Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

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