@pm sentiment -- trotsky, 11:02:53 04/24/07 Tue
mixed message, unfortunately. the Rydex pm fund's cumulative cash flow ratio has dropped to yet another new low at 131 points, however, XAU put/call OI has dropped sharply post April expiration. yesterday it was at 0.92, but has since recovered to 1.01 (=neutral). we'll have to wait and see if put OI keeps expanding this week.
the biggest worry right now is the huge speculator net long position in COMEX gold futures, especially as it coincides with DXY hugging multi-decade support levels (note in this context that the biggest component of DXY is the Euro with an almost 60% weight, and specs are extended in the Euro as well).
another worry remains the Chinese stock market. this rally is now as extended as the Nasdaq's rally was at its 2000 top. every time China sneezes, gold futures get immediately whacked. the thing is, i don't merely expect it to sneeze next time. imo that market is primed for crash, or at least a 'mini crash'. i'm not saying that because i possess any extraordinary insight , but because such parabolic advances ALWAYS end in that manner. they never end peacefully, and in China's case we know that the public is 'all in' via hocking its possessions to play in that market. the same happened in Saudi Arabia in 2005/6, and when the top was in, the market plummeted by almost 80% subsequently.
@home sales collapse -- trotsky, 10:38:37 04/24/07 Tue
the bursting housing bubble is now in the middle of its recognition phase after today's atrocious number. we even have a WS analyst on CNBC saying that 'it is hard to put lipstick on today's data'. well, duh.
an interesting aspect is that prices aren't yet reflecting the plunge in sales volumes, due to the lag effect in illiquid markets such as housing. however, the price decline is probably unavoidable, and this will put further pressure on both borrowers and lenders.
meanwhile, the stock market has ceased to be a leading indicator years ago - since 2000 it has behaved more like a lagging indicator actually. there have been periods in history when this was also the case, none of which had a happy outcome for speculators. |
