Dow-Gold Ratio

[swissaustrian]

I´m sure you´re all familiar with the Dow-gold ratio.
It´s a very good indicator to identify long term trends in stocks and pms.

It also provides evidence for the failure of the FED to smoothen the business cycle:

It can also be used for short term spread trading. You go either short gold and long the dow or you do the opposite: Right now gold is oversold, especially relative to the dow. So you go long gold, short dow. If gold and the dow fall, the dow is poised to plunge more, so your losses on the long gold trade should be smaller than the gains on the short dow trade. If both soar, gold should be outperforming on the upside. There is the scenrio where you are on the wrong side of both trades (gold going down, dow up). Given the current technical situation, this is very unlikely to happen. See here:

An article by Mike Krieger explaining this in more detail has been posted on zerohedge recently:
http://www.zerohedge.com/news/lets-talk-markets-mike-krieger

 

[ancona]

Thanks for the superior chartage SA. Information is power these days more than ever.

 

[DCFusor]

This class of trade is where I'm heading myself these days. It's becoming harder to discover single trades where you can take advantage of certain mis-valuation - the information is too available for you to be the first one to figure that out and get in before it corrects.

Whereas with the near-infinite number of possible pairs, you have a shot at it, this pair being a good one IMO. I might be overstating that near-infinite here, since there's so much doggone correlation now, but at least its more than there are single issues worth looking at.

 

[swissaustrian]

Thanks for the superior chartage SA. Information is power these days more than ever.

It´s not my work to be fair. I just connected some information which others put into charts

 

[swissaustrian]

Update:
Looking overbought now. Time to short the Dow and go long gold!

 

[KMS]

Thanks, SA.

 

[pmbug]

Update:
... Time to short the Dow and go long gold!

...

Sell Mortimer! Sell!!!!!

(linked from the Yahoo! front page currently):

Goldman Sachs: Best Time in a Generation to Buy Stocks, Sell Bonds

http://finance.yahoo.com/blogs/breakout/goldman-sachs-best-time-generation-buy-stocks-154722104.html

 

[swissaustrian]

kWN piece by Egon von Greyerz on the DOW-gold ratio. Still plenty of space to the downside:

http://kingworldnews.com/kingworldn...os_&_Incredibly_Important_200_Year_Chart.html

 

[69mach351]

Forgive my lack of knowledge on the subject (I am far from a stock market/trading analyst) but what is being said here, is that with current trends in the stock market (and assuming that past performance somewhat predicts the future), one should be able to buy gold right now, and sell for profit as the market bottoms out again, when should be higher. I hope I am not trying to over-simplify it, but I am trying to learn this game a little bit more.

 

[swissaustrian]

Time for another leg down