Spike In Gold Not A Good Sign For Stocks

Gold gaining ground today has nothing to do with rising inflation expectations. On the contrary, it is quite the opposite. Spain’s 10 year  yield is climbing again. Swiss, German and U.S. Treasuries are rallying. There is only one explanation behind the rally in $GLD – it is currently playing the role of a “safe” asset in a “risk-off” environment.

The U.S. stock market is oversold on various measures, which doesn’t mean that it can’t become more oversold as nothing brings fear as fast declining prices. The silver lining of this correction is that we are entering earnings season with reduced expectations, which has usually been a good predisposition for positive surprises.

Even if there is a short-term bounce coming, we have entered a period of choppiness, where mean-reversion trades are likely to work better than breakouts.

$GLD rallying with $TLT is bearish for stocks. Once you see gold selling off along with the equity market, then we would be much closer to a “forced liquidation” period, which has historically provided great entries for long-term investors.

JPMorgan ($JPM) and Wells Fargo($WFC) report this Friday and the reaction to their earnings will reveal a lot about the near-term future of the stock market.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

You might be interested in: 154 Liquid Stocks Closed At All-Time High (ivanhoff.com)Does "Sell In May" Really Work? (crossingwallstreet.com)Stocks rebound after string of losses (CNNMoney.com) View the discussion thread.blog comments powered by Disqus

My name is Ivan Hoff. I am a stock trader. I manage Stocktwits 50, Stocktwits Email and was featured in The Stocktwits Edge, which I edited. (More)

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My name is Ivan Hoff. I am a stock trader. I manage Stocktwits 50, Stocktwits Email and was featured in The Stocktwits Edge, which I edited. (More)

This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice.This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

Copyright © 2012 Ivanhoff Capital. All rights reserved.

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