• 4 hours A Russian Billionaire’s Space Quest To Save Humanity
  • 7 hours Markets Take Breather As Consolidation Continues
  • 9 hours Economic Woes Weigh On Copper Prices
  • 12 hours World's Largest IPO At Risk Following Drone Strikes
  • 1 day Gold Is Beating Buffett’s Berkshire Hathaway
  • 1 day What’s Behind The Silver Sell-Off?
  • 1 day The Retail Apocalypse Is Accelerating
  • 2 days The Top Tech Stocks Of The Year
  • 2 days America’s Workforce Elderly Workforce To Double By 2028
  • 2 days Toyota Tests Solar-Powered Prius
  • 3 days Why The Gold Rally Flatlined
  • 3 days The Uranium Sector Can’t Catch A Break
  • 4 days Upcoming Fed Meeting Has Investors On Edge
  • 4 days Global Gold Sector Outlines Responsible Mining Principles
  • 5 days China’s Giant Vampire Fund Loses $120B
  • 5 days McDonalds To Roll Out Robot Drive-Thru Clerks
  • 5 days Savvy Investors Are Betting Big On This Little Data Company
  • 6 days How The Government Is Wasting Tax Money This Year
  • 6 days Supply Concerns Halt Expansion On Tianqi Lithium Plant
  • 6 days The World’s Biggest IPO Is Almost Here
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Dan Norcini

Dan Norcini

Dan Norcini is a professional off-the-floor commodities trader bringing more than 25 years experience in the markets to provide a trader's insight and commentary on…

Contact Author

  1. Home
  2. Markets
  3. Other

Full out 'RISK ON'

Financial markets are becoming absolutely giddy with delight as they are now firmly looking beyond their "dark night of captivity" to the Obama administration's growth killing regulatory scheme with all its oppressive mandates to a "new morning" of a business friendly Trump administration.

Wall Street is sensing growth and investors are responding by unceremoniously trash-canning the safe haven or defensive categories of stocks.

Witness the carnage in the Utility sector:

Utilities ETF Daily Chart
Larger Image

AND in the Defensive Consumer Staples sector:

Consumer Staples ETF Daily Chart
Larger Image

Notice both charts contain the dreaded technical "Death Cross". That is a long term negative chart signal. What it is telling us is that DEFENSIVE stocks for a SLOW GROWTH scenario are now fully out of favor with investors now in the mood for growth stocks or stocks that are going to perform well during a period of economic expansion.

Witness what we saw today in the Financials sector with the surge higher in bank stocks over the past two days.

Consider the high-beta Russell 2000 which just a few days ago looked as if it was ready to give up the ghost and completely fall apart. It is now pushing back up near all-time highs again ( this is the emini Russell 2000).

eMini Russell 2000 Daily Chart
Larger Image

All of this has HUGE implications for gold, none of it any good.

Gold has fallen apart technically and is now back below its 200 day moving average. It goes without much saying that a fall through the October lows near $1240 would send the metal down to $1210-$1200.

Gold Daily Chart
Larger Image

Gold Daily Chart 2
Larger Image

Gold Weekly Chart
Larger Image

Gold owes its woes not to "manipulation" like the gold RA-RA sites are all screaming again (ad infinitum, ad nauseam) but to this rush out of defensive/safe haven/risk aversion trades or investments and into growth trades. Additionally, the strongly higher US Dollar will work to provide additional headwinds to the yellow metal.

US Dollar Index Daily Chart
Larger Image

If the Dollar takes out today's high and can hold above it, it is going to make a run to 100 basis the USDX and it would not surprise me to see it easily press through that level.

Investors around the globe are looking at the US under a new Trump administration and are getting excited about growth prospects.

Speaking of the growth prospects - traders might want to take a serious look at playing the growth trade and running some long silver/short gold spreads. The silver/gold ratio runs strongly in favor of silver during periods of growth.

Here is the monthly chart of that same ratio. Notice how it did when the Fed unleashed its first round of QE back in early 2009. It looks to be coming off a bottom that has held all the way back to 1995.

Silver/Gold Ratio Monthly Chart
Larger Image

Silver/Gold Ratio Daily Chart
Larger Image

Silver/Gold Raio Daily Chart 2
Larger Image

The only fly I see in the RISK ON ointment at this time is the fact that the commodity currencies, (the Canadian, and Australian Dollars) are not breaking out to the upside. I think however that can be explained by the fact that the US Dollar is so incredibly strong at the moment that many are afraid to sell it, even on those commodity currency crosses.

It looks as if the world is looking at the US as the place to be for next year.

 

Back to homepage

Leave a comment

Leave a comment