Late in last September I charted, down below, several indicators tied to gold over the past few years. The ratio of the US Tsy long bond to the US Dollar has remained useful as a leading or coincident indicator for gold:
Another indicator targets inflation and precious metals:
Clearly the market prices of gold, interest rates, inflation expectations, and currency exchange rates are all fairly tightly bound. All the gold news and internet chatter we see and hear is immaterial. I retained my gold and may buy more when I'm convinced the bear market is over.
As for US stock indexes, I was reminded by James Stack of an old truism in stock bull markets: “Be quick to turn bullish, and slow to turn bearish.” Looking at historical bull markets, one finds the starts of new bull markets are often very sharp out of V-shaped bottoms, whereas bull market tops are rounded and take much longer to unfold.
My chart of the SP500 index (SPX) has two measures of sentiment. One is Inverted VIX and the is other my favorite, 2CS. I have been calculating this by hand every day since 1996, by multiplying each day's CBOE combined put volume divided by call volume by each day's VXO (old VIX), and summing the last five day's product of these inputs. 2CS is inverted as to price, so the higher the market goes, the lower the 2CS.
2CS made its most exuberant level of 37 at the end of 2013! Each subsequent breakout high in the SPX has been accompanied by less exuberance, a phenomenon I call "sentiment divergence". This past Friday the 13th market exuberance was less than half what it was at the December 2013 new high. This does not mean stocks will necessarily fall from the sky immediately, only that stocks are sailing on thin air.
If a lot of your money is in long term stocks or funds you don't want to or can't sell, you might want to hedge some part by options, futures, or inverted index ETFs. If you have just won a lottery or simply want to begin investing now, John Hussman's Strategic Growth Fund is a partly hedged stock fund which almost certainly will make money for you in the coming bear market. I have some leveraged ETFs and have recently bought HSGFX.
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