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Another Sign Of A Short-Term Bottom In Risky Assets

Published 05/10/2012, 03:33 AM
Updated 07/09/2023, 06:31 AM
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I recently wrote that gold and gold stocks could be setting up for a short-term trading bottom (see A bottom for gold and gold stocks?) and followed up with a post that the market may be seeing a short-term reversal at these levels (see The "Merde" rally?). Now comes another sign that a trade-able bottom in risky assets may be near.

The chart of the gold stock ETF GDX below shows that it experienced an outside day yesterday on high volume, which is an indication that we could be seeing signs of a trend reversal.
GDX CHART
While there is still a high degree of headline risk, consensus sentiment is becoming overly bearish, which is contrarian bullish (see Mark Hulbert's article Major correction unlikely), and the stock market is now overpricing tail-risk in Europe. Notwithstanding the problems posed by Greece, the message from the bond markets of France, Italy and Spain is one of relative calm.

Who would you rather believe, the stock market or bond market?

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