Saturday, February 18, 2012

18 Feb 2012 (Gold, Silver vs Nasdaq Update)

 Gold and oil are tracking pretty well due to the time shift between their starts.  I really hope oil doesn't do what it did soon in the 70s, but as we all know, hope doesn't do much in place of action.
 Short time frame oscillators show a negative divergence between the index peaks and these. 
All time frames combined give us a pretty good look at how overbought / oversold something is no matter your investing perspective.  If you want to buy, the odds are currently against you no matter how you look at it.  If you are an outstanding individual stock picker, this may not matter for a little while to you.
 Dow Transports in terms of Dow Industrials ratio (bottom).  Usually it is good for bull markets if this is increasing.  The glaring exception being the glaring transports dead cat bounce in 2008 after a more steep decline in 2007.  The Industrials have been outpacing the transports since early 2011.
JJC (the Copper ETF) in terms of the SP-500 (bottom - green).  Generally a rising ratio (JJC outpacing SP) indicates a strong bull market.  Again, since early 2011 we have seen deterioration. 

I didn't know if JJC was as bad as tracking actual copper as USO is at tracking crude so I decided to check.$COPPER:JJC&p=D&yr=3&mn=0&dy=0&id=p77344439382
Sure enough, actual copper has outpaced JJC by about 16% since 2009 so my chart is not completely accurate above.

Here is a better one, but it is not that much different:$COPPER:$SPX&p=D&yr=3&mn=0&dy=0&id=p30938694681

As a reminder of how poorly USO tracks crude:$WTIC:USO&p=D&yr=3&mn=0&dy=0&id=p42110621925

You can say well using this I would have missed this last rally.  Yes for the overall Dow and Nasdaq, but if you check out the chart of C, you will see it is still down 40% from that point.  Others are up significantly.  This is one of the reasons I advocate trading; if done well, it allows you to experience the good parts and miss a lot of the bad.

SP-500 in terms of VIX (bottom) shows a divergence between the SP price and the ratio still in both the longer term and currently (until it changes) the shorter term. 

"To combat depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection or production, we want to create further misdirection- a procedure which can only lead to a much more severe crisis as soon as the credit expansion comes to an end."
I don't know what will force our effort to expand credit to end.  Extreme inflation?
Fredrich Hayek, 1933

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