Last Time This Happened, We Saw A Steep Decline
Longtime
subscribers may recall that back in October when we were long the Asian bourses
we predicted the US stock market would roll over in 2005 coincident with a major
peak in oil.
Here we show you oil priced in gold
to represent the real appreciation of energy prices. Below that is the MSCI
World Stock Index and the same index to VIX
(
VIX |
Quote |
Chart |
News |
PowerRating) ratio that shows relative
fear (high meaning no fear).
When we lined up these charts the
cycle high pattern in the oil gold ratio caught our attention because it lined
up perfectly with the low seen in global equity markets in March 2003.
So with the real price of oil rising
exponentially, and global bourses having doubled over the past two years driving
investor fear to near record lows, we rhetorically ask ourselves, "Is this a top
or bottom?"
As we see it, the last time the real
price of oil was this high the Fed was busy raising rates to cool the economy,
while the yield curve threatened to invert. What followed was a steep
market decline. We remain long the VIX
(
VIX |
Quote |
Chart |
News |
PowerRating) and will look to short the
S&P500
(
SPX |
Quote |
Chart |
News |
PowerRating) on a move below yesterday’s lows at 1222.
Jes Black
FX Money
Trends
613 4th St Suite 505
Hoboken, NJ
07030
Tel: 646.229.5401
Jes Black is the fund manager at Black Flag
Capital Partners and Chairman of the firm’s Investment Committee, which oversees
research, investment and trading strategies. You can find out more about Jes at
BlackFlagForex.com.
Prior to organizing the hedge fund he was hired by MG Financial Group to help
run their flagship news and analysis department,
Forexnews.com. After four years as a senior currency strategist he went on
to found FxMoneyTrends.com – a research
firm catering to professional traders.
Jes
Black’s opinions are often featured in the Wall Street Journal, Barrons,
Financial Times and Reuters. He has also written numerous strategy pieces for
Futures magazine and regularly attends industry conferences to speak about the
currency markets.