Dollar versus Gold Bottom Signal…………with update at 1:30 PM CDT
One big relationship that we are following in this whole first cycle up since March 2009 is the Dollar / Gold. This stock and commodity sell-off, what CNBC apparently is calling the “Flash Sell-off” has been characterized by a flight to both the dollar and gold and the ratio between the two, while the dollar has gained on gold is still more or less static.
The 1075 level on the S&P was about the halfway point to the primary support level at 923. The sell-off to date has taken 18 days, if the next half only takes 9 days it really will be a flash.
What is important to understand is that the coming real bottom will be where the “real economy” takes hold with real drops in unemployment. While the major corporations were able to siphon off the dollars and do well in the first cycle up after the start of the stimulus, this next phase will have much broader participation and will not be driven by the speculators. In my opinion the lowering of panic in that situation will trigger the gold sell-off and the breakout of the dollar-gold ratio.
Update….we are moving our double short oil assets to double short gold, selling DUG ETF and Buying DZZ ETF.