The Correction In Gold Is Not Over

You are—face it—a bunch of emotions, prejudices, and twitches, and this is all very well as long as you know it. Successful speculators do not necessarily have a complete portrait of themselves, warts and all, in their own minds, but they do have the ability to stop abruptly when their own intuition and what is happening Out There are suddenly out of kilter. ~ Adam Smith, “The Money Game”

Good morning!

In this week’s Dirty Dozen [CHART PACK] we look at qualitative and quantitative sentiment signals, dive into gold’s recent fall and explore what it means. Pour over a key ratio chart that gives a bullish signal, discuss consensus earnings estimates that are still too low. And end with some talk on buybacks, GBP risk-reversals, very exotic data, and pitch a mismanaged beaten down travel stock that just might be about to turn.

Let’s dive in.

***click charts to enlarge***

  1. I have a few qualitative sentiment gauges that I like to routinely check. My three favorites are MarketWatch’s Homepage and Most Read articles banner, Bloomberg’s Real Yields show on Fridays, and CNBC’s Fast Money (just the first and last few minutes of the show).

You can see narrative adoption progress in real-time with these. Take MarketWatch’s Homepage below, for example. The green highlights are bullish article headers and the red bearish. We’re seeing more green (bullish) headlines than just a week or two ago. But… expect this page to be marked in nearly ALL green by the time this rally is good and done. That’s typically how the sentiment cycle swings.

  1. The BofA Bull & Bear Indicator, one of my favorite aggregate sentiment/positoining indicators is still neutral.

  1. I’m of the opinion that we’re probably setting up for a rocky start to 2021. BofA’s Scores on the Doors show record inflows into equities, EM equities, EM debt, 2nd largest-ever inflows into value, 4th largest into small-caps, and their Cash-Rule close to giving a sell signal. My base case is a fast climb into January causing positioning to catch up to sentiment leading to an eventual unwind starting mid-Jan and lasting a few months. I expect the correction to be more sideways than down unless we see long-end yields spike more than expected.
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Disclaimer: All statements are solely opinions and are for educational purposes only.

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