מדד S&P 500שורט
TOPPING PATTERNS: SPX and the SPY/GDX ratio
These ratios are KEY to understanding the valuation of the marketplace, SPY/GDX being just one of many.
Either equities are going to fall, or mining stocks are about to explode. The latter is in my view, exceptionally unlikely, as we see bearish price action in gold across many of the major G20 currencies.
IF there is anything that a gold investor should recognize, it's deflationary environments.
SO then, what comes next? An important question:
Why is it that other asset classes are moving in the reflation trade, but the asset amongst the most sensitive to this environment, is lagging behind the leading commodities?
The answer: LIQUIDATION RISK
The argument that there are other assets that provide interest or dividends that make them more attractive, or provide some sense of opportunity cost, is a straw man argument. Many of the mining stocks provide dividends at a greater return than that of treasury yields, albeit not as high as those in oil or financials. The concern is that the mining sector has crumbled beyond these opportunity costs in terms of their relative valuations with respect to their competing assets.
US Oil and Energy prices, which as of now have been artificially bid up with temporary demand from the Texas grid shutdowns, are among the few things keeping the reflation trade intact. Bond yields and financials are directly correlated to this broadened move in oil. Once the temporary demand retracts from the marketplace, I expect to see a massive deflationary environment come into the market. IFoil reverses, expect to see bond yields and financials to reverse and bleed into other asset classes across the market.
Additionally, with the GBP seeing artificial appreciation from the news related to the easiness of BoE's negative interest, the DXY has weakened slightly. This will not last once UST/USB yields breakdown.
The market now faces a SEVERAL KEY hurdles in the near term:
Maintaining oil prices
Maintaining yields
Maintaining equity prices
Maintaining a slightly weak or sideways Dollar
These are the stages where money get's trapped and the demanded liquidity becomes unobtainable. Best of luck.
Either equities are going to fall, or mining stocks are about to explode. The latter is in my view, exceptionally unlikely, as we see bearish price action in gold across many of the major G20 currencies.
IF there is anything that a gold investor should recognize, it's deflationary environments.
SO then, what comes next? An important question:
Why is it that other asset classes are moving in the reflation trade, but the asset amongst the most sensitive to this environment, is lagging behind the leading commodities?
The answer: LIQUIDATION RISK
The argument that there are other assets that provide interest or dividends that make them more attractive, or provide some sense of opportunity cost, is a straw man argument. Many of the mining stocks provide dividends at a greater return than that of treasury yields, albeit not as high as those in oil or financials. The concern is that the mining sector has crumbled beyond these opportunity costs in terms of their relative valuations with respect to their competing assets.
US Oil and Energy prices, which as of now have been artificially bid up with temporary demand from the Texas grid shutdowns, are among the few things keeping the reflation trade intact. Bond yields and financials are directly correlated to this broadened move in oil. Once the temporary demand retracts from the marketplace, I expect to see a massive deflationary environment come into the market. IFoil reverses, expect to see bond yields and financials to reverse and bleed into other asset classes across the market.
Additionally, with the GBP seeing artificial appreciation from the news related to the easiness of BoE's negative interest, the DXY has weakened slightly. This will not last once UST/USB yields breakdown.
The market now faces a SEVERAL KEY hurdles in the near term:
Maintaining oil prices
Maintaining yields
Maintaining equity prices
Maintaining a slightly weak or sideways Dollar
These are the stages where money get's trapped and the demanded liquidity becomes unobtainable. Best of luck.
כתב ויתור
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