The pairs charts, or ratio charts, which I follow did an amazing job predicting the explosive move higher by precious metals relative to stocks. Recent weeks, however, have seen metals get clobbered, and there have been other important shifts to ratio charts that are worth checking in on.
The gold versus US dollar index chart shows the blast-off which took place with gold following the recent bullish base shown in green. It has burned off some of this ascent since gold has taken a recent tumble.
The NASDAQ is still insanely overvalued compared to the money supply, although I’m sure the forthcoming monster bear market will take care of this historical extreme quite handily.
In spite of oil’s strength, and the jaw-dropping rise of energy companies lately, the long-term prospects for the oil index versus the money supply remains bearish. I will note that this data is about a month old, so it is possible that the updated ratio will show a breakout above this very long-term channel, which would negate that point.
The equal-weighted S&P has been generally degrading versus the ‘normal’ SPX for years. A handful of stocks continue to be largely responsible for holding up this quickly-rotting market.
Months ago, I was nearly obsessed with palladium, but it has fallen off my radar until just very recently. It seems that we may be near an interesting point based on this chart of the Russell 2000 versus palladium, which appears ready to take a hard fall.
The case is also made by way of palladium versus the dollar index, which has retracted to what could be a major support level, suggesting that palladium is ready to climb again (although I will hasten to add I am not entirely convinced, since I don’t think gold and silver are done dropping).
Another pro-palladium argument could be offered by comparing the metal’s value to the stock market, which is also at important support since it has retraced to the rounded bottom.
The last three charts all show roughly the same theme: bearish stocks/bullish precious metals. The problem with these, if you want to call it that, is that present price levels are kind of in a no man’s land in which it’s impossible to know whether the price is heading lower or higher in the near-term. All that is clear to me is that, long-term, the price levels have much more downside.
