There are a couple of factors that may well continue this move over coming months: contracting world demand suggests further weakness for commodity prices, at the same time that the US dollar receives relative “safe haven” inflows from international capital looking for the most liquid places to park. In addition, in a world of near-zero deposit rates most places, currency appreciation offers the prospects for capital gains in the US dollar as it rallies from a 40% decade-long-decline between 2001 and 2011. With US stocks now priced for flat returns and ungodly volatility from present levels–literally return free risk– it is not necessary to hold dynamite for exposure to attractive return potential as the global economy slows down. But one does have to think outside of the group-think box.
Please bookmark us
The
mining shares still continue to sink lower seemingly unable to attract
sufficient buying to stem the flow of red ink being seen across the
sector. As a fundamentalist, I think one can make the argument that some
of the leading shares in the sector are severely undervalued against
the price of gold; however, as a technician, one has to respect the
chart action be that as it may.
A strange sea of red inhabits the screens of many traders and
investors across the USA this evening, and all it took was for the FOMC
to hint that the punchbowl will have to be taken away at some point in
the future. Biggest jump in VIX in 2013; biggest
plunge in Homebuilders in 8 months (as TOL misses and Starts were
ugly); biggest dump in stocks in 2013; Gold plunges to $1565 and
suffers Death Cross; USD soars and crosses above its 200DMA;
and oil has frantic flash crash early on. Not a pretty day as stocks
drop below the lower edge of their up-trend channel for the year and
test critical support amid the highest volume of the year. The four words on everyone’s lips this evening: