08-25-2011, 02:38 PM
It's really only been within the last year that I've been trying to pay more attention to the stock market. One thing I feel I'm seeing is this:
So basically I feel like commodities are the real measure of confidence in the economy. Bad news can cause a market dive, or good news can cause a spike, but how investors treat precious metals is a better indication of what they really think it's going to do long term. If they REALLY think the global economy is going to shit, they will invest in commodities, otherwise they will hold or sell commodities to buy stocks.
And then looking at SLV vs ZSL ("Proshares UltraShort Silver") I feel like it's possible to get a further reading there. If SLV is going up and ZSL is going down, that's "normal" -- silver is going up and people don't foresee it going back down. Sometimes, though, I'll see SLV go up and ZSL hold steady -- this suggests to me that the feeling is silver is going up on a bubble but will come back. People are holding their ZSL where it is because they don't really think the increase is permanent, and are hoping it may even be coming into a dip.
Incidentally, I wish I'd been following gold more than silver. It seems like gold is pretty stable whereas silver is crazy. On the other hand, I think you could make a lot of money day trading silver if you were able to read it right -- I'm sure some people are doing this. 20% swings have been just about typical lately.
Today, for example, I thought we might be looking at bargain buying earlier. Gold was down and stocks were down. People selling gold to get ready to invest in stocks? Silver was up, though, so I didn't make any moves. Now, though, silver is up a decent margin and gold has gone from negative to slightly positive. ZSL is disproportionally down. If my rule of thumb is any indication, there is not much confidence in the markets and what was starting to look like some gains may have been a very short term anomaly.
Whaddya think? What rules of thumb do you try to look for when judging when to buy/sell?
- Stocks up, gold/silver down = lots of people think the market is recovering.
- Stocks down, gold/silver up = lots of people think the market is tanking.
- Stocks down, gold/silver steady or down = Market is suffering a short term dive, but will recover -- people are selling precious metals to get ready to buy big on stocks.
- Stocks up, gold/silver steady or up = Market is experiencing a bubble, but will dive again -- people are keeping their investments in precious metals because they don't think the stock market increase is a real sign of health.
So basically I feel like commodities are the real measure of confidence in the economy. Bad news can cause a market dive, or good news can cause a spike, but how investors treat precious metals is a better indication of what they really think it's going to do long term. If they REALLY think the global economy is going to shit, they will invest in commodities, otherwise they will hold or sell commodities to buy stocks.
And then looking at SLV vs ZSL ("Proshares UltraShort Silver") I feel like it's possible to get a further reading there. If SLV is going up and ZSL is going down, that's "normal" -- silver is going up and people don't foresee it going back down. Sometimes, though, I'll see SLV go up and ZSL hold steady -- this suggests to me that the feeling is silver is going up on a bubble but will come back. People are holding their ZSL where it is because they don't really think the increase is permanent, and are hoping it may even be coming into a dip.
Incidentally, I wish I'd been following gold more than silver. It seems like gold is pretty stable whereas silver is crazy. On the other hand, I think you could make a lot of money day trading silver if you were able to read it right -- I'm sure some people are doing this. 20% swings have been just about typical lately.
Today, for example, I thought we might be looking at bargain buying earlier. Gold was down and stocks were down. People selling gold to get ready to invest in stocks? Silver was up, though, so I didn't make any moves. Now, though, silver is up a decent margin and gold has gone from negative to slightly positive. ZSL is disproportionally down. If my rule of thumb is any indication, there is not much confidence in the markets and what was starting to look like some gains may have been a very short term anomaly.
Whaddya think? What rules of thumb do you try to look for when judging when to buy/sell?
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