Quick reminder that this is our last report until the January edition of The Trade Report on January 6. See you in the New Year!
Good morning,
We love relative strength around here, and one ratio I look at every week is paper vs. rocks, or more specifically, banks vs. gold.
Paper assets are financial instruments. A piece of paper showing ownership in something, a company, a mutual fund, a bond. You get it.
And rocks are well, rocks.
Whether investors are favoring paper assets (and arguably what’s more paper-y than financial stocks) or rocks, like everybody’s favorite yellow metal, has historically been an important risk-on/risk-off signal.
But as I was putting this week’s report together, the number one thing sticking out to me was just how well paper AND rocks were working.
Financials broke out from the bull flag formation called out last week, and proceeded to hit a new high.
Gold, which I’ll fully admit I was too negative on two months ago, has seen a relentless bid in December, with gains in 10 of the past 13 days, and the worst daily decline just -0.11% during that stretch.
I’m not sure what the message is (other than investors better own something besides cash and bonds) but I will caution that investors just now considering an investment in precious metals should be able to answer two things:
Why am I investing in it?
What would make me sell?
