Another ratio or spread to watch for SPX buying signals

In early July 2022, the Copper/Gold Ratio registered its 7th weekly oversold reading within 12 years.

This occasion coincides with a notable low, or at least safer, longer term buying opportunity in stocks…..or as the chart below implies, in the S&P 500 Index.

In other posts I have mentioned how the monitoring of this ratio is also helpful in tracking the direction of interest rates.

In the meantime, I’ll watch if the Copper/Gold ratio re-visits the oversold region in the coming 3-8 weeks.

September 25, 2022

by Rob Zdravevski

Notable low for S&P 500 isn’t in yet

The vertical lines show the significance when the Japanese 10 year bond yield is (on a weekly chart) simultaneously OVERSOLD and trading 2.5 standard deviations and BELOW its rolling weekly mean.

Around the same time, the S&P 500 also registers a notable low.

There have been 9 such moments over the past 15 years when probability suggests nibbling and adding to your holdings.

BoJ and Fed news this week will be helpful shaping the JGB yield but this study suggests the S&P 500 low isn’t there yet. This doesn’t necessarily mean a lower low, but rather a ‘notable’ low.

September 20, 2022

by Rob Zdravevski

A trough in Bitcoin volatility portends a S&P 500 bottom

Bitcoin’s price action, trend and sentiment suggests it tests somewhere around the US$16,000 mark. +/- $600.

A drop in Bitcoin’s 30 day volatility precedes a trough in the price of BTC/USD which precedes ‘one more decline’ in the S&P 500 before itself finds a floor.

This would put my S&P 500 target around 3,645.

A bottoming process which builds into a rally in these two markets would cause much damage to all those huddled on the other side of the boat.

p.s. The direction Bitcoin also has reasonably good correlation with the Australian Dollar and commodity prices.

September 20, 2022

by Rob Zdravevski

Economy Health Check

I’m watching the Copper/Gold Ratio (HG/GC)

Its direction tells me about the health of the economy.

The direction of the HG/GC also helps confirm the direction of interest rates. More specifically, the U.S. government 10 year bond yield.

In the chart below, I’ve overlaid a price chart (in blue) of the S&P 500 against the HG/GC.

You can see that the general direction of both the SPX and the HG/GC follow each other.

At this moment, the HG/GC is nearing a point where it breaks either way.

We’ll need to wait and watch in the coming week or so.

In my earlier post today, I imply that interest rates may rise.

This, then suggests that the HG/GC breaks higher (meaning Copper rises and Gold declines) which translate into the S&P 500 rising further.

A ‘melt-up’ in the S&P 500 is not a perverse idea, especially against the grain of many who are calling the top, let alone a crash.

It may seem odd to think, but markets often move to where they can do the most damage…..

and going higher can damage those who have been on the sidelines or sold up recently.

Missing out can also hurt investors.

September 10, 2021

by Rob Zdravevski

%d bloggers like this: