Speak Low

As anticipated, there was a rallying cry on Wall Street yesterday morning but things seemed to have fallen apart by the end of the day and much of the day’s gains were erased.

What’s weird about this sell-off is that there doesn’t seem to be any specific catalyst. Things like the trade war, Brexit, and the Italian budget are commonly blamed, but these things have been in the news for months already.

Fear is a strong motivation and since most traders are humans watching things fall it’s very tempting to join in and sell. However, as we know it’s usually the traders with a more long term outlook who make the most consistent gains.

To be clear, I have no idea how much further south we could go. This might end today and we may be entering a bear market that lasts a year or more. I think it’s still too soon to tell. 

Today’s Highlights

Traditional Markets

In terms of the major indexes, it seems we’re sitting well below the 200 averages by now. The S&P 500, for example, is now in a loss of about 1% from the start of the year.

Of course, this phenomenon is only new in the American markets. As we’ve previously pointed out, the China 50 index has already seen a drop of approximately 30% from the peak earlier this year.

Looking at the German Dax as well, we can see that the 200 day average has been broken during February’s sell-off and never fully recovered.

Pure Gold

Though we did see a pause in the safe haven sentiment yesterday, today gold is back in full swing.

Gold is the purest indicator of this attitude and it is having a fantastic October. However, even this isn’t an astonishing update. We’ve been speaking about the metal sell-off over the last few months already and the long-term range is pretty clear.

The fact that it bounced off the lows of $1175 an ounce hardly comes as a surprise.