It looks like someone linked you here to our printer friendly page. Please make sure you go Back to for more great articles just like this one!


By: Erik Swarts | Thursday, February 21, 2013

What started off as a tinder ignition in the currency markets this fall - namely, the US dollar asserting quiet dominance over each of the major currency crosses (first the yen, then pound, Aussie, the Swiss franc and recently the euro); has now caught flame in the more emotional risk proxies of the hard commodity markets - specifically, gold and silver.

And while silver typically runs the rabbit leg with gold on the risk continuum, the market began heavily selling gold over the past few sessions. This dynamic in turn has arrested the silver:gold ratio in the most recent swoon from undercutting the lows from late December.

To make a long story short, we believe the recent leg lower in the precious metals sector will likely continue - until the silver:gold ratio makes a proportional low. Considering gold has recently led the charge in undercutting its August low, this volatile feedback loop appears to have ample room remaining to inflict additional collateral damages in the short term.

Larger Image

This perspective is also buttressed by the Value Trap comparative - which to date has recognized very similar momentum signatures in how the financials capitulated and led the broader market lower in 2008 and 2009.

Simply put, the miners have done the same with gold and silver here.

Value Traps: VKX:SPX 2008/2009 vs BDX:GLD 2012/2013
Larger Image


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 © 2011-2016 Erik Swarts