While everyone is making a big fuss about S&Ps making new lows, or Oil hitting new lows, or the amount of stocks in the NYSE hitting new lows, believe it or not, there are plenty of things making new highs. So although we’ve been bearish towards the U.S. Stock Market for months and could not be happier to see stocks continuing to sell off, today I want to focus on something that is making new highs.
This is a 20-year chart of Gold relative to the CRB index. This index is comprised of 19 Commodities including Crude Oil, Copper, Corn, Sugar, Gold etc. We consider the CRB to be the benchmark for the commodities markets, as the S&P500 is for U.S. Stocks and the U.S. 10-year yield is to interest rates. Currently, Gold has taken charge of this index and is now breaking out to new highs:
From a price-target perspective, I think this one is pretty simple. We have been in a 2 point over the past 3 1/2 years in this ratio, between 4 and change and 6 in change. This gives us a measured move target of about 8 and change when you add those 2 points to the breakout level. I think we probably get there pretty quickly and would continue to take advantage of any weakness to get long the ratio (Long Gold / Short CRB Index).
So while so many seem to be worried about what is making new lows, this is old news to us. Today we’re focused on what we consider to be a secular breakout in an important asset class. I don’t see this getting the attention it deserves, which I would chalk that up as a good thing. By the time this one gets as noisy as the S&P500 currently is, it will probably be too late. Kind of like it’s too late to be panicking about S&Ps right now.
Tags: $CRB $GLD $GC_F $DJP