Tuesday, April 16, 2013

Relatively Speaking...

After taking the stairs down for the better part of six months, silver quietly entered the elevator Sunday night and arrived within range of fulfilling our interim comparative decline.

And although it broke formation in breathtaking fashion, looking back at our Euro/Silver chart which displayed the two previous occasions that exhibited atypical correlation environments with the USDX - the proportion and structure of the decline is within comparative character. With hindsight 20/20 to this particular strain of momentum, we would guess it's likely the first cascading leg lower in the series.   
The friction noted Friday between the carry cocktail of the Japanese yen and the Australian dollar caught flame yesterday morning and blew like wildfire through the markets. Considering the comparative pattern - it may just be getting started. 
Downstream, this materialized in the anticipated further decline of the RUT:SPX ratio this week. 

On a day the price of gold fell almost 9% within the session, the miners just marginally underperformed spot prices. It is our belief that the ratio exhibited below will follow the yen higher - with the greatest vulnerability likely coming from the denominating spot prices themselves.  
Just last week we had updated our longer-term comparison of the miners Value Trap series. And despite the considerable trauma that has taken place in the sector between then and now, it is barely notable in the ratio. This is in stark contrast to the underlying price of gold that began to play catch up and materially erode over the past week.




























We continue to feel when it comes to gold these days - it's a relative game (see Here).   
"As I mentioned before, this is not an apples to apples comparison, but an expression of how a derivative sector capitulates - relative to its eroding and denominating backdrop. While the miners, relative to gold, are now searching for an intermediate term low - spot prices likely have a ways to go."
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*  All stock chart data originally sourced and courtesy of www.stockcharts.com 
*  Subsequent overlays and renderings completed by Market Anthropology