Gold has been sidelined for many months as it has been in an intermediate term downtrend. Since the Hilsenrath article it has shown some strength. As you can see below it has made a series of lower highs throughout most of 2012, and it is now coming to touch the trend line. If we see gold begin to blast off it would put credence into the idea that action from the Federal Reserve is imminent.
As for the general market, we have a rally in the Euro and weakness in the dollar. With that this incredibly strong relationship continues to be rooted in the market and equity buyers step in. S&P 1340 continues to be an incredibly strong magnet. While this selloff has been sharp the S&P 500 did not actually create a new lower low. So the potential remains for the range bound action we have seen for the past 2 months…
That said I mentioned housing related as a relatively immune sector, and true to form this is an area seeing a lot of selling today. It continues to be impossible to buy almost any strength as these areas get attacked. At this point the only theme I see working ok is perhaps agricultural stocks, due to the U.S. drought. A few REITs also stand out but the way things are going, those will be the next area for selling to occur. The lack of themes or groups working in concert showcases an underlying weakness in the tape.
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog