Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter


Market’s flight-to-safety: Should You Buy Stocks Now?

Stock-Markets / Stock Markets 2019 Aug 10, 2019 - 01:43 PM GMT

By: Troy_Bombardia


The stock market and bond yields recovered today from an early morning decline. Meanwhile, financial markets have exhibited some extreme flight-to-quality over the past few days. Today’s headlines:

  1. Lots of gaps
  2. Put/Call ratio remains high
  3. Flight to quality: part 1
  4. Flight to quality: part 2
  5. Similarities between today and 2016
  6. Bullish Percent falling to a new low
  7. Gold spiked (again)

Go here to understand our long term outlook. For reference, here’s the random probability of the U.S. stock market going up on any given day.


The S&P 500 has gapped a lot recently on the open. Gaps are common in a:

  1. News-driven environment
  2. Stock market crash (big swings during non-market hours)

The past 7 days have seen 4 opening gaps that are greater than 0.4% (absolute value %).

Similar historical cases with lots of gaps saw mixed forward returns in the short term, but were mostly bullish 6-12 months later.


The Put/Call ratio tends to move inversely with the S&P when the S&P is volatile.

  1. Stocks crash, put/call ratio goes up
  2. Stocks rally, put/call ratio goes down

This did not happen today. The Put/Call ratio spiked to a new high even though the S&P did not make a new low vs. 2 days ago.

Here’s what happened next to the S&P when the Put/Call ratio is at a 2 month high, while the S&P is more than 1% above a 5 day low.

The S&P’s 3 month forward returns are mostly bullish.

Flight to safety

Plenty of market watchers have noted an extreme flight to safety. Bond yields have tanked as investors bid up traditional safe assets (e.g. bonds).

As a result, the 10 year Treasury yield’s 5 day rate-of-change has fallen below -16%. This is on par with figures during many other stock market crashes:

  1. 2008/2009
  2. 2011
  3. 2015
  4. 2016

Here’s what happened next to the S&P when the 10 year yield’s 5 day rate-of-change fell below -10%.

The 6-12 month forward returns were mostly bullish.

Here’s what happened next to the 10 year Treasury yield.

The 10 year yield usually rallied over the next 3 months.

Flight to safety: part 2

Tom McClellan looked at the flight to safety in a different way. Instead of just looking at the change in Treasury bonds, he added the change in stocks. When stocks tank and bond prices surge (e.g. right now), there is flight to safety in the financial markets.

To avoid recency bias, here’s a more comprehensive chart that adds the 10 day rate-of-change in the S&P + the 10 day rate-of-change in the 10 year Treasury yield.

Here’s what happened next to the S&P when this figure fell below -20% in the past.

6-12 month forward returns were mostly bullish.

Similarities between today and 2016

Strategas noted that many different asset classes have done well this year. Stocks, bonds, gold, and REIT’s have all gone up a similar %.

Aside from right now, there is only 1 other case in which the S&P, TLT, Gold, and Dow Jones REIT Index are up more than 13% over a 7 month period:

  1. Now
  2. August 2016

Does this mean that today is “2016 all over again”? No. Hard to make any conclusions from n=1.


The NYSE Bullish Percent Index (a breadth indicator) has fallen to a 6 month low.

When the NYSE Bullish Percent Index fell to a 6 month low for the first time in more than 150+ days, the S&P’s 1 month forward returns were more bullish than random.


And lastly, let’s look at gold. The yellow metal continues to spike. Gold’s RSI (momentum indicator) has exceeded 80 twice over the past 30 days.

It’s rare for gold to spike twice during such a short period of time. When gold spikes (and RSI exceeds 80), it usually takes gold much more time to digest these overbought readings.

Rapid double spikes are signs of strong momentum. There are only 6 other cases, and gold performed well over the next 9 months.

But should you chase gold at this current price? I don’t think it’s the best idea. Gold’s volume has expanded significantly during the recent rally.

We cannot look at the absolute level of volume, since this changes throughout the decades. Instead, we can look at gold volume’s 50 dma in relation to its 200 dma. The bigger this figure, the more gold’s volume is surging.

This figure currently stands at 37%. The 6 similar historical cases were mostly bearish for gold in the short term.

Take my gold thoughts with a grain of salt. I don’t trade gold, and these are small sample sizes.

We don’t use our discretionary outlook for trading. We use our quantitative trading models because they are end-to-end systems that tell you how to trade ALL THE TIME, even when our discretionary outlook is mixed. Members can see our model’s latest trades here updated in real-time.


Here is our discretionary market outlook:

  1. Long term: risk:reward is not bullish. In a most optimistic scenario, the bull market probably has 1 year left.
  2. Medium term (next 6-9 months): most market studies lean bullish.
  3. Short term (next 1-3 months) market studies are mixed.
  4. We focus on the medium-long term.

Goldman Sachs’ Bull/Bear Indicator demonstrates that risk:reward does favor long term bears.

Click here for more market analysis

Here’s what happens next to the S&P when lumber rallies above its 50 week moving

By Troy Bombardia

I’m Troy Bombardia, the author behind I used to run a hedge fund, but closed it due to a major health scare. I am now enjoying life and simply investing/trading my own account. I focus on long term performance and ignore short term performance.

Copyright 2019 © Troy Bombardia - 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.

Troy Bombardia Archive

© 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

6 Critical Money Making Rules