Thursday, October 08, 2009

Today May Have Been Significant

Top Line: Today was a key reversal day for gold and the dollar as both moved to extremes and then backed off. This has implications for the broader market.

We feel compelled to post this evening. There were a few key indications that present information that is valuable. The combinations are interesting.

The dollar collapsed to a fresh relative low like it seemed to have wanted to do for about a month. Meanwhile gold jumped to a new actual high. Normally this is what is supposed to happen, these two asset classes move in opposite directions. We think that the reversals are what are important today. The media will most likely tell you about the extremes in both and conclude they will continue in that direction.

Today's reversal is a first good sign that the moves might be over. Time will tell but for now we say that the market is showing us something different. The reason we say that is the action in GDX today. Yes, GDX went to a new high for the move near 50, that's true. But, as we mentioned yesterday, GDX is Following gold, not leading. This is not a sustainable in our opinion.

While this was going on, the stock market was merrily moving higher which it can easily do because it is Below its recent highs. We think the market can always get back to where it was but getting past that is what makes us pay attention. Today, the market failed to get back to the highs together with a new relative low in the dollar and a new high in gold.

Taken all together, we think today was significant. We hope you found some way to sell some of your GDX in the 49's today. If not, we would probably have you re-read yesterday's post and figure out a way to get off that risk for awhile as we wait for further developments. Tomorrow should tell us a lot about whether today was important or not.


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