Late last week I was working on a Genetic Algorithmic model and analyzed the current state of the market with it. I wasn’t surprised at all when I found that Gold, not necessarily oil, is the major driving force of the sentiment of the market right now. It doesn’t matter how steep or flat the bond yield curve goes, the higher the price of Gold goes, the lower the markets go.
Eventually Gold will run its course and the markets will recover but the key price level right now for Gold and the markets is $900/oz. The markets will tread higher for any price (and dropping) lower than $900/oz.
Seems like we’re going to see $900-$1000 for a while with the dollar fueling it toward $1000 on the rips — plus a weak month or so coming for SPY I believe. We shall see though.
Lucas: The trend in Gold is definitely up and with all the recent Fed rate cuts, inflation will probably get out of control, so a move back to $1000 is probably a good prediction!