Risk Off - Week of April 14 to April 18

Many growth sectors have broken their long term trend lines last week. The Queen QQQ broke down and lost 2.62% and 30y US Treasury yields went below 3.5%, while gold and utilities enjoyed decent gains. All the indicators are flashing red lights going into next week. 

Bond vs Equities: TLT/SPY:

This ratio gives us a proxy of when SPY is going into a correction phase. Since the inception of TLT in July 2002, there have been 8 times where this ratio changed trends. 7 out of 8 times, SPY pulled back immediately. This occurrence signaled the bear market in 2008 for the first time during the week of Dec 10, 2007. Then again, during the week of May 5, 2008. The last warming was around August 11, 2008. If you are a long term investor, the market tends to give you multiple warnings before it finally crashes. This is only the first occurrence since Sept 2012. So I will not rush to sell everything for now.

Momentum stocks: PDP

The Powershares DWA Momentum Portfolio printed a red inverted hammer, pinching the lower Bollinger band. Every time it touched the lower Bollinger Band since Nov, 2012, it has found support. Last Friday, it was the third time it’s pinched the lower BB since March 24 this year. Warnings ahead of some more blood?  

Commodities: DBC

DBC, the Commodities ETF is flagging on the weekly chart. On the daily chart, we hit the green TL, and found resistance. The doji on Thursday was the sign to take profit on commodities.

Gold and gold miners: GLD, GDX, GDXJ

The ratio of XAU / GLD just hit the mid Bollinger Band, and found resistance with a big red bar. This ratio has only failed to break the mid BB for only 24 times since the inception of GDX in May 2006. Every time it failed, GDX dropped immediately. However, Only 5 times of this occurrence GDX entered into a bear market. So I am not suggesting miners are in a bear market at all. In my view, miners are risky assets, and the recent decoupling with gold is a sign that we might be entering a risk off environment. All risky asset should be avoided or shorted. Gold, as seen as a safe haven asset, will bode well if we have another down week. Miners once more, will likely be a victim again. With that said, when this correction is over, miners will try to outperform the metal again.

So gold bugs, which instrument will you invest in? metal or miners? Or both?

In conclusion, I think many stocks still have room to drop. Have a good week!