Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Pre-COVID US Economy Wasn’t All That Great Either - 4th Dec 20
Bitcoin Breath Taking Surge - Crypto Trading Event - 4th Dec 20
Platinum Begins A New Rally – Gold & Silver Will Follow - 4th Dec 20
Don't Let the Silver (and Gold) Bull Shake You Off! - 4th Dec 20
Stronger Risk Appetite Sends Gold below $1,800 - 4th Dec 20
A new “miracle compound” is set to take over the biotech market - 4th Dec 20
Eiro-group Review –The power of trading education - 4th Dec 20
Early Investors set to win big as FDA fast-tracks this ancient medicine - 3rd Dec 20
New PC System Switch On, Where's Windows 10 Licence Key? Overclockers UK OEM Review (5) - 3rd Dec 20
Poundland Budget Christmas Decorations Shopping 2020 to Beat the Corona Economic Depression - 3rd Dec 20
What is the right type of insurance for you, and how do you find it? - 3rd Dec 20
What Are the 3 Stocks That Will Benefit from Covid-19? - 3rd Dec 20
Gold & the USDX: Correlations - 2nd Dec 20
How An Ancient Medicine Is Taking On The $16 Trillion Pharmaceutical Industry - 2nd Dec 20
Amazon Black Friday vs Prime Day vs Cyber Monday, Which are Real or Fake Sales - 1st Dec 20
The No.1 Biotech Stock for 2021 - 1st Dec 20
Stocks Bears Last Chance Before Market Rally To SPX 4200 In 2021 - 1st Dec 20
Globalists Poised for a “Great Reset” – Any Role for Gold? - 1st Dec 20
How to Get FREE REAL Christmas Tree 2020! Easy DIY Money Saving - 1st Dec 20
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Chinese and Indian Tails Wagging the Global Equity Dog?

Stock-Markets / Stock Markets 2011 Dec 22, 2011 - 05:50 AM GMT

By: Adam_Brochert

Stock-Markets

Best Financial Markets Analysis ArticleThere is no significant decoupling in our current global economy. As I am typing this, the Chinese stock market (Shanghai Index or $SSEC) is making new lows (intraday basis) for the current decline it has been undergoing. Is the Chinese market signaling what comes next for developed stock markets like the US and Germany? Is the tail predicting what the dog will do? I think it is.



Here's a 2.5 year daily chart of the $SSEC with a daily plot of the S&P 500 ($SPX) below the $SSEC plot thru today's US market close:


I think another decent decline is imminent in "advanced" economy stock markets that haven't already experienced it. Japan is already in the midst and another BRIC economy market, that of India, looks very weak here. Here's a 6 month daily chart of the $BSE Bombay Index thru the close on 12-21-2011:


The Volatility Index ($VIX) is also screaming for equity bears to come out of hibernation. Here's a 6.5 year daily chart of the $VIX thru today's close:

Meanwhile, the "Gold versus paper" ratio is settling in and trying to find a bottom here. There is now an ETF that allows traders to bet on this ratio, a double leveraged ETF with ticker FSG. It represents a double-leveraged way to bet that the Gold to S&P 500 ratio (i.e. $Gold:$SPX) is going to go higher. Here is a 6.5 year daily log scale chart of this ratio thru today's close, using the GLD:$SPX ratio as a proxy:

Of course, the easiest way to play the "Gold versus paper" trade, which is the secular trade of the past decade (and it is not close to ending), is to buy physical Gold and avoid paper financial assets like stocks altogether. For those who like to trade with a portion of their capital, however, we are very close to the re-entry point for this ratio trade in my opinion.

Until the Dow to Gold ratio hits 2 (and we may well go below 1 this cycle), Gold will continue to outperform paper. It's really that simple. The twists and turns give commentators like me a chance to hear ourselves talk and traders a chance to try to juice the gains of a "buy and hold" strategy, but they are simply noise for conservative investors who understand the current secular trend. If you are crazy enough to try and trade in this environment, consider giving my low-cost subscription service a try. My subscribers and I have recently been and are still short emerging markets and are waiting for a good entry point to go long Gold stocks as our next trade.

Adam Brochert
abrochert@yahoo.com
http://goldversuspaper.blogspot.com

BIO: Markets and cycles are my new hobby. I've seen the writing on the wall for the U.S. and the global economy and I am seeking financial salvation for myself (and anyone else who cares to listen) while Rome burns around us.

© 2011 Copyright Adam Brochert - 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 http://www.MarketOracle.co.uk - 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