WTI at $100, Gold and silver – strategy
Oil just surpassed $100
Gold has not followed Oil or Silver to new highs
Silver Broke out and looks to retest the 34 high
What could derail these commodities run-up?
- In the next few days if we get any form of concessions from the Libyan leader, then the fear trade should subside (i.e. all three oil, gold, silver will drop hard) atleast temporarily
- You will have a relief rally in world markets. But mostly in the developed countries, as emerging markets are in a rather difficult situation with inflation wreaking havoc in their economies.
Could we have an outright crash in the equity markets? Yes, it's possible, particularly if oil continues to go up and further escalation in the middle east.
Watch the VIX (volatility Index)
The VIX is up close to 30% in the past 2 days. As volatility increases, the risk of a crash will be a concern. Note we are no where near those levels like those witnessed in 2008
EEM vs SPY
Emerging markets Continue to underperform as the emerging economies will be hard hit with the increase in energy costs and the cost of food. So far, in 2011 developed economies have outperformed the emerging markets. The chart below illustrates this clearly.
