Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Trends and Central Bank Balance Sheet Expansion

Stock-Markets / Stock Markets 2012 Sep 02, 2012 - 11:24 AM GMT

By: Submissions


Best Financial Markets Analysis ArticleGeorge Tsiourvas writes: It’s been a slow week, we spent it mostly waiting to get to Bernanke’s speech at Jackson Hole. When we finally got there exactly what we were expecting happened: nothing! A substantial part of Bernanke’s speech went into details regarding cost vs benefit with respect to making monetary policy with non traditional tools. He acknowledged that additional asset purchases have the potential to impair the functioning of securities markets. Read the whole speech here: .

This cannot really be what the money printing afficionados have been looking for. No immediate action was announced, simply a routine statement at the end of the speech that the FED is still there to take action if and when necessary shall suffice this time around. Europe is in similar mode, talk a bit, say nothing and mostly: do very little or nothing. Given that markets have bounced strongly over the last 10-12 weeks, given the expectation of heavy central bank intervention, with that expectation turning into dust, it is quite hard to see what everything is still trading that high.

In terms of charts we are now looking at most interesting situations. There are at this moment so many individual charts I could talk about that I will have to spread it over the next several days. Let’s start with the big picture and some monthly charts. First up is American large caps, represented by the SPX, versus Gold. The big picture has not changed at all. The big bull from 1981 to 2000 is still being retraced, it has been a decade long down trend now and no end in sight yet. There has been a bounce out of the 2011 sell off but that topped out in May of this year. Since then the SPX/Gold ratio has been trading lower again.

SPX vs Gold, SPX in Gold terms

Note the Stochastics in the indicator section of the chart. They show that since 2000, since this relationship started trending down, this indicator never managed to stay above 80 for long. Typically that level has represented a pretty good opportunity to sell. As we are not dealing with a trend change of any kind, not even a hint, I would not see why this should be different this time. The drop will likely stop in the area of the 1981/82 lows which would mean a full retracement of the bull move. I wonder how long it will take to get there.

A similar picture is given by Gold vs Copper. Since the beginning of 2012 that relationship has been attempting to break out higher again and thus get out of a 3 year sideways move post the sharp advance of 2008. In the battle between “growth” (Copper) and “value” (Gold), participants start to be looking more and more for “value” again.

Gold vs Copper, Value vs Growth

This should not come as a surprise given what we know and hear out of China lately, which obviously feeds through to commodity prices and asset values everywhere else, especially in countries such as Brazil or Australia but also individual sectors, like shipping (no matter if dry bulk, tankers or containers) remain weak as China keeps weakening.

Shanghai Stock Index

BVSP, Bovespa, IBOV, Brazil Stock Index

All of the above leads only to one conclusion: central bank balance sheet expansion has done nothing to stop the economic decline. In terms of Gold, which is an item many are not convinced of and it does not pay any dividend either, stocks have been trending lower for 12 years. The best group of stocks has been destroyed in value compared to how Gold has performed. It is hard to argue with a chart picture that strong.

I leave you to have a good look at these charts today. Tomorrow I will be back, narrowing down on the time frame, and looking at some more concrete things for next week and the first half of September.

Have a nice day!

Copyright © 2012 George Tsiourvas - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in