Serious DeLeveraging or Not, Now…………9:50 AM,selling out Gold at 1607
There is so much one could say today and a really long blog is rolling around in my mind but I think I will wait to see a few more things to fall in place. What is critical here, however, is whether Gold and the S&P take out recent lows and move into a new lower range of trade. If gold takes out the 1543 level and if the S&P takes out the 1273 level on the downside, we will see a swift move to a new trading range.
At the moment we are seeing a lot of forces that are together betting on the recent lows holding and the prudent approach will be probably to go to a modest long gold / short stock position when the S&P drops to the 1283 level (ie take profits on the extra 70 percent short S&P position) and see what happens. If the market would take out the 1250 level, one will need to be quick to get back short for a quick hundred points down to the 1150 level.
What is remarkable here is that the gold/S&P ratio is holding tight. This indicates to me that the driving force is a belief that more deleveraging will not happen now and more importantly the fantasy that the long term deleveraging move is over.
More thoughts at 11:30 AM CDT:
As is evident we have for the moment one legged out of our long gold/short stocks position. This leaves us 100 percent short stocks and 15 percent short T-Bonds (based on total equity). The levels of 1294 on gold and 1316 on the S&P are the swing points of the current trading ranges, so we will risk the resistance levels of 1660 on gold and 1370 on the S&P.