Printer Friendly

eMail Article

October 12, 2006

Quick Chart Checkup
by Gary Tanashian

1) Although downtrend line and heavy resistance in the Dow-Gold ratio (monthly chart) are within spitting distance, the relative strength in stocks continues unabated. This tells us not to expect a reversal of recent fortunes overnight. It also tells us that stocks are not likely to roll over and dramatically under-perform gold in the near to intermediate term. 2) The Gold-Oil ratio (monthly) is a different story, where the barbarous relic looks short-term bullish and relatively strong. This trend, if it continues, would help the bottom lines of gold miners, who are as energy dependant as a business can get. 3) The bond herd has received its wakeup call over the last several sessions in the form of the Fed's jawbone. 10 year yields have broken the recent downtrend, but the ratio between long and short rates is critical to asset allocation. The yield spread (daily) sits at resistance while continuing to bullishly diverge. 4) We never tire of presenting this little warning chart; the VIX (weekly). One by one the bears are capitulating as FrankenMarket staggers higher, while at the same time the VIX' status is unchanged; double bottom in '05 and a falling wedge down to support. It pays to remember that this game is about risk vs. reward and not trying to capture the last 5%. Smart money buys major bottoms from scared retail and at tops the opposite happens. Do you think stocks offer a good risk/reward profile now, regardless of whether or not they have higher to go in the near term? Relevant symbols to the above are DIA, GLD, SHY and IEF.

Gary Tanashian
http://www.biiwii.com/

Disclaimer: biiwii.com does not recommend that any trading or investment positions be taken based on views expressed on this site. If you speculate or invest it is suggested that you consult a financial advisor qualified in your area of interest.

Copyright © 2005-2008 Gary Tanashian

Image rendition and html coding Copyright © 2000-2008 SafeHaven.com

« BullionVault.com -- Buy gold online - quickly, safely and at low prices »
« Honest Money: A History of U.S. Gold & Silver Currency -- by Douglas V. Gnazzo »

« Opinions expressed at SafeHaven are those of the individual authors and do not necessarily represent the opinion of SafeHaven or its management. Articles are available via RSS/XML. Please visit RSSHelp for instructions. »