Gold, Treasuries Still In Bearish Camp For Stocks

By: Chris Ciovacco | Fri, Nov 4, 2011
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The video below explores the current ratio of gold (GLD) to Treasuries (TLT). The ratio helps us monitor the battle between:

  1. Inflation via GLD and deflation via TLT.
  2. The bulls via GLD and bears via TLT.

Like many markets, the GLD:TLT ratio is near a possible inflection point. However, the ratio was near a similar bullish inflection point in 2008 before stocks and gold took another leg down. The points below highlight similarities between 2008 and 2009:

  1. A1 & A2: GLD:TLT ratio makes similar twin peaks.
  2. B1 & B2: Ratio breaks inflation/bullish trend.
  3. C1 & C2: When the indicator, Williams % R, remains weak, the bear market in stocks remained intact (left of C1, right of C2). When the indicator moved back above -20 (overbought), the bear market was nearing its end.

GLD:TLT SPDR Gold Trus/IShs T-Bnd 20+y

GLD:TLT SPDR Gold Trus/IShs T-Bnd 20+y

The video expands the commentary on the two charts above and also comments on Italian bond yields.

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode. If you want to skip the technicals, comments on Europe begin at the 10:33 mark. You can improve the resolution by clicking on 480p and selecting a higher figure (lower right of player).

Video: Strong Bear Market Rally Possible

Video: Strong Bear Market Rally Possible

Some developments from Europe via Bloomberg:

World leaders meeting at the G-20 summit in Cannes, France, balked at spending more money to help bail out the euro-area, demanding the region's own governments first do more to fix the two-year-old debt crisis. Governments are awaiting further details of Europe's own week-old rescue package before they commit cash, German Chancellor Angela Merkel said on the final day of a Group of 20 summit in Cannes, France.

From Reuters:

HIGHLIGHTS-Comments by policymakers at Cannes G20:

GERMAN CHANCELLOR ANGELA MERKEL

"There are hardly any countries here which said they were ready to go along with the EFSF (euro zone rescue fund)."

BRITISH PRIME MINISTER DAVID CAMERON

"Every day that the euro zone crisis continues is a day that has a chilling effect on the rest of the world economy."

"Britain will not contribute to the euro zone bailout fund and we are clear that the IMF will not contribute to the euro bailout fund either."

"Global action cannot be a substitute for concerted action by the euro zone to stand behind their currency."

"The job of the IMF is to help countries in distress, not to support currency unions."

"The world can't wait for the euro zone to through endless questions and changes about this."

"You can't ask the IMF, nor should you, nor ever would I, ask the IMF to put its money into a euro zone bail out fund - that wouldn't be right."

"Britain will not invest in a euro zone bailout fund. Britain will not invest in the IMF, so the IMF can invest in a euro zone bailout fund. That is not going to happen."

From the BBC:

Italy's planned budgetary reforms lack credibility, IMF chief Christine Lagarde warned after a G20 summit dominated by the eurozone debt crisis. "The main problem we have, which has been clearly identified as much by the Italian authorities as by their partners, is a lack of credibility in the measures that have been announced," Lagarde told reporters according to AFP news agency.

 


 

Chris Ciovacco

Author: Chris Ciovacco

Chris Ciovacco
Ciovacco Capital Management

Chris Ciovacco

Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com.

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