With many investors still concerned about the recent downdraft in stocks, here is an important update on stocks, bonds and gold.
Stocks, Bonds & Gold
March 6 (King World News) – From Jason Goepfert at SentimenTrader: Monday’s gain was a good sign, at least in terms of following through on the reversal from Friday. If we’re following (somewhat) the 1997 precedent as noted below, then that should be “it” for the test of the panic low and we should see generally rising prices going forward. Anything other than that, the 1997 scenario goes out the window…
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Jason Goepfert continues: “Most of what we’ve seen since the height of the panic is in line with historical norms, and while the selling pressure over the past three days has seemed troubling, it’s still perfectly in line with the precedents we looked at on February 5 and February 6 as well as reports in the following week(s) suggested months of choppiness, including a test of the panic low, before consistently higher prices over the medium-term. The past few days have been a little scary, but as noted above, such strings of 1% down days have had a good medium-term record at leading to positive returns, so I’m sticking with the idea that the short-term volatility we’re seeing is a test and not likely a failure.
Of the four precedents of “panic and reversals” that we looked at before, the one that was most similar to what we’ve seen lately is 1997, which as we saw on Monday also exceeded the usual retracement of the initial decline, and then saw a reversal somewhat similar to today’s to end the test of the low. It took off from there, so we’ll see if that continues to hold. So far, there isn’t much to suggest the test will fail, and I’m still expecting generally higher prices in the months ahead. Not sure after that.
Bond risk is falling fast and just hit a level of 2 due to the Optimism Index approaching 30, the lowest since last spring. I’m still not in a big hurry to add exposure there yet, though. The studies we’ve run on various developments there have been inconclusive, not something that makes me eager with such a persistent downtrend.
Sentiment on gold is back to neutral and there isn’t anything particularly interesting there. The recent jump in gold miners has more of a positive spin, at least shorter-term.
The commentary above is from SentimenTrader. To try a free 14-day trial of the internationally acclaimed work that Jason Goepfert produces at SentimenTrader simply CLICK HERE.
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ALSO RELEASED: Art Cashin – We Are Seeing A Rally In Stock, Gold & Oil, Here’s The Reason CLICK HERE TO READ.
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