In the decade leading to the end of the Great Asset Mania in 2007, a rising tide of credit expansion drove many major financial market trends in remarkable harmony. Yet in 2009 this correlation seemed to diverge: stocks, precious metals, and oil moved contra-cyclically. But today, the trend in those markets is aligned once again.
From the NYSE Composite to the NASDAQ, from secondary stock indexes to metals, from oil to the U.S. dollar, all are trending away from their recent price extremes.
For Elliott Wave Financial Forecast subscribers, recent market action has included more echoes and reverb than a spelunking trip. That's because they see these trends in context -- and in the May Financial Forecast issue, that context has become even more clear.
The issue begins with a Special Section titled "A Silver Bullet Sets Things in Motion." It explains investor confidence as reflected in the Gold/Silver Ratio: Our 13-year close-up chart shows how a rising ratio coincides with increasing risk appetite and rising stocks, and that a falling ratio jibes with risk aversion and falling stocks. The current reading suggests a "critical moment" could be close at hand.
- Banking on Banks: Our chart of US financial assets at broker/dealers as a percentage of US GDP shows whether these crucial financial players really are "back"
- Cash Is Trash: Our chart of mutual fund cash-to-asset ratio shows that money managers' contempt for cash is at a record high. One look and you'll know the answer to the question, Is this a bullish sign?
- Brass Ring Bidding War: We reveal whether the recent takeover battle for the New York Stock Exchange has arrived at a cyclical low.
- Silver Linings: In one line, consumers stand outside pawn shops to sell their silverware. In the other, investors jump on the silver exchange traded fund wagon. Which line is it time to get in?
Consider these other insights from the May Financial Forecast:
You can know if Fed's $2 trillion Quantitative Easing policy is working simply by looking at the performance of its number one beneficiary: Banks. Well, our chart of the share price of two major financial indexes reveals whether QE2 is really bringing about recovery.
Gold and the US Dollar stand at polar ends of the financial spectrum: Zaniness for the one is matched by an equal disdain for the other. We reveal how sentiment extremes in both markets suggest that may be at an important juncture.
After a "miserable bounce" from 2009 to early 2011, we revisit a major economic indicator of future employment. This hair-raising chart shows whether the lynchpin of economic recovery -- job growth -- has finally hit its hinge point.