On the heels of the Shanghai stock market plunging another 3.5%, today one of the greats in the business sent King World News a fantastic piece that warns about the chaos in China, oil and the currency markets. Also included is a fascinating chart of gold and oil.
King World News: One of the legends in the business has a key note below, but first let’s take a look at an extremely important chart. The chart below shows that the gold vs crude oil ratio has now broken out to nearly a 30-year high! (see chart below)
The gold vs crude oil ratio has now moved solidly in favor of gold and will remain there for at least a decade if the historic pattern continues to remain in place. This is a positive for the mining companies, despite the extreme pessimism toward the sector at the current time.
And now for an important note below from Art Cashin….
August 20 (King World News) – From Art Cashin’s notes: “Overnight And Overseas – Shanghai closed down the equivalent of 591 Dow points. It is testing its early July low of 3664. Tomorrow may be critical and the government may have to support it. Hong Kong fell half that amount and Tokyo is also down. Emerging market currencies appear on the verge of freefall.
European markets are lower across the board. Gold is smartly higher, probably in response to the currency chaos. WTI trades at $40.25 and appears ready for a crucial test of $40.
U.S. futures are broadly lower and the yield on the ten year is 2.10%. The Euro firms against the dollar.
Consensus – Crude will remain critical to equity pricing. If selling is heavy, traders will look to the recent lows, circa 2050 in the S&P. This could be quite interesting. Keep a careful eye on the chaos in the currency markets. Stick with the drill – stay wary, alert and very, very nimble.”
***ALSO JUST RELEASED: What To Expect Next After The Turmoil In Gold And Emerging Markets CLICK HERE.
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