Gold, Banks, Consumer Discretionary: Three Market Relationships

by: Brett Steenbarger November 21, 2008 | about stocks: GLD / XLF / XLP / XLY    
Brett Steenbarger

Brett Steenbarger

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Here are a few relationships that have been on my radar:

1) Gold, unlike other commodities, has been performing well relative to stocks (top chart). Should we see a weakening of the U.S. dollar, this could get interesting.

2) Banks have resumed underperforming stocks overall. The reversal by Treasury, deciding to not use TARP to rid banks of their bad debt as was first planned, has been one catalyst in the banks' swoon.

3) Consumer discretionary stocks continue to greatly underperform consumer staples issues, in a classic recessionary relationship.

Many good trade ideas follow not just what is moving, but what is moving relative to other things.

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This article has 2 comments:

  •  
    Nov 22 08:49 AM
    I agree that it is very useful to look at these kinds of ratios esp S&P/Financials
    Also worthwhile to look at the price of gold for example in foreign currencies as a reflection of declines in purchasing power for those economies with weak currencies. For example gold is notw trading at historic highs against sterling
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  •  
    Nov 22 10:33 AM
    I say. The wealth of the dollar is in value building. What you have produced. Know what you are selling and you have exchanged for trade goods for value and have traded for exchange value for goods. Because earned money is capital money and capital money is to produce and to sell what you have produced. Money value is a capitalist society but print money is still nothing but paper money until earned.
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