

The latest move at the bowser has not come from another leg higher in crude. It has come from the removal of tax relief.

Australian households are therefore starting from a higher energy-cost base even if oil goes nowhere from here.

The pressure is showing up in retail

You can see some signs of it in discretionary retail before the excise even lands.

The Good Guys is the cleanest read. Comparable sales went from 5.3% in Q2, to 2.5% in Q3, 0.0% in Q4 and -1.7% in July. JB Hi-Fi says it was still taking share in a weaker home-appliance market, which arguably makes the slowdown in the category more interesting, not less.

JB Hi-Fi’s own FY26 result was strong, and the shares still fell around 12% on weakening recent momentum. The company points partly to supply issues and prior-year product launches, so I would not overstate the consumer weakness yet.

I also run a rough basket, JB Hi-Fi, Harvey Norman, Premier Investments, Myer, Adairs and Beacon Lighting. Not an index, just a barometer. It peaked late last year, the recovery failed at its major moving averages, and it has rolled over again.

And the RBA gets the bill

This is another part of the equation.

The excise is not just a hit to the household budget. It mechanically lifts headline inflation, even if the RBA ultimately chooses to look through it as a one-off shift in the price level.

At the same time, higher fuel costs take discretionary income out of the economy and weaken demand elsewhere.

That puts the Reserve Bank back in the same uncomfortable territory I wrote about in Australia’s New Normal: Expensive Energy, Sticky Inflation, and Fading Growth last October: inflation gets another push while parts of the economy are already slowing.

The question is whether the RBA worries more about the headline inflation impulse or the demand destruction underneath it.

The banks were better than I expected

I need to own this one.

In May, in The Market Is Getting the Memo, I made a lot of three banks lifting forward-looking provisions inside three weeks. CBA’s corporate stress at $6.5 billion. Personal loan arrears above pre-COVID. A sector signalling in chorus.

The results since have not vindicated the harder version of that view.

CBA delivered cash profit of almost $11 billion, up 7%, with return on equity around 14%. Westpac’s quarterly profit excluding notable items rose 2%. NAB also reported higher cash earnings. Margins held up better than I expected. Capital is comfortable. And Westpac reported 90-day mortgage delinquencies of just 0.58%, falling, not rising.

Provisions are forward-looking. Delinquencies are backward-looking. Both were true. But I leaned on the provisioning signal harder than the evidence has so far justified, and the mortgage book has not cracked.

So this is not a banking-crisis argument but It never needed to be.

The banks don’t need to blow up for their share prices to underperform. They simply need the direction of earnings, credit growth and economic activity to become less favourable at a time when expectations and valuations remain elevated.

(WBC close to breaking to new yearly lows, see chart below)

And there are early signs of exactly that. Westpac reported rising stressed exposures across transport and storage, utilities, agriculture and manufacturing, sectors that are all relatively energy- and transport-intensive. Mortgage applications are moderating, and Westpac expects investor housing credit growth to slow from 9.1% in FY26 to 4.5% in FY27.

Halving investor credit growth is not a crisis. It is a volume problem and Australian banks are volume businesses.

The tape agrees

CBA’s momentum peaked long before its price. Weekly RSI topped in early 2024, while the stock itself did not peak until June 2025 near $192. Every rally since has been weaker. (see chart below)

That is a change in character, not yet a breakdown.

The level that decides which one it becomes is $147–150. Hold it and this remains a broad consolidation. Lose it and the range starts to look much more like a trend change.

So what leads?

If the Big Four, roughly a quarter of the ASX 200, are entering a period of relative underperformance, and the consumer is being taxed at the bowser, the question is what propels the index higher.

My answer is still resources.

The ASX Resources ETF has begun outperforming Financials again over the past few weeks after holding an important support area. The ratio has not broken its 2026 highs, so the rotation is not confirmed just yet, but its looking promising.

Within resources I still love gold, and particularly the producers running exceptional margins at current prices.

But energy sticks out to me for two reasons.

First, the supply side is still not fully resolved. As the post below highlights, the Strait of Hormuz is not yet back to normal oil flows. As long as that remains the case, I think the energy complex stays tight and retains the potential to overshoot to the upside. If it does, that gives energy producers another earnings and cash-flow tailwind.

Second, I see energy as a portfolio buffer.

The same higher energy prices that squeeze household budgets can keep inflation and interest rates higher, pressure the banks, weaken discretionary retail and raise costs elsewhere in the economy, including for gold miners.

Energy producers sit on the other side of that equation.

So this is not just about being bullish on oil. Energy can provide some protection against the very forces creating pressure elsewhere in the portfolio.

The irony is simple:

The consumer pays. The producer collects.

Have a great week

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

But one thing kept jumping out. Global bond yields simply refuse to come down.

Last week gave them every opportunity. US payrolls were weak, CPI was relatively benign and PPI was flat. Yet the US 10-year yield finished the week around 4.70%, still sitting near the upper end of the range it has occupied over the past three years.

And this isn’t just an American story.

European 10-year yields are pushing around their highest levels of this cycle, while Japanese 10-year yields are approaching 2.9%, levels that would have seemed almost unimaginable only a few years ago.

Put the three charts next to each other and the message is difficult to ignore:

The global cost of long-term capital keeps going higher.

That suggests something more structural is keeping long-term yields elevated, something has changed in who is willing to hold long-dated government debt, and at what price.

Japan is where I’d start, because Japan spent thirty years demonstrating what governments do when the bond market becomes an inconvenience.

Japan’s debt-to-GDP has come down. Not because they paid the debt down, but because they kept borrowing costs below nominal growth and let the denominator do much of the work.

For decades, Japan dealt with an enormous debt burden by preventing the bond market from fully setting the price of money. The BOJ kept yields extraordinarily low. Then, when inflation and nominal growth finally arrived, they began doing some of the work on the debt.

Tax receipts rise with nominal prices and wages. The interest bill adjusts much more slowly when you suppress yields. Hold that gap open long enough and the debt ratio falls without ever paying down much of the principal.

That is financial repression.

Japan inflated down part of the real burden of the debt, helped along by some spending discipline.

The currency became the escape valve. A large part of the pressure showed up in the yen rather than the bond market.

And the person who paid was the Japanese saver, who earned almost nothing on her deposits while the weaker yen pushed up the cost of imported energy, food and goods, steadily eroding her purchasing power at home.

She was taxed. Nobody called it that and nobody voted for it.

Worth remembering that Japan has spent thirty years at the frontier of monetary policy. Zero rates before almost anyone else. Quantitative easing before almost anyone else. Then negative rates. Then yield curve control.

Every time, much of the rest of the world said it could never happen here. And then some version of it did.

If keeping nominal interest rates below nominal growth is part of the playbook for working down an enormous debt burden, Japan wrote the modern version.

But there is a catch.

The policy that helped Japan work down the debt ratio is now being unwound. Yield curve control is gone, Japanese yields are rising and the enormous interest-rate differential with the United States is beginning to narrow.

That should help the yen. But as old government debt rolls over at higher rates, Japan’s debt servicing costs will rise. The full impact will take time because of Japan’s long debt maturity, but the direction is already visible in the budget. Debt servicing hit ¥31.3 trillion in the FY2026 budget, up 10.8%, the first time above ¥30 trillion and the sixth consecutive record. (Source)

For years Japan could suppress the bond yield and allow the currency to absorb the pressure. Now it is beginning to let the bond market clear at higher rates.

And this is where it stops being a Japan story.

For thirty years Japan was one of the world’s great exporters of savings, the buyer who turned up for everyone else’s bonds. But with Japanese yields approaching 3%, that capital finally has a credible alternative at home.

It doesn’t need to come rushing back. It just needs to stop leaving at the same rate.

Japan doesn’t need to sell its foreign assets. It simply needs to become a less willing buyer of everyone else’s debt.

In a world already struggling to absorb record government issuance, that matters.

Which leaves the question of who actually pays for all this. One chart answers it.

Since the lows in 2018, gold has risen roughly 260% in US-dollar terms.

For a Japanese investor, the gain has been closer to 450%.

That gap isn’t gold outperforming. It’s the yen losing.

The Japanese saver holding cash earned almost nothing while imported energy, food and goods became more expensive. The saver holding gold benefited from the same monetary regime that was quietly eroding the purchasing power of the first one.

That is what financial repression does. Good for the debtor. Not good for the saver. It quietly shifts purchasing power from creditors to debtors.

Japan protected the debtor. Gold protected the saver.

Which brings us back to the United States.

Japan showed that an enormous debt burden can be carried for a very long time if the effective interest rate on that debt remains below nominal growth.

The question is what happens when the bond market starts demanding more.

If Japan is leading again, the lesson is uncomfortable: the debt problem can be managed, but the pressure has to surface somewhere. In Japan, much of that pressure surfaced in the yen. The question is where it surfaces next, in America, or across other highly indebted Western sovereigns.

Mrs Watanabe should have bought gold. Perhaps the rest of us should pay attention.

Have a great week

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

Through July, federal receipts have reached $4.49 trillion. The five obligations I track, Social Security, Medicare, Health, Net Interest and Veterans Benefits, have consumed $4.48 trillion.

As a reminder, the Fiscal Flexibility Index measures how much of every federal revenue dollar remains after funding these five essential obligations. The lower the index falls, the less room Washington has to fund the rest of government without borrowing.

The chart makes the deterioration pretty clear. The orange portion represents the revenue left over after those obligations have been paid. Over the past few years that orange slice has steadily shrunk. In FY2026, it has effectively disappeared.

That leaves the FY2026 Fiscal Flexibility Index at just 0.2%, down from 5.6% at the end of June.

Virtually every dollar Washington has collected this fiscal year is already spoken for.

The cleanest comparison is ten months against ten months. Through July, the deterioration is stark:

Receipts increased by roughly $139 billion year on year.

The five essential obligations increased by roughly $383 billion, almost three times as much.

The interest bill continues to stand out. Net Interest was $104 billion in July, the third consecutive month above $100 billion. Year to date it has reached $931 billion, around 11% higher than a year ago.

One important caveat, and it cuts both ways.

July’s outlays were inflated. Several payments normally due on August 1, including Medicare and Veterans benefits, were brought forward because August 1 fell on a non-business day. Treasury flags this in the statement itself.

July’s receipts were also weak. It is normally a thin month for tax payments, while customs duties came in at minus $8.5 billion as refunds exceeded collections. July receipts were actually slightly lower than a year ago.

So I would not read too much into July’s monthly FFI of roughly -67%. August should show some of the mirror image.

The cumulative number is what matters.

This is no longer a story about whether Washington can raise more revenue. It is about how little of that revenue is left once the essential bills are paid.

That is why the chart of the 10-year Treasury yield is so important.

Every time there is renewed upward pressure on long-term rates, whether from higher oil prices, a weaker yen, heavier Treasury supply or competition between public and private borrowers, the pressure on the fiscal position increases.

And increasingly, whenever that pressure becomes uncomfortable, something seems to intervene. Geopolitical tensions ease, the administration softens its rhetoric, or Treasury officials step in to calm markets and keep the show on the road.

The latest economic data has given the Fed some breathing room. Payrolls were weaker than expected last Friday, while July CPI was also a touch softer. Chair Kevin Warsh’s upcoming Jackson Hole speech will therefore be closely scrutinised.

But when I look at the Fiscal Flexibility Index, the broader constraint is becoming increasingly obvious.

The Fed can still raise rates if inflation forces it to. But higher rates now come with an increasingly significant fiscal cost.

Warsh has an inflation problem. Treasury has a funding problem.

The higher yields go, the harder it becomes to solve one without making the other worse.

Perhaps this is what gold has been sniffing out over the past couple of weeks.

As I wrote in What If You Can’t Sell the Reserve Asset?, the intervention felt like an important moment for gold. Since then, the rally has been impressive, with gold reclaiming its key moving averages and pushing back above the $4,400 area.

But I would add one word of caution.

Gold is becoming overbought on the shorter time frames, the gold/silver ratio still isn’t giving me the confirmation I want, and GDX has already rallied roughly 30% from its recent lows. Several of the ASX gold names I own have risen closer to 60%.

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade (see full disclaimer at the end, if you make it that far!)

So while I remain constructive, I’m not chasing here.

I would much rather buy the pullback.

Have a great day.

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

In What If You Can’t Sell the Reserve Asset? I said two things needed to go right for Scott Bessent: oil needed to come down, and the yen needed to strengthen in an orderly fashion.

Oil initially did exactly that. But both are now beginning to move back the wrong way.

WTI has rallied roughly 10% from last Wednesday’s lows and has now closed back above both its 50-day and 200-day moving averages. Monday alone saw WTI jump more than 5%, back above $82 a barrel.

The yen has also begun to weaken again. The level I’m watching is roughly ¥160.50 on USD/JPY. That is where it runs into its 40- and 50-day moving averages and the 61.8% retracement of the intervention move. A decisive break above ¥160.50 would suggest the intervention is losing its grip and put the ¥164 highs back into play.

And then there is the bond market.

The US 10-year jumped back above 4.70% overnight, one of its highest closes of the move and roughly where yields were when Washington and Tokyo intervened.

Bessent is back under the pump.

These markets aren’t independent. Higher oil adds to inflation pressure and pushes bond yields higher, while higher US yields widen the rate gap with Japan, supporting the dollar and weakening the yen. For Japan, higher oil and a weaker yen also mean higher import costs and more inflation pressure at home.

So the levels are pretty clear. Oil needs to head lower and not break above its July high of $93.40, the 10-year needs to stay below 4.75%, and USD/JPY needs to remain below ¥160.50 and begin moving lower again in an orderly fashion.

Those are the three markets I would be watching.

None of This Appears to Be Bothering Equities, yet.

Despite oil rising, bond yields pushing back toward their highs and the yen weakening again, the S&P 500 continues to hover around all-time highs.

For now, the equity market is simply looking through it.

Charts of Interest

The ASX 200 Finally Broke Out

After almost a year trapped in a broad congestion zone, the XJO closed last week at a record high, confirming the breakout above the previous highs.

If the breakout holds, the technical targets sit around 9,560 initially and 9,830–9,850 beyond that.

The key now is follow-through. I would want to see the index hold above the old breakout area around 9,100. A move back below there would raise the risk of yet another false breakout.

Silver Is Starting to Do What I Wanted

In my last report, I said the precious-metals complex was starting to look increasingly bullish, but I wanted to see silver outperforming gold before becoming more confident.

Last night we finally started moving in the right direction. The gold/silver ratio fell to around 67.5, with silver outperforming gold.

We’re not quite there yet, but we’re close. A decisive close below 67 remains the confirmation I’m looking for.

The Commodity Complex Is Coming Alive

The broader commodity complex has also come alive over the past week.

The Bloomberg Commodity Index has turned higher again and closed back above both its 40- and 50-day moving averages. The combination of energy, precious metals and industrial metals strengthening together is starting to look increasingly constructive.

One chart I’m keeping a close eye on is the VanEck Agribusiness ETF (MOO), which provides exposure to companies across the global agricultural supply chain.

A number of the underlying areas are starting to come alive, with fertiliser, crop-input and broader agricultural stocks beginning to rally, while several soft commodities including wheat, sugar, cocoa and soybeans are also starting to look technically interesting.

With the potential for El Niño, higher energy prices and tighter availability of key inputs such as sulphur, there are a number of potential tailwinds building across the agricultural complex.

It is another corner of the commodity market that is starting to get my attention

I’m starting to Develop a Sweet Tooth

Two charts in the soft commodity complex are starting to get my attention.

Sugar is the first. The Teucrium Sugar ETF (CANE) has spent the past couple of years grinding lower, but the weekly chart is beginning to look increasingly constructive. A break out of the current downtrend would suggest a potential move towards $12–13.

Cocoa may be even more interesting. I don’t normally put too much weight on downward-sloping trendlines, but on a weekly chart this is beginning to look like a genuine bottoming formation. Cocoa has already recovered sharply from its lows and is now pushing up against that trendline.

A clean break above it could set up a potentially explosive move higher.

Maybe it’s worth stocking up on your favourite sweets, they too might be about to get more expensive.

Have a great week

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

What looked like an obscure piece of market plumbing has since been picked up and debated by the Financial Times, The Wall Street Journal and just about every macro analyst and economist on the planet. Depending on who you ask, its prudent crisis management, quiet desperation, or QE by another name.

Luke Gromen highlighted an important observation from the Financial Times: if Treasuries can’t be sold during periods of stress without destabilising the market, they become less effective as a reserve asset.

“Reserve diversification is apt to gather steam.” - Financial Times

The Wall Street Journal came at it from another direction, arguing that the intervention was unprecedented and effectively added liquidity to the system at precisely the moment policy was supposed to be removing it.

But the most interesting development wasn’t either article.

It was Scott Bessent’s interview with NHK.

The final two questions are worth reading carefully.

NHK: Even after the coordinated intervention, the yen’s rally has remained limited. So what would you like to see from the Japanese Treasury and the Bank of Japan to achieve a more fundamental reversal of yen weakness?

Bessent:

Again, intervention is a signalling mechanism, and the U.S. wanted to signal that we have confidence in Japanese policies.

But I do believe that part of the inflation uptick in Japan was a result of the weak yen and also energy prices.

Then comes the important part:

I think we will get to the other side of the Iranian conflict. Energy will come down, and then as we no longer have excess yen weakness, that will also contribute to inflation coming down, and that Japan and the yen can go into a virtuous cycle.

Then NHK asks this:

NHK: Japan is one of the largest holders of the U.S. dollar. Has that been a factor?

Bessent doesn’t answer the question.

Instead, he pivots straight to bonds. He says what concerns him is the perception that the Japanese economy was overheating, and then that Japanese government bonds have been a global anchor for interest rates.

Any perception that this anchor was being lost would be “unhelpful and disorderly for markets.”

And then, without being asked, he adds:

The MOF, BOJ, and U.S. Treasury are completely aligned that JGBs are a very safe and sound asset.

Anyone who follows sport knows exactly what that sounds like.

“The board has full confidence in the coach.”

Nobody says that when the team is comfortably on top of the ladder. You hear it after seven straight losses, when journalists have started asking uncomfortable questions about the pressure surrounding the coach.

The intervention was presented as being about the weak yen. It was about the bond market.

A U.S. Treasury Secretary doesn’t normally feel the need to publicly certify the strength of another country’s government bond market unless confidence itself has become an issue.

The market spent the past week talking about currency intervention. Bessent spent the interview talking about bonds.

There was another tell.

Repeatedly, Bessent was asked whether the Bank of Japan should raise rates. Repeatedly, he declined to answer. Higher Japanese rates would strengthen the yen, but they also risk accelerating the unwinding of one of the world’s largest carry trades.

Instead, what appears to have happened is something more nuanced:

Support the yen without forcing materially higher Japanese rates.

Relieve pressure on the Treasury market without forcing Japan to sell its bonds.

Look at it that way, and last week starts to make a lot more sense.

Two Things Need to Go Right

But there is another part of Bessent’s answer that I think deserves more attention.

He effectively lays out the path he wants:

Oil comes down.

The yen strengthens in an orderly fashion.

The two are connected.

Japan is one of the world’s largest energy importers. Lower oil reduces Japan’s import bill, eases imported inflation and removes one of the fundamental pressures weighing on the yen.

That creates Bessent’s “virtuous cycle”: lower energy, lower inflation, a stronger yen and less pressure on Japanese bonds.

The problem is that neither part is entirely within his control.

Bessent says, “I think we will get to the other side of the Iranian conflict. Energy will come down.”

But that’s an assumption, not a policy lever.

The Iranian conflict remains very much in the balance. The consequences for energy infrastructure and oil supply haven’t simply disappeared. If the conflict persists or escalates and oil reverses higher, one of the key foundations of that virtuous cycle goes with it.

Despite the recent sell-off, oil's weekly structure remains constructive. Price is holding above a rising 200-week EMA, with the 40- and 50-week averages now above it, technically, oil remains in a moderate uptrend.

And the second requirement, an orderly adjustment in the yen and Japanese bond market, is ultimately determined by markets.

Bessent may have bought the market time.

Oil has fallen sharply. The yen has stabilised. Bond yields have come off their highs. The immediate pressure has eased.

But if oil turns higher again, or the adjustment in Japanese rates and the yen becomes disorderly, we may find out very quickly whether last week’s intervention solved the problem, or simply bought some time.

Why I Think This Matters for Gold

Which brings me back to gold.

I don’t want to overstate this. But there’s a reasonable chance we look back on last week as another milestone for gold, perhaps even in the same conversation as the freezing of Russia’s foreign-exchange reserves in 2022.

2022 was pivotal because it forced central banks to reconsider what owning a reserve asset actually meant. If your reserves could be frozen, were they really yours? What followed was official-sector gold buying and a gradual move away from Treasuries at the margin.

But that process was orderly.

Last week was different.

This wasn’t about whether Treasuries could be owned. It was about whether they could be sold.

If one of America’s largest foreign creditors needs dollars during a period of stress, but selling Treasuries risks destabilising the Treasury market itself, the problem has moved from theoretical to practical.

And it arrives at an uncomfortable moment. U.S. federal debt is approaching $40 trillion. On my own numbers, mandatory spending and true interest expense now absorb roughly 95 cents of every dollar the government collects. Inflation remains sticky. Long-term yields, even off their highs, remain structurally elevated, in part because of the debt load.

This is where my Fiscal Flexibility Index matters. For the last year I’ve argued the destination was fiscal dominance: monetary policy increasingly constrained by the fiscal position. Last week may have been the first time we saw the rubber hit the road.

See here for more info on The Fiscal Flexibility Index

Faced with rising Japanese yields, a weaker yen, potential Treasury selling and higher U.S. long-term rates, policymakers intervened. Not because Treasuries had failed, but perhaps because they could no longer afford to let the market set the price.

The post-2022 gold story was about trust.

The next phase may be about arithmetic.

Gold has no counterparty. It doesn’t need a repo facility. And nobody has to worry about what happens to another country’s bond market when you sell it.

2022 asked whether your reserves could be frozen.

2026 may be asking whether they can be sold.

For gold, that distinction could prove enormously important.

I have family visiting from England this week, people I haven’t seen in more than 25 years, so I’m on tour-guide duty. I’ll try to put out a few brief technical notes during the week, but before I go, a couple of key takeaways from the price action, which, ultimately, is the most important metric.

If there was one market takeaway from last week, it was the price action in precious metals.

That rally was more than short covering. I think last week was significant. In all likelihood, a low is in, and my bias is to buy the pullbacks.

Gold finally broke back above its 50-day moving average last week, the first signal I was looking for that the bulls were regaining control. It reached my next key level around $4,400 before rejecting it slightly, so a convincing close above there remains the confirmation I want to see. But last week was powerful, and even more encouraging was the performance of gold equities relative to the metal itself.

GDX vs Gold pulled back almost exactly to the 50% retracement of the entire move from the 2025 low to the 2026 high, held it, and then exploded back above its 50-day EMA last week. It was one of the strongest closes of this entire bull market. Very bullish.

We’ll come back to this chart if we get back to the 2016 and 2026 highs, which mark the top of this decade-long congestion zone. If GDX/Gold breaks out above there, things could get very interesting.

The leadership underneath the surface is equally encouraging. GDXJ versus GDX printed a weekly bullish engulfing candle and closed just above its 50-week EMA, which itself remains above a rising 200-week EMA. When gold equities are outperforming gold, and the juniors are starting to outperform the seniors, that's exactly the kind of leadership you want to see in a precious-metals bull market.

There’s always a but in markets. Always something that makes you question whether you’re right.

As bullish as gold behaved last week, as bullish as GDX versus gold looks, and as bullish as GDXJ versus GDX looks, the gold/silver ratio isn’t quite giving me the final thumbs up.

I want to see silver outperforming gold. The ratio has essentially been moving sideways, and a close below 67 would be the confirmation I’m looking for. Instead, the 200-day EMA is flattening and starting to turn higher, with the shorter-term averages also trying to push higher. I want to see the opposite.

But three out of four ain’t bad.

Let’s see how the week progresses, but I increasingly believe we’ve turned the corner in this four-to-five-month drawdown in precious metals.

Have a great week

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

What I underappreciated was the mechanism.

To buy yen, Japan needed dollars, and Japan’s dollars are tied up in roughly US$1 trillion of US Treasuries. The old way to free them was to sell the bonds. That’s the part that scared everyone, the world’s largest foreign holder liquidating into a long end already trading at its highest yields since 2007.

Bessent found the other door.

Instead of selling the bonds, Japan can pawn them at the Federal Reserve through its Foreign and International Monetary Authorities (FIMA) Repo Facility. The Fed lends dollars against Treasuries held in custody at the New York Fed. Japan takes those dollars, buys yen, and the bonds never touch the market.

Here’s my best attempt at simplifying what I think actually happened.

The facility was established in 2021 and is currently capped at US$60 billion per day per country. Market estimates suggest Japan spent somewhere between US$53 billion and US$59 billion supporting the yen on 30 July. The facility's daily ceiling is US$60 billion. Do the arithmetic.

That’s why Scott Bessent publicly called for the FIMA limit to be increased. Here’s the important part: he doesn’t need a full vote of the FOMC to get it. Under the Fed’s own authorising resolution, a designated subcommittee can raise the borrowing limit, extend the maturity of the repos and adjust the pricing, informing the full Committee afterwards. The request was made in public. The answer can be given in private.

That’s it.

That’s the whole trick.

No forced seller. No Treasury liquidation. No yield spike. No crisis for markets to absorb.

They found a way to strengthen the yen without forcing Japan to dump Treasuries into an already fragile bond market.

USD/JPY has spent the past few sessions sitting just below its 200-day EMA. Despite all the speculation, the yen hasn’t resumed its collapse.

The S&P 500 has surged to fresh all-time highs, while the Magnificent Seven, which had been lagging badly, has rebounded almost 10% from last week’s lows.

Perhaps most importantly, the US 10-year Treasury yield has fallen from 4.75% to around 4.60%. If Scott Bessent has one scoreboard he’s watching above all others, that’s probably it. The whole objective was to stabilise the bond market without forcing Japan to liquidate Treasuries, and so far that objective appears to have been achieved.

There’s another piece of the puzzle that’s equally important.

Stabilising the yen was only half the battle. The other major threat to markets was oil. The latest ceasefire headlines helped drive crude prices almost 20% lower from their 23 July highs, removing another major source of pressure on inflation expectations and bond yields.

Don’t think for a minute there wasn’t a crisis brewing, there was.

Oil was at US$92, pushing towards US$100 . The yen was in freefall. US Treasury yields were breaking out to their highest levels in nearly two decades. A reported US$45 billion hedge fund was being forced to unwind positions. Taken individually, each was manageable. Together, they were the ingredients for a genuine market accident.

None of these problems existed in isolation. They were all connected.

They needed oil lower. They needed the yen to stabilise. They needed Treasury yields to stop rising. And they needed an orderly way to deal with a highly leveraged fund.

So far, they’ve managed all four.

There used to be an expression:

“Don’t fight the Fed.”

On recent evidence, it might need updating:

Don’t f##k with Scott Bessent.

Whether it all stays this neat is a question for another note.

For now, let’s simply accept what the market is telling us and follow the price action.

Last week, in “The Australian Breakout?”, I wrote:

“The ASX has spent the better part of twelve months carving out a large rectangle consolidation. We did see a false breakout earlier this year, followed immediately by a brutal bear trap. For me, the signal would be a convincing weekly close above 9,200, which would represent a genuine escape from what has been a remarkably orderly congestion pattern.”

Yesterday the ASX 200 closed at 9,145, just below that breakout level.

The weekly close is what matters, but it’s certainly encouraging. More importantly, I’m starting to notice an increasing number of constructive-looking charts emerging across the Australian market.

Maybe Australia’s turn is finally coming.

I’ll cover gold in more detail later in the week, but for now the technical picture hasn’t changed all that much.

Gold continues to find resistance around its 50-day moving average and remains trapped between that resistance and support around the US$3,980 level. Until one of those levels gives way, I’m reluctant to read too much into the day-to-day price action.

What is beginning to catch my attention, however, is what’s happening beneath the surface.

Silver outperformed gold by around 2.5% overnight. It’s only one day, but it’s something I’m watching closely. I’d like to see the gold-silver ratio break back below both its 50-day and 200-day moving averages. That would signal silver is beginning to outperform gold again.

As I’ve written before, that’s usually a constructive development for the precious metals complex. Gold tends to be the defensive asset, while silver sits further out on the risk curve. When investors are prepared to buy silver ahead of gold, it often reflects growing confidence in the sector rather than simply a search for safety.

The other encouraging development came from the miners. Last night the GDX-to-gold ratio pushed back above its 40-day moving average after successfully holding its 50% Fibonacci retracement. That may sound like a minor technical detail, but it’s an important one. Bull markets in precious metals are typically led by the mining shares. If miners can begin outperforming bullion once again, it would be another small piece of evidence that the sector is starting to regain leadership.

It’s far too early to declare victory, but after several months of deteriorating relative strength, these are the sort of subtle changes I’d expect to see if the correction is beginning to run its course.

As usual, markets never make it that easy for us.

The next major hurdle is Friday’s payrolls report. The Fed has made it pretty clear that it no longer wants to provide much forward guidance. Instead, it wants markets to trade the data.

That makes this payrolls report particularly important. A weaker-than-expected number would likely reinforce the recent decline in bond yields, which should be supportive for gold and the broader precious metals complex. A stronger report, on the other hand, could see yields push higher again and temporarily reintroduce some of the headwinds we’ve been discussing.

As always, let’s keep an open mind and follow the price action.

Have a great week

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

Leopold Aschenbrenner is 25, a former OpenAI researcher who had never traded professionally before launching the fund in late 2024. By June, it was up 439% net and had grown to roughly US$45 billion. The trade was simple: long the AI build-out, short software. He borrowed roughly four times his capital to express the view.

Then both sides of the trade turned against him.

Chip stocks fell more than 30% in a fortnight while software rallied sharply, leaving the fund losing on both sides of the book simultaneously. Margin calls followed and, by Thursday, Citadel had reportedly purchased the fund’s remaining public portfolio. Assets are now estimated at around US$10 billion.

Markets have a habit of reminding investors that leverage works... until it doesn’t.

The interesting part, however, wasn’t the collapse itself. It was the market’s reaction.

Amazon reported after Thursday’s close. AWS revenue accelerated to its fastest growth since 2021, management lifted capital expenditure guidance to around US$220 billion, and the stock surged more than 15% on Friday. Microsoft had already delivered similarly impressive results.

A US$45 billion hedge fund was effectively liquidated into the tape... and the tape went up.

The Nasdaq is currently around 5% above last Thursday’s lows, while the S&P 500 sits just 1.5% below its all-time high.

While the liquidation of Leopold’s fund and the technology earnings dominated the headlines, bond yields quietly finished the week at their highs.

The 30-year Treasury yield climbed to 5.25%, its highest level since 2007.

The 10-year Treasury moved through 4.7%, its highest level since January 2025.

The Yen – It’s a Big Deal

Last Thursday Japan intervened aggressively to support the yen, spending more than US$50 billion in a single day, the largest single-day intervention in its history. The following day the US Treasury joined in through the New York Fed. Bessent has since publicly called the yen substantially undervalued, and Japan’s Ministry of Finance has been encouraging the country’s enormous state pension fund to bring capital home over time. That last part matters most: it raises the prospect of a structural source of demand for the yen, not simply another round of intervention.

Taken together, that is a meaningful shift.

For years, being short the yen has been one of the world’s most profitable and crowded trades. Investors borrowed at near-zero rates in Japan and put the money into higher-yielding assets around the world. While the yen stayed weak, the trade looked after itself.

Here is the bind. To defend its currency, Japan has to sell dollars, and Japan is the largest foreign holder of US Treasuries. Defending the yen risks putting upward pressure on US long rates at precisely the moment they’re already at their highest since 2007. Which is why Bessent is asking for the Fed’s FIMA facility, the plumbing that lets Japan raise dollars without dumping Treasuries, to be expanded over the coming months. That backstop is currently capped at roughly one day’s worth of what Japan spent on Thursday.

It increasingly appears that Tokyo and Washington are trying to engineer an orderly reduction in one of the world's largest leveraged carry trades. By enlarging the liquidity backstop, they're attempting to let leverage out without forcing widespread Treasury selling. Either way, the policy backdrop for yen shorts has changed materially.

The risk is that policymakers don’t get to choose the pace.

There is still a very large speculative short position in the yen, and for the first time in years it faces not just intervention but a genuinely hostile policy backdrop. Tokyo wants a stronger yen. So, now, does Washington. The policy backdrop has shifted against anyone still short the currency.

As I write, in Asian trading, the buying of yen has continued. USD/JPY has broken below the 200-day EMA and is approaching the May lows.

Markets rarely break because investors suddenly become bearish. They break because too many leveraged investors are forced to do the same thing at the same time.

If enough investors decide the environment has changed and cover at once, the buying of yen becomes the catalyst for selling everything else. US equities, credit and Treasuries funded with cheap yen borrowing may need to be sold to repay those loans. What begins as an orderly reduction in leverage can quickly become something far less orderly.

For me, the key indicator isn’t whether Tokyo intervenes again. It’s whether the yen continues strengthening on days when policymakers are absent from the market. If that happens, the marginal buyer is no longer a central bank, it’s private capital reducing leverage.

That’s when this story becomes much more important.

The strength in the yen has already begun feeding through to the US Dollar Index (DXY), which has fallen back into the middle of its year-long trading range. A softer dollar modestly eases global financial conditions. That’s important because trillions of dollars of debt around the world are denominated in US dollars. When the dollar rises, servicing that debt becomes more expensive, effectively tightening financial conditions. When the dollar falls, some of that pressure is relieved.

Net-net, these developments should be supportive for gold.

Gold is trading around 1% above Friday night’s lows, but from a technical perspective very little has changed. The July high at A$4,214 and the 50-day EMA at A$4,223 remain the first hurdles the bulls need to reclaim to regain control of the short-term trend. Beyond that, A$4,400 remains the major level that would give me confidence the correction has run its course.

Until then, it’s probably best not to get too excited.

One thing I found myself wrestling with over the weekend, as I tried to make sense of everything that happened, the stronger yen, the hedge fund blow-up and bond yields breaking to new highs, was just how resilient equities have remained.

If you’d told me six months ago that the US 30-year Treasury yield would be sitting above 5.2% and the S&P 500 would be trading within 1% of its all-time high, I would have said that sounded fanciful.

Yet here we are.

That led me back to a series of charts I’ve been watching for months. Rather than comparing assets against cash, I started comparing them against long-duration US Treasuries.

The results are remarkably consistent.

The S&P 500 continues to outperform TLT and is trading at fresh relative highs.

Despite the recent pullback, gold has continued to outperform long-duration Treasuries since 2020 and has now reclaimed its 50-week EMA, suggesting the longer-term relative uptrend remains intact

Copper continues to outperform TLT.

Even the Bloomberg Commodity Index has recovered to near relative highs after its correction earlier this year.

That got me thinking.

Perhaps we’ve been asking the wrong question.

We all know bonds are in a structural bear market. What gets less attention is that the equity bull market might be the same event, seen from the other end.

Money leaving government bonds doesn’t simply disappear.

It has to find another home.

Sometimes that’s gold.

Sometimes it’s commodities.

Sometimes it’s businesses with pricing power and real assets.

Equities may not be exceptionally strong. It may simply be that bonds have become increasingly unattractive.

That doesn’t automatically make me bullish equities at these levels. Higher long-term bond yields will eventually matter, and at some point the cost of capital begins to weigh on valuations.

But perhaps the more useful question today isn’t “stocks or cash?”

Perhaps it’s “financial promises or productive assets?”

A government bond is a claim on a number, fixed nominally, decades in advance, adjusting for nothing. If the currency it’s written in loses value, the promise is honoured in full and you’re still poorer. A copper mine promises you nothing, and that’s the point. It produces a thing, and the thing is priced in the currency of the day. Same for an oil field, or a business with pricing power. Their output reprices. A bond’s cannot.

If the bond market is undergoing a structural repricing, investors may increasingly favour ownership of productive businesses and real assets over fixed claims on future dollars.

That’s a subtle but important distinction, and it may help explain why equities have remained far more resilient than many, myself included, expected.

Conclusion

As I write on Monday morning, Bessent and the Bank of Japan appear to be getting what they wanted, for now. The yen is stronger, the US dollar is weaker, and US Treasury yields have eased modestly from Friday’s highs.

Whether they can let the air out of the world’s largest carry trade in an orderly fashion remains to be seen.

The collapse of Situational Awareness was a reminder that leverage is rarely the problem......until the funding behind it changes.

Right now, the funding currency underpinning one of the world’s largest leveraged trades appears to be changing.

Over the coming days, I’ll be watching three things.

First, does the yen continue strengthening without official intervention? If it does, that suggests private investors, not central banks, are beginning to reduce leverage.

Second, can the 30-year Treasury yield retreat from recent highs? If long-end yields continue pushing higher despite a weaker US dollar, then the bond market remains the dominant story.

Finally, can equities continue absorbing all of this? So far, they’ve been remarkably resilient. If that resilience starts to crack while the yen continues strengthening and bond yields remain elevated, the probability of a broader de-risking event increases.

Price action will tell us far more than the headlines.

Have a great week

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

Thirty-year Treasury yields climbed above 5.2%, their highest level since 2007. Warsh reaffirmed the Fed’s commitment to restoring price stability but offered little guidance on September.

For me, the bigger story is the bond market. Long-term yields continue to tighten financial conditions regardless of what the Fed does. Technically, 30-year Treasury yields are testing a multi-year resistance zone that capped the market in 2023, 2025 and again in May this year. A monthly close above 5.25% would complete a significant breakout and create another headwind for equities, housing and government finances.

Stepping back, I think this monthly chart may be one of the most important in global macro today.

I started in the markets in 1993, at the tender age of 19. Unless you’ve only been trading for the past two or three years, almost every market professional has spent the formative part of their career in a secular bond bull market, a world where inflation and bond yields trended lower for decades.

That was the era of globalisation, peace dividends and China’s entry into the World Trade Organization. Every major risk-off event, from the Asian Crisis to the GFC and COVID, reinforced the same lesson: buy bonds, buy the dip and wait for central banks to ride to the rescue.

I think that world changed around 2022. The chart above suggests the secular trend in bonds may have reversed, ending a 40-year bull market that began in the early 1980s and ushering in a new regime of structurally higher bond yields. We’re moving from a world of globalisation and disinflation to one of fiscal dominance, re-shoring, trade wars and kinetic conflict (both inherently inflationary), where governments increasingly prioritise resilience over efficiency. Add in AI, electrification and rising defence spending, and the world is becoming far more commodity intensive. If that’s right, the next decade may reward a very different set of investment themes than the last.

The dollar is on trial. After breaking above a year-long consolidation, the DXY has reversed sharply and is now back testing the breakout zone. So far, the move lacks conviction. A break back below the 50-day EMA and the July low would turn this into a classic bull trap. For now, the bulls still have the benefit of the doubt, but only just.

Tech stocks were sold again after the Fed, leaving the sector looking short-term oversold. Microsoft’s earnings then triggered a strong after-hours rebound from those oversold levels, but the broader market still has something to prove.

The S&P 500 is sitting on key support around 7,400. If buyers can defend that level into Friday’s close, the uptrend remains intact. If not, it may be the first sign that rising bond yields are finally starting to weigh on the broader market.

Gold finally caught a bid, and I’ll happily take it. The first test now sits at the July high (4,214) and the 50-day EMA (4,223). A move back above that zone would provide the first real evidence that buyers are regaining control.

For me though, 4,400 remains the line in the sand. Until gold can reclaim that level, I’ll treat this as a rally within a correction rather than confirmation that the bulls are back in charge.

They’re Not Buying Ounces. They’re Buying Time.

Why the economics of mine building are changing, and why that matters for gold developers.

The most important thing I heard at the Noosa Mining Conference wasn’t about the gold price.

It was about waiting.

Read more

That may be about to change.

Today’s softer-than-expected CPI print has probably taken another RBA rate hike off the table for now. That was enough to push the ASX 200 to the top of a trading range that has contained the market for almost a year.

The technical picture is becoming increasingly interesting.

As the chart below shows, the ASX has spent the better part of twelve months carving out a large rectangle consolidation. We did see a false breakout earlier this year, followed immediately by a brutal bear trap, so I don’t think today’s move should be chased just yet. For me, the signal would be a convincing weekly close above 9,200, which would represent a genuine escape from what has been a remarkably orderly congestion pattern.

Banks have staged an impressive recovery over the past few months and have significantly outperformed the resources sector. That’s not particularly surprising. Higher long-term bond yields have steepened yield curves around the world, improving the earnings outlook for banks, while investors have preferred the relative earnings certainty of financials as commodity prices consolidated.

Today’s CPI release, however, gave us a glimpse of how quickly leadership can change when markets begin pricing easier monetary policy. As I write, the ASX 200 Resources Index is up around 1.15%, while the Financials Index is little changed.

Using the BHP versus Commonwealth Bank ratio as a simple proxy, the relationship has now pulled back almost perfectly to its 200-week exponential moving average.

That is a level worth watching.

If my broader view is correct, that we’re in the early stages of a structural rotation back towards commodities, then this is exactly where resources should begin to regain relative leadership. A decisive bounce from here would suggest the recent pullback has been little more than a pause within a much larger trend.

Another area that caught my attention today was the healthcare sector. CSL and Cochlear, two of the worst-performing large-cap stocks in the last financial year, led a broad rally across the sector, with almost every major healthcare stock up 2–3%. It suggests investors may finally be prepared to look beyond the recent earnings disappointments.

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade (see full disclaimer at the end, if you make it that far!)

Technically, CSL (above) is beginning to look particularly interesting. After more than a year of making lower highs and lower lows, the stock has now registered both a higher low and a higher high, the first meaningful change in trend since the decline began. Even more encouraging, the 40-day EMA is on the verge of crossing above an upward-sloping 50-day EMA, something we haven’t seen in over a year. While it’s still early days, it is the type of price action you would expect to see if a major bottom were forming.

Interest-rate-sensitive retailers also joined the party. Harvey Norman (above) rallied strongly and is now testing an important resistance zone, while JB Hi-Fi (below) continued to recover from its recent lows. Both businesses stand to benefit if today’s inflation surprise ultimately translates into lower borrowing costs and stronger consumer confidence.

It all feels a little counterintuitive. If you were asked to pick the market most likely to be on the verge of a major breakout, Australia probably wouldn’t be high on the list. Weak productivity, together with the recent budget and tax policies, hardly scream bull market.

Yet price has a habit of humbling strong opinions. We still need to see confirmation above the top of the range, but perhaps today’s price action is the market’s way of saying Australian interest rates have peaked and investors are beginning to position for the next phase of the cycle?

Have a great week

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

The bond market got a vote this week, and it voted hawkish.

The biggest development was the breakout in US 10-year Treasury yields. Part of that reflects the sharp rise in oil prices, but there is another force at work: an enormous wave of bond issuance.

It isn’t just the US Treasury borrowing record amounts. As I discussed in Too Strong to Cut, the hyperscalers are also issuing billions of dollars of debt to fund AI infrastructure. Governments and corporations are now competing for the same pool of capital, and increasingly it is the bond market, not central banks, that is setting the price of capital.

The Smoke Detector

In There’s Never Just One Cockroach, I wrote:

If private credit is the first cockroach, junk bonds are the smoke detector.

This week JNK recorded its lowest weekly close since late March. The 40- and 50-week EMAs remain below a gently declining 200-week EMA, leaving the technical picture under pressure. It hasn’t broken its March lows yet, so it isn’t panic stations, but for the first time in months the chart looks more bearish than bullish.

One important caveat: JNK can weaken for two very different reasons. Higher Treasury yields reduce the value of all bonds, including high-yield debt, while widening credit spreads reflect growing concerns about corporate defaults. At this stage, much of JNK’s weakness appears to be driven by higher Treasury yields rather than a broad deterioration in credit quality. A sustained widening in high-yield credit spreads would be the stronger signal that the smoke detector is really starting to sound

The Nasdaq 100 recorded its weakest close in a month and looks increasingly vulnerable to a pullback towards its 200-day EMA.

The Magnificent Seven fared even worse, falling 6.5% for the week and closing below its 200-day EMA.

After correcting 24% from its highs, the semiconductor index attempted to reclaim its 50-day EMA but was rejected, ending the week back below it. Until that level is regained, the burden of proof remains with the bulls.

Leadership cracking doesn’t necessarily mean leadership is leaving equities, but it does suggest the character of the market may be beginning to change.

Disclaimer: This isn’t investment advice. It’s a perspective, not a licence to trade. (See the full disclaimer at the end—if you make it that far!)

Why Technology Matters for Gold

The reason I continue to highlight the Nasdaq, the Magnificent Seven and the semiconductor index is simple: they have been the market’s undisputed leadership group. If they are entering a more meaningful correction, it will become increasingly difficult for the broader indices to keep advancing.

More importantly, it could become the catalyst for a rotation into precious metals.

Over the past five to six months, gold has been battling three powerful headwinds. First, higher real yields have increased the opportunity cost of holding a non-yielding asset. Second, an extraordinary amount of capital has been drawn into technology and the AI ecosystem, leaving little appetite for anything else. Third, the correction has been exacerbated by forced selling from late-arriving retail investors, alongside some limited official-sector selling at the height of the regional conflict, most notably by Turkey.

Importantly, there are signs that this headwind is beginning to fade. China's gold imports have risen for three consecutive months, with June imports reaching 173 tonnes, the strongest monthly total since March 2024. That suggests physical demand is strengthening again as prices have retreated, helping absorb some of the selling pressure seen earlier in the year.(source)

If technology begins to lose its leadership, another headwind starts to disappear.

The impact of higher yields is more nuanced. In the short term, rising real yields remain a headwind for gold. But if borrowing costs continue to climb, they eventually become a problem for policymakers.

As I discussed in The Fiscal Flexibility Index, persistently high yields, now compounded by a costly and potentially inflationary war, are exactly what Treasury Secretary Scott Bessent and the administration do not want. They need stronger growth and lower borrowing costs. If yields continue to move higher, something in the system is likely to give.

That doesn’t mean gold rallies immediately. We still don’t have the technical evidence that a durable bottom is in place, and another leg lower cannot be ruled out. But gold has a long history of sniffing out trouble before the Federal Reserve does. The technical evidence isn’t there yet, but when it arrives, I believe the next major move in the precious metals complex will be higher.

One final thought

The biggest event locally next week will be Australia’s CPI and PPI data. Globally, however, all eyes will be on the Federal Reserve.

It will be fascinating to see what Chair Warsh does. A rate hike into higher oil prices, rising bond yields and a market that is already beginning to show signs of fatigue would, in my view, be a meaningful headwind for risk assets. That said, I still think the most likely outcome is that the Fed remains on hold while retaining a hawkish bias.

The more important question is what happens over the months ahead. If inflation proves sticky and the Fed continues to prioritise price stability, higher real yields are likely to remain a headwind for gold. But if rising borrowing costs begin to expose cracks in the economy, the equity market, the credit markets or even the Treasury’s funding task, policymakers may eventually be forced to change course. That would weaken the US dollar and create a far more supportive environment for precious metals.

Either way, I suspect this will be one of the most closely watched Fed meetings in years. I’ll gather my thoughts from the Noosa Mining Conference and put out a more detailed note after the Fed meeting, unless something material happens in the meantime.

Have a great weekend.

Stay sharp.

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

Oil. Transport stocks. Manufacturing data. Bond markets. Semiconductors. Commodity ratios.

The more I thought about it, the more they all pointed towards the same conclusion.

The economy simply isn’t slowing enough to justify lower interest rates.

The problem is that large parts of the financial system increasingly need them.

Oil is becoming an inflation problem again

Oil has rallied 22% in just over two weeks, reclaiming its 200-day moving average. As I press send on this report, it appears the Middle East has deteriorated again. Reports over the weekend suggest the ceasefire has effectively collapsed, with US casualties raising the risk of a broader escalation.

Unless tensions ease dramatically before markets reopen, it is very hard to imagine crude opening anywhere other than higher.

More concerning, however, is what is happening further down the supply chain.

The diesel crack spread, the margin refiners earn by turning crude oil into diesel, has surged back towards the extremes reached during the Russia-Ukraine energy shock. Part of that reflects Russia curbing diesel exports after Ukrainian drone strikes damaged refining capacity, reducing fuel available to global markets.

Diesel is the fuel of the real economy. It powers trucks, ships, mining equipment and agriculture, meaning higher diesel prices eventually feed into freight costs, production costs and, ultimately, consumer prices.

If this proves to be more than a temporary disruption, it represents another supply-driven inflation shock at exactly the wrong time. Combined with the renewed escalation in the Middle East, it only strengthens the case that inflation risks remain tilted to the upside.

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade (see full disclaimer at the end, if you make it that far!)

Transport Stocks Tell a Different Story

Interestingly, transport stocks don’t appear concerned.

The Dow Jones Transportation Average, made up of America’s largest railroads, airlines, trucking companies and freight operators, has quietly become one of the strongest-performing indices this year.

According to Dow Theory, transports are one of the market’s best barometers of economic activity. If goods are being produced, someone has to move them.

With the Dow Industrials, the S&P 500 and now the Transports all pushing to new highs, the market continues to signal that economic activity remains healthy.

That leaves an interesting contradiction.

Higher diesel costs and stronger transport stocks shouldn’t comfortably coexist for long.

Either diesel prices retreat...

...or transport companies eventually begin to feel the squeeze.

One of those markets is likely to be wrong.

The data keep refusing to weaken

Thursday’s Philadelphia Fed Manufacturing Index came in at 41.4, crushing expectations of 12.7 and producing one of the strongest readings of the post-COVID expansion.

One data point never makes a trend, but it fits a broader picture.

• Oil is rising.

• Diesel crack spreads are widening.

• Transport stocks are making new highs.

• Manufacturing remains surprisingly resilient.

These simply aren’t the conditions that normally precede aggressive interest rate cuts.

Two Objectives, One Interest Rate

The stronger the economy remains, the harder it becomes for the Federal Reserve to justify cutting interest rates.

The problem is that Washington increasingly needs them.

As I discussed in The Fiscal Flexibility Index, a significant portion of US government debt matures every year and must be refinanced at prevailing market yields. The longer interest rates remain elevated, the larger the government’s interest bill becomes.

The Fed is focused on inflation.

The Treasury is focused on financing.

For the first time in many years, those objectives are beginning to pull in opposite directions.

The bond market is taking notice. US 2-year Treasury yields finished the week at their highest level since February 2025, reflecting expectations that the Fed may have to keep rates higher for longer. From a technical perspective, the 40-week EMA has now crossed above the 50-week EMA, another indication that momentum in short-term yields is turning higher.

For now, the bond market appears to be siding with the Fed rather than the Treasury.

Capital is becoming scarcer

It’s not just the US Treasury competing for capital.

America’s largest technology companies have become significant borrowers as they fund AI infrastructure, data centres and shareholder returns. (source)

Recent data from Apollo suggest investors are becoming more selective. The average cover ratio for bond issues from Amazon, Apple, Microsoft, Meta and Oracle has fallen to around 1.7 times, the lowest level since at least September last year.

That doesn’t mean these companies are under financial stress.

Far from it.

But it does suggest capital is becoming a little less abundant than it has been.

Governments...

Investment-grade corporates...

Private credit...

Hyperscalers...

They’re all competing for the same global pool of savings.

The price of that capital is interest rates.

Watching for the First Cracks

I want to be clear about where I stand.

I believe we’re living through an AI investment bubble.

I also believe we’re living through a sovereign debt bubble.

That doesn’t mean either has to burst next month, or even next year. History is full of bubbles that became even larger after they first looked overextended.

I’m not trying to predict the timing.

I’m trying to identify the first meaningful cracks.

If the AI investment cycle eventually begins to unwind, the implications are likely to extend well beyond the technology sector. At a time when the US government is already financing record deficits, a meaningful slowdown in asset prices, capital raising or economic activity would place even greater pressure on the fiscal position.

For now, I’m content to let the evidence accumulate and allow price, not opinion, to tell me when the market agrees.

Semiconductors may be providing one

Several weeks ago I highlighted the bearish engulfing pattern that developed on the Semiconductor Index after one of the strongest rallies in decades.

Since then, the sector has continued to weaken.

Whether this develops into a routine correction or something larger remains impossible to know.

What interests me more is the positioning behind it.

US margin debt has climbed to record levels (source), while South Korea, one of the world’s most speculative semiconductor markets, has reportedly seen more than one million retail investors receive margin calls during the recent pullback. (source)

Leverage doesn’t cause markets to fall.

But it can make corrections much more violent once they begin.

I’ve seen that movie before.

Silver behaved in much the same way last year. As prices accelerated, leverage increased and investors became convinced the trend could only continue. Eventually, relatively modest selling pressure snowballed into forced liquidation.

Bull markets rarely end because valuations become expensive.

They end because buyers run out...

...or leveraged buyers are forced to become sellers.

Has the Rotation Already Begun?

While semiconductors have started to lose momentum, something else has quietly caught my attention.

The Bloomberg Commodity Index has now pulled back to what is, from a technical perspective, exactly where you would expect a healthy correction to end. After rallying strongly from last August’s lows, the index has retraced almost precisely to its 50% Fibonacci retracement level. On the daily chart, that level also coincides with the rising 200-day moving average, creating an important area of support.

It’s not just the broad commodity index. Copper miners (COPX), diversified miners (XME), steel (SLX) and rare earths (REMX) have all corrected back to similar support levels relative to the S&P 500. Collectively, they are sitting at an important technical crossroads.

Markets often rotate leadership rather than move in unison. If the commodity complex can stabilise here and begin making higher highs while semiconductors continue to lose momentum, it would provide another piece of evidence that leadership is beginning to rotate away from the AI winners of the past several months and back towards hard assets.

Equally, I’ll know quickly if I’m wrong. A weekly close below the 200-day moving average and that 50% retracement, and the setup has simply failed. No rotation, no thesis, back in the drawer until the evidence improves.

It’s far too early to declare that rotation has begun. But this is exactly the type of setup where major leadership changes often begin.

Food for Thought

Hat tip to Luke Gromen, who highlighted an outstanding article on the Groundbreaker Substack titled “The Second Derivative: Why No One Understands the AI Boom.” It’s a long read, but one of the best pieces I’ve read on this subject. Even if you’re firmly in the bullish camp on the AI ecosystem, it’s thought-provoking nonetheless.

The article argues that today’s AI infrastructure build-out may ultimately prove to be this cycle’s equivalent of the pre-2008 housing boom. The comparison isn’t about mortgages or subprime lending, it’s about a highly leveraged investment cycle whose biggest risk emerges when growth stops accelerating.

Whether that analogy ultimately proves correct remains to be seen.

When I combine that framework with softer demand for hyperscaler debt issuance, record investor leverage, signs of fatigue in semiconductors, and the commodity complex arriving at major technical support, I think it’s worth paying attention.

Since much of this note was written, events in the Middle East have escalated sharply. In the short term, that clouds the outlook. Sustained higher oil prices would add to inflationary pressures, place upward pressure on bond yields, and almost certainly increase volatility across financial markets.

Longer term, however, I think the structural case for hard assets remains intact, perhaps even stronger. A world of de-globalisation, strategic stockpiling, fractured supply chains and export restrictions is a world where commodities become increasingly strategic rather than simply cyclical.

That remains one of the reasons I continue to favour gold over the long term.

In the near term, though, I recognise the tension. Resilient economic data, higher oil prices and rising bond yields could continue to support higher real interest rates, traditionally a headwind for gold. My gold thesis has never been a cyclical one; it’s a fiscal one, and it plays out over years rather than weeks. That also means I need to be prepared to be early, and at times, to look wrong while I wait for the market to confirm the thesis.

In the near term, though, we may have to contend with a much noisier and more volatile market.

I’m off to the Noosa Mining Conference this week, where I’ll be catching up with companies, investors and, hopefully, uncovering a few new ideas. I’m looking forward to catching up with many of you in Noosa. Until next week.

Have a great week

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.

Every year there are a handful of months that make the US fiscal position look healthier than it really is.

June is one of them.

It’s one of the government’s strongest tax collection months, helped by quarterly estimated tax payments from corporations and higher-income individuals. After May’s ugly deficit, receipts jumped almost 50%, from $336 billion to $496 billion, while the monthly deficit narrowed from $293 billion to $120 billion.

On the surface, that looks like meaningful progress.

Its not.

Introducing the Fiscal Flexibility Index

I’ve started tracking a measure I call the Fiscal Flexibility Index (FFI).

It measures how much of every federal revenue dollar remains after funding the government’s five largest essential obligations:

• Social Security

• Medicare

• Health

• Net Interest

• Veterans’ Benefits

These obligations consume revenue before policymakers have meaningful discretion over how the rest of the budget is allocated.

The lower the index falls, the less room Washington has to fund the rest of government without borrowing.

Fiscal Year Fiscal Flexibility

FY2021 =20.6%

FY2022 =25.7%*

FY2023 =8.7%

FY2024 =9.5%

FY2025 =6.3%

FY2026 (YTD – 9 Months) =5.6%

*FY2022 benefited from unusually strong post-pandemic tax receipts.

The trend is becoming difficult to ignore.

Since the post-pandemic revenue surge faded, fiscal flexibility has continued to erode, even as federal tax receipts have climbed to record highs.

Washington isn’t running out of revenue.

It’s running out of discretionary revenue.

When the Good Months Aren’t Good Enough

June is supposed to be a good month.

It’s one of the government’s strongest revenue months of the year.

Yet after collecting almost half a trillion dollars, the Fiscal Flexibility Index still came in at just 2%.

That left only 2 cents of every revenue dollar to fund the rest of government.

Everything else was financed through borrowing.

If that’s what a good month looks like, imagine what the weaker revenue months look like.

The race that matters

For a long time I framed this as a race between government receipts and the interest bill.

I think that’s now too narrow.

The real contest is between government revenue and the entire mandatory spending complex.

Through the first nine months of Fiscal Year 2026:

• Receipts: $4.15 trillion

• Mandatory spending: $3.92 trillion

• Fiscal Flexibility Index: 5.6%

One number jumped off the page.

Between May and June the Treasury collected another $495 billion in revenue.

Mandatory spending increased by $485 billion.

Almost every additional dollar collected went straight back out the door.

Washington isn’t getting ahead.

It’s barely keeping pace.

The bond market

Over the past three weeks, the US 10-year Treasury yield has risen 20 basis points and, at the start of this week, was up as much as 27 basis points, returning to its highest level in more than a year.

The Federal Reserve has struck a more hawkish tone. Oil prices rebounded on renewed tensions in the Middle East, lifting inflation expectations. Together, those developments pushed long-term yields steadily higher.

This week, however, both Consumer Price Index (CPI) and Producer Price Index (PPI) data came in softer than expected, easing concerns that inflation was beginning to reaccelerate. Treasury yields retreated from their recent highs as markets reassessed the inflation outlook.

At the same time, Federal Reserve Chair Kevin Warsh spent two days before Congress reinforcing the Fed’s determination to prevent inflation from becoming embedded.

“The longer that prices have been above the inflation target, it’s usually a bit harder to dislodge them and get them lower. Our job... is to take sticky prices and to unstick them.”

The softer inflation data, the Fed’s hawkish rhetoric and higher oil prices left markets with competing signals. By week’s end, the 10-year Treasury yield had eased to around 4.56%, below its recent high, but still well above the levels seen just a few weeks ago.

The June Treasury Statement, released this week, brought the fiscal arithmetic back into focus.

For the second consecutive month, the Federal Government’s Net Interest bill exceeded $100 billion.

• May: $107 billion

• June: $104 billion

At the same time, long-term borrowing costs are moving higher. That matters because a significant portion of Treasury debt matures every year and must be refinanced at prevailing market yields. If those yields continue to rise, today’s borrowing costs become tomorrow’s interest bill.

Oil may influence yields in the next few weeks. Fiscal arithmetic will determine the next few years.

Every increase in long-term Treasury yields reduces tomorrow’s Fiscal Flexibility.

The Fiscal Flexibility Index suggests Washington has less room to absorb higher interest rates than at any point in decades.

The sequence is straightforward:

Higher yields today → Higher interest costs tomorrow → Lower Fiscal Flexibility → Greater Fiscal Dominance.

The Fed is trying to restore price stability. The Treasury is trying to finance record deficits. As debt continues to grow, those objectives are becoming increasingly difficult to reconcile. That’s why the Fiscal Flexibility Index matters.

Gold and Markets

I’ve just returned from holiday and head to the Noosa Mining Conference on Tuesday, so I’ll put together a more detailed market update before I leave.

For now, a few observations.

The Nasdaq looks set to finish the week lower. If it closes around current levels, it will finish below its 50-day EMA for the first time in several months.

The S&P 500 continues to looks healthier. It remains comfortably above its 50-day EMA and came within touching distance of fresh all-time highs this week.

Meanwhile, the Semiconductor Index continues to weaken. Semiconductors have been the market leaders throughout this rally. Leadership rarely disappears quietly. If the sector continues to weaken, it would suggest investors are beginning to rotate away from the highest-growth areas of the market.

My expectation has been that some of that capital would eventually find its way into gold and precious metals.

So far, that hasn’t happened.

In my previous update, I noted that gold had begun to carve out a higher low and that the technical picture was becoming more constructive. Unfortunately, that improvement proved short-lived. For now, the bears remain in control.

The important point, however, is that the technical picture and the macro picture are telling different stories.

Technically, gold still has alot of work to do.

Fundamentally, I struggle to recall a stronger backdrop. As today’s Fiscal Flexibility analysis highlights, structural deficits, rising interest costs and deteriorating government finances continue to strengthen the long-term investment case for gold.

Could we see one final washout before the next major advance?

Absolutely.

Do I know whether that’s what happens next?

No.

That’s why patience remains so important.

The market will eventually tell us when the coast is clear, and when it does, I expect there will be an opportunity to add aggressively.

Until then, I am trying remain patient.

For long-term investors, I continue to believe periods like this are opportunities to gradually accumulate quality gold and precious metals exposure. (As always, this is not personal financial advice, please do your own research.)

Final thoughts

June is one of the Treasury’s strongest revenue months.

The headline numbers looked encouraging.

The underlying trend did not.

Washington continues to collect record amounts of tax revenue, yet almost every additional dollar is immediately absorbed by mandatory spending and interest costs.

The Fiscal Flexibility Index has fallen from 9.5% just two years ago to 5.6% today.

That’s why I believe this measure is worth watching.

Not because it predicts the next move in markets, but because it tells us something about the long-term direction of US fiscal policy.

The next few months will be important. July and August are typically much weaker revenue months than June. If fiscal flexibility continues to deteriorate despite record tax collections, it will reinforce the structural themes I’ve been writing about for some time.

For now, the technical picture in gold remains frustrating.

The macro picture, however, continues to strengthen.

Eventually, one of those two views will have to give way.

It’s simply the arithmetic.

Have a great weekend

Stay Sharp

P.S. If you enjoy these posts, please give it a like and share it.

https://tasmanlovell39.substack.com/publish/home

https://x.com/Lovell_bullbear

Disclaimer: This Isn’t Investment Advice, It’s a perspective, not a License to Trade

The Lovell Bull Bear Report is an independent publication intended for informational and educational purposes only. It reflects the views, observations, and occasional battle scars of a market participant, not personalized investment advice. Any opinions, charts, or trade ideas shared here are general in nature and not tailored to your individual financial situation, risk tolerance, or emotional constitution.

Markets are unpredictable beasts, and while we strive for clarity and conviction, we cannot guarantee accuracy, completeness, or future results. Investing involves risk, sometimes a lot of it, and past performance is no guarantee of future outcomes. You should do your own research (or consult a licensed advisor) before acting on anything you read here.

Tom Lovell, its publisher, and any related parties accept no liability for losses, financial, emotional, or otherwise, that may result from decisions based on this content. We may hold positions in securities mentioned, and those positions may change without notice. Nothing in this note constitutes a solicitation, offer, or recommendation to buy or sell any financial instrument. In short: read wisely, act carefully, always respect your stops, and remember, by the time you read this, the market may have already moved.