Dialing forward to today, we find a tired rally in nominal stock, commodity and low quality debt prices. We see a rising Gold-Silver ratio (GSR) and a US dollar not far above our 'do or die' support level of 78. See the free, albeit abbreviated issue of NFTRH for the monthly view of USD.

NFTRH held and added gold miners strongly throughout the process of gold's impulsive rise in ratio to the things that are positively correlated to economies and rising human spirits. This even as nominal gold stock prices imploded. Positions were added 'all in and around' a historic bottom and this trade has paid off quite well.

Okay, that is history. Now what?

We have been watching the GSR (among other indicators) tirelessly and its message for the markets has been actively bearish for about a month now. To review, when silver is rising relative to gold it indicates a willingness on the part of market participants to accept risk, to 'play'. The GSR has been working like a more sensitive version of the VIX in recent years. Ah, but there is literally a world of ratios that can be used to advantage when attempting to gauge the winds of the markets.

In the chart included today we see gold in ratio to the Reuters CRB commodity index ($CCI). Even as many people micromanage nominal prices of asset markets, gold's ratio to commodities tells a story of a bottom in the making, which of course tells a story of a top in the making in what NFTRH called 'Hope 09'.

Sure, I would like you to join my newsletter. With its early identification of the various rallies off of unsustainably bad sentiment, it has acted as an early warning system for those looking for opportunities to make money. Most recently however, NFTRH has acted as an early warning system in service to preservation of capital gains with an eye toward coming opportunities.

Regardless, let this short article serve as notice that gold's consolidation vs. the assets of hope looks to be in its final stages. This is a bullish chart, and in this weekend's NFTRH41, we will look at gold's ratio to several other assets and markets. It is time to pay attention and it is time to get it right.

Markets travel in roundabout directions and cycles - both short and long term - must be endured. It is technical, sentiment and market ratio analysis that guides us through these cycles and keeps us on the right track. Please heed the above chart and consider what will happen when gold finishes consolidating the explosive ratio gains of 2008.

Gary Tanashian

http://www.biiwii.com
http://www.biiwii.blogspot.com
Notes From the Rabbit Hole

-- Posted Friday, 10 July 2009 | Digg This Article