Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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.


© 2005-2022 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