Friday, September 23, 2011

Metals getting killed

Unbelievable! That's the least you can say about the action in the metals today. While the major indices struggle to stay in the green, metals got hit. Hard! An intraday snapshot, 2 hours before market close and right after what looked like an intraday bottom to me:

Look at silver! Down 16.66% and it was -18% briefly. The other metals losing 'only' 4% to 6%. Now why is there such a selloff in metals while stocks are still mostly in the green? Metals were outperforming stocks since early Summer. But in these volatile markets, where the word crash is used quite often, there are no real safe havens. This is just a reversion to the mean, illustrated by the chart below.
The chart shows the spread between SPY (representing the S&P500) and GLD (= gold). We see a breakout, showing that the spread will probably move back to more 'normal' levels. The SPY-SLV (silver)-spread shows more or less the same picture on the weekly chart; silver outperforming stocks since August last year. So basically, we can expect more downside in metals, or at least narrower spreads in the future (which can also mean: metals up, but stocks move up stronger).

No comments:

Post a Comment