Gary from Biiwii with a chart depicting a divergence that bears should be very interested in.
The gold-silver ratio (GSR) and the SPX are concurrently doing something that is most unsustainable during this last little thrust higher in markets. They are rising together. To review, when gold is rising vs. silver, a signal is given that liquidity is draining. When gold declines vs. silver, the bull party is on. It is no more complicated than that.
As you can see by the chart, the GSR has been in an intermediate downtrend since the blow-off hysterics in fear back in March. Last week, bears (including myself) thought we had the market right where we wanted it and guess what, as long as the bearish divergence of a rising GSR remains concurrent with a rising market, we do! This will not last.
So the vital question is 'which is real and which is Memorex?' when it comes to the two short term uptrends. I did a less formal version of this study on my blog during pre-market and it appears for the moment at least, that the stock market and the GSR are cooperating toward my favored view, which is that the market will break down and the GSR will continue to rise, possibly into a new intermediate leg up (with corresponding intermediate leg down in the markets).
We should realize however, that the bulls have the benefit of the established trend and that counts for a lot. So, my furry friends, let's keep the hubris under wraps until we get further confirmation. But so far, so good.
