I normally try to offer up opinions with some sort of quantified backing. But as with all things there are exceptions to every rule. As the stock markets teeters on the edge of the precipice, other action looks a bit “suspicious” to me.
Specifically:
*The action in both gold and long-term Treasury bond looks to me (yes, this is an entirely subjective, gut level reaction based on nothing but similar scenarios that my market-addled brain seems to recall in the past) like “blow off” panic buying.
This type of action is typically not sustained.
(See also Jay’s Trading Maxim’s (Part 1))
Figures 1 and 2 display the intraday action for tickers GLD (an ETF that tracks gold) and TLT (an ETF that tracks the long t-bond)
Figure 1 – Ticker GLD (Courtesy: www.FreeStockCharts.com)
Figure 2 – Ticker TLT (Courtesy: www.FreeStockCharts.com)
If the stock market does break down through the resistance level shown in Figure 3 then “all bets are off” and things may get a whole lot worse. And in that case there may be more buying coming into gold and bonds.
But for what it’s worth – and despite the fact that I have been bullish on gold and bonds recently – I am not chasing GLD or TLT at this point.
Figure 3 – Ticker SPY – on the “ledge” (Courtesy: www.FreeStockCharts.com)
Jay Kaeppel
