A Potential Shift in Relative Performance Between Gold and Oil

Gold has been a disaster lately, with the past few days seeing some large selling take over in this shiny metal market. I wrote about gold hitting resistance the day after gold ($GLD) peaked back in March and more recently last week I highlighted the triangle pattern that was forming on the daily gold chart with momentum hitting previous resistance. So where does gold stand now?

With the recent increase in weakness for gold ($GC_F) I wanted to show one bright spot that may be developing, at least compared to oil. Below is a chart of the relative performance between gold and crude oil ($CL_F). As a reminder, when the green line is rising we know that gold is outperforming oil. That could mean gold is rising more or gold is falling less than oilit doesn’t mean gold prices will start rising – this is just looking at the ratio between the two commodities.

The ratio right now is testing previous support going back to 2013. In late December and in August and September of last year we saw the ratio between gold and crude oil bottom around the 12.2 level. We also can see that the Relative Strength Index (RSI) as shown in the bottom panel just kissed the ‘oversold’ 30 level. Back in August ’13 we saw the RSI spend some time under 30 before seeing a shift in relative performance. However, if we go back further we can see that sometimes we just see a day or two of being ‘oversold’ in momentum before a trend change occurs in the ratio.

So with the relative performance ratio between gold and oil testing support and momentum being nearly ‘oversold’ its possible we see a shift in relative performance to begin favoring gold. We’ll see.

gold oil

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

Investors Show Lack Of Trust Of New Stock Highs

As the market hits new highs it appears traders are beginning to get a little more cautious based on the latest data of fund flows for the Rydex family of mutual funds. As I’ve written before, while sentiment polls are somewhat helpful, being able to watch what investors are actually doing provides a much clearer lens into the mind of the market. Even though the S&P 500 ($SPX) has been moving higher, albeit at a slow choppy pace, it seems both the bears and the bulls are hoping for a pullback but for difference reasons.

Below is a chart of the Total Money Market Assets at Rydex, as you can see since mid-2012 we’ve seen a slow set of higher highs. It’s important to note that this is a total number not as percentage of total assets, so as more traders add funds to Rydex this figure will rise which doesn’t mean investors are shifting out of stocks or bonds and into cash. What is interesting is to see that off the low in April of this year, the amount of money in money market assets has been going up right along with the equity market.

Click here to keep reading and see the charts

Source: Investors Show Lack Of Trust Of New Stock Highs (TraderPlanet)

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

Complacency Takes Over As Fewer Stocks Hit New Highs

There was a very interesting note put out by Andrew Lapthorne of Societe Generale discussing the complacency that’s taken over. As the number of stocks making new highs dwindles we are seeing minimal market volatility. How long can it last?

From Business Insider:

“Little wonder,” wrote Societe Generale’s Andrew Lapthorne this morning. “The number of 1% down days for the S&P 500 in any given year has averaged 27 since 1969; the S&P 500 has seen just 16 1% down days over the last 12 months. It has now been 468 days since a market correction of 10% or more, the fourth longest period on record, and, as we show below, the annualised peak to trough loss has only been 5% compared to typical annual drawdown of 15%.”

Lapthorne charted the maximum annual drawdowns in the S&P since 1970. As you can see in the far right, volatility has been below normal.

 

SG chart

Traders are beginning to get use to stocks just going up. Forget the fact that the number of stocks that are making new highs has been dropping all year. The chart below shows the number of stocks that are making new highs vs. new lows over the last five days. In 2013 we saw this number stagnate around 4,000 as the S&P 500 ($SPX) put in one of its best years in quite a while. But it’s been a different story for 2014, as we sit at just over 1,000 net new highs and the S&P is just a few points from its own new all-time high.

New Highs

Source: We’re Witnessing A Risky Build Up Of Investor Complacency In The Stock Market (Business Insider)
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.