Friday, March 15, 2013

A Few Thoughts From the Top

Almost 13 years to the week, and barring a major outperformance by the silver:gold ratio today - the equity market sell signal that we have been following since the start of the year should trigger at the close. This will be the first inversion for this reflationary measure of the equity market rally that began in March 2009. In the past (2000 & 2007), when the silver:gold ratio's performance has "inverted" below the SPX's (as measured from the start of the secular bear market in equities that began in March 2000), this has indicated the start of another cyclical leg lower in the equity markets.
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Despite the erosion noted in the ratio, silver has actually outperformed gold since the lows recorded last summer. This was not the case up until the most recent decline that began in January. Considering the surge in risk appetites in the equity markets over the past three months, this dynamic, although not typical - makes sense. It is our expectations that the ratio will continue to rollover - with silver taking the baton on the downside.  
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Below is an update of the 1992 Nikkei comparative (not extended - for further explanation see, Here) that we have utilized since last summer to guide us through the pivots in silver. And although we have recently followed set-ups in the currency markets closer for added color (namely the euro) - we couldn't help but notice it appears to be profiling the turn once again.  
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Based on both the long-term secular comparative of the US dollar and the more nuanced roadmap of the euro in the Mirrored Pivot - the currency markets are taking breaths in trend where we would have expected them to. 

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The SPX is currently above its long-term hinge at 1542. It is our expectation it will once again respect resistance through the balance of March and retrace some of the most recent gains. 
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We will be closely watching the Shanghai Composite Index over the next few weeks to see if it continues to roll-over - or rekindle the trend higher as the breakout leg of the 1982 SPX comparative did.  
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*  All stock chart data originally sourced and courtesy of www.stockcharts.com 
*  Subsequent overlays and renderings completed by Market Anthropology