Good Time To Check The Silver To Gold Ratio

Before we get into the chart and subject of today’s Daily, a quick recap of the market activity.

The Modern Family, Regional Banks KRE, Transportation IYT, the Russell 2000, Granny Retail XRT,  Biotechnology IBB, and Semiconductors SMH, is whacked.

Over the weekend, we saw the divergence among sectors-or what is starting to look like the have’s versus the have-nots.

As mentioned in the weekend Daily, “Rarely have I seen such variation among sectors-from new all-time high bullish patterns, to ominously bearish ones.”

And we wondered if Monday would help us determine who is right.

Would it be the almighty Sister Semiconductors joined by her Transportation brother?

Or, the meek Granddad Russell, Granny Retail, the Regional Banks and Biotechnology?

If the law of “majority rules” has any significance, the weak outnumber the strong.

Yet, the strong were really strong today. While the weak were really weak.

So, who wins?

With the U.S. economy more reliably measured by the weaker sectors, perhaps now is a good time to look at the silver to gold ratio.

Top chart is the daily of Silver or SLV.

The phase is Distribution, which means that the 200-DMA (green) is below the 50-DMA (blue) and the price sits below both MAs.

That is not a strong phase. In fact, it means that there is literally a distribution out of the instrument into cash or something else.

Now, I have gotten a lot of flack on calls for inflation or worse stagflation.

And on paper, that is understandable.

A strong dollar, many commodities on 100-year lows, tariffs, slowing global demand, and overproduction, are all the logical factors keeping inflation down.

I like to think though about the X factor. And what is the X factor?

That’s the factor that economists and armchair economists do not see or account for.

It could start with the Federal Reserve cutting interest rates.

It could ignite if the dollar drops hard.

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