Asset prices are moving. We appear to have moved beyond chop to something more meaningful, even for US equities. The best way to explain this is via the instruments. Particularly the US$ index and Bullion have given clear signals of something more meaningful than the recent low volatility price action. The two key reserve instruments moving sharply like this says much as usually a stronger dollar is a clear sign of reduced global monetary liquidity which is usually not a good omen for risk assets and particularly leading US equity indexes like the sp500.
Looking at some of the sectors we can see the step change in volatility from yesterday’s bar. Semi conductors moved sharply lower indicating a possible steep correction to come. The Transports look like an excellent short target given their long range and inability to breakout.
Bullion wise I was able to get a few cash additions to the add leverage on the resurgent secular bullion bull earlier this year but was unable to add leverage. With the recent pull back in bullion and resumption of the dollar index bull the opportunity is about to present. A few stats for you with this in mind.
GLD – +31% from the December low. Price is currently sitting at the 38.2% fib retracement level.
SLV – +51% from its Jan low (moving after gold had based). Price sitting now at approx 50% fib retracement.
GDX +152% from its Jan low. Price now sitting at 50% retracement level.
SIL +258% from its Jan low. Price is now sitting at 38,2% retracement level.
The minor irony that the silver miners are out performing the underlying silver whereas gold miners are under performing their underlying. Logic or mis price? Anyway i post this information up for you. (GDX looks better value for now on this recent metric).
I’m less bearish international risk for now given the under performance of international risk in recent years and also the supportive currency debasement in rest of world vs the US$. Whilst its moving away from a carry trade set up for international equities its not, as yet, a good international bear market either. I remain open to this but im not convinced on that set up as yet.
Here the Swiss team
Here Fitzpatrick:
Even Fitzpatrick starting to lean toward sp500 2000 level as risk’s forward progress stutters and slides and is pretty bearish gold here due to the combination of higher rates and US$.
If this secular gold market is in line with its 1970s equivilent, post this correction gold should resume her uptrend in line with a renewal of inflation expectations and weak relative growth.
More coming..
Inc here Citi Asia with their tech comments:
here sc on fx
Rich