I would still say the risk vs. reward is much greater in gold vs. stock market, as has been the case since spring time when trend followers came out with dire proclamations against gold and pro the stock market (right before the big market dump, BTW).
But gold vs. the broad US market has done nothing in the way of establishing a new trend. That cannot even begin to be discussed until the ratio gets over the 50 day moving averages. Meanwhile it just fans along sleepily, right in line with the pro-Goldilocks, Operation Twist instigated long term T Bond vs. short term T bond yield curves.
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But gold vs. the broad US market has done nothing in the way of establishing a new trend. That cannot even begin to be discussed until the ratio gets over the 50 day moving averages. Meanwhile it just fans along sleepily, right in line with the pro-Goldilocks, Operation Twist instigated long term T Bond vs. short term T bond yield curves.
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http://www.biiwii.com/analysis.htm
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Subscribe to the free eLetter
OT: There appears to be a trend change on the VIX today. It has broken through heavy support. In my mind, this was expected because Bonds and USD were overbought.
ReplyDeleteSunny, we covered the VIX in the newsletter this week. The measured downside target off this pattern sounds ridiculous to me. But it is what it is, a measurement. So the VIX is a negative divergence to T bonds and Uncle Buck... dat what you sayin'?
DeleteThe assumption you made is that the theory of H&S patterns applies to a fear premium in options.
DeleteH&S patterns apparently also need to be confirmed by a certain specific volume pattern, acording to the guy who pioneered the H&S. Can you get a daily volume measurement in the fear premium?
And I'd suggest that H&S patterns only apply to linear number series, and $VIX behaves more like an inverse exponential fraction or something.
The fact is that the VIX broke a neckline to a bearish pattern. It's not an H&S because there is no previous sustained uptrend. But it is bearish - if you can put much weight in technicals on a volatility index (you can't, I agree w/ you). So in so far as one wants to assign technicals to the VIX, it is a bearish looking pattern because it lost the neckline - volume or no volume.
DeleteIt broke the neckline because it's in a downward trend. The right side of an H&S pattern is a downward trend.
DeleteBut if you use "downward trend" terminology instead of "H&S" terminology, you can avoid setting a target.
And anyway, $VIX downward trends should more resemble exponential decay curves.
As you noticed in the letter, I did just that. Avoided setting a target.
DeleteSeparately, regarding any H&S what I meant was they need to be in a previous down trend before the H&S began to form.
Hey, it's all TA hocus pocus anyway. :-)