S&P500 $SPY versus Gold $GLD since the election

A great way to monitor the stock market is to divide it it by gold.

Since the Presidential election on Nov 8, 2016, the stock market advanced 46% against gold into the October 2018 high, but since then has tumbled back down to only a 15% gain over the past 3+ years.

Violent setbacks are clearly evident on this chart and even reveals more of a triangle formation as the ratio goes back and forth over a smaller and smaller range.

It looks as if stocks have fallen far enough relative to gold here to suggest a low risk buy in stocks. We can examine the rally from this oversold condition to see how sentiment unfolds and how economic conditions unfold too. The move towards safety of gold and out of stocks is clearly evident in this chart. The coronavirus has been the rationale for the movement, together with aggressive central bank easing sparking the risk of inflation.

Let's monitor closely. As it looks now, gold is overbought and stocks are oversold.

If you buy, use TIGHT STOPS.

Tim West
2/24/20 2:42PM EST

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Here's the $XAU Gold stock index from the 1987 Crash. It DIDN'T provide downside insurance in a market meltdown.

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The ratio DID BOTTOM AT THE ELECTION, as suggested. Click on UPDATE to see