Where the Wild Things Are

By: Erik Swarts | Tue, Feb 28, 2012
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Where the Wild Things Are

"And now," cried Max, "let the wild rumpus start!" - Where the Wilds Things Are - Maurice Sendak

For many different reasons, silver has been an important asset to follow and contrast over the last decade. From appraising inflationary and disinflationary pressures, to the respective risk appetites of the collective - silver, and more importantly, silver relative to gold - has been a key asset and relationship to follow. I went over a number of these and my variant perspective on them in my last note of 2011 (see Here).

I often use ratio charts because it gives you more information than just price. And while price alone has paid in spades lately - there's still a great deal of truthiness in determining the underlying asset's risk profile and trajectory based on price alone. Ratio charts, when used appropriately - can add another dimension to the picture.

As apparent in the chart below, silver gave the impression (through price) last summer of breaking out of the consolidation range that developed after the May crash. And although things looked promising for the silver bulls for the balance of the summer, the ratio charts told a different story and foreshadowed the eventual swoon that followed in September.

Eight months later, the set-up, both viewed through price and the ratio - looks very much the same.

SLV:GLD Ratio

For a little more perspective, here is the same contrast for 2010, which included the breathtaking breakout for silver and the ratio that coincided with the hint and then deployment of QEII.

2010-2011 SLV:GLD Ratio

So goes silver (relative to gold)... so goes the SPX.

Performance SLV:GLD Ratio, SPX

 


 

Erik Swarts

Author: Erik Swarts

Erik Swarts
Market Anthropology

Although I am an active trader, I have always taken a broad perspective when approaching the markets. I respect the Big Picture and attempt to place each piece of information within its appropriate context and timeframe. I have found that without this approach, there is very little understanding of ones expectations in the market and an endless potential for risk.

I am not a stock picker - but trade the broader market itself in varying timeframes. I want to know which way the prevailing wind is blowing, where the doldrums can be expected and where the shoals will likely rise. I will not claim to know which vessel is the fastest or most comfortable for passage - but I can read the charts and know the risks.

I am not a salesperson for the market and its many wares. I observe it, contextualize its moving parts - both visible and discrete - and interpret.

I practice Market Anthropology - Welcome to my notes.

Erik Swarts is not a registered investment advisor. Under no circumstances should any content be used or interpreted as a recommendation for any investment, trade or approach to the markets. Trading and investing can be hazardous to your wealth. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This is strictly for educational and informational purposes only. All opinions expressed by Mr. Swarts are subject to change without notice, and the reader should always obtain current information and perform their own due diligence before making any investment or trading decision.

Copyright © 2011-2014 Erik Swarts

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austrian-money-supply/