When the market fears INFLATION, Bonds go down and Gold goes up, driving this ratio lower.
When the market fears DEFLATION, Bonds go UP and Gold goes down, driving this ratio higher.
We have just finished a major "deflation fear" wave that has failed to make a push during this entire stock market decline in the past 5 days. Since this ratio has stalled out during this stock market slide (5%), I am going to view Bonds as a low risk short sale with specific parameters, to be discussed.
This looks like a normal "wave" of "deflation fears" with bonds dramatically outperforming gold and just a slight underperformance by bonds (TLT) versus gold (GLD) and this ratio will turn down and give a low risk short sale. If the stock market "crashes", then you do NOT want to be short the bonds, as they could rally 5-10 points in a matter of days. Keep your risk in control and low. Use options to manage risk if you fear outright losses from short positions.
Tim 1:23AM EST 10/14/2014
التعليقات
A-shot
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To those who can't do shorts or options you advise to keep on the sidelines and keep some bonds still?
timwest
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The big 5+ point jump in bonds was the mini-correction (not really a crash), but shows how dangerous the bond market can be for traders. From a long term perspective, this is a great time to take money off the table in bonds and move it over into gold. That's how you have to think to be successful - a bit different from the crowd.
A-shot
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I guess im already am, already added to gold more than a week ago.