Many of those intermarket comparison charts I look at often. The rule of thumb I use, is that a correlation across markets has to be conceptually correct to be a valid predictor of the future. Some of those relationships do not meet that criteria in my opinion.
As a trader or investor it depends on the time frame for your investments. Large picture fundamentals do not have much effect if you are looking at short time frames, 90 days or less for example. However, they are important for longer time holds.
The two most important relationships that I study are interest rates vs S&P 500, and gold vs. interest rates. I like to keep things as simple as I can. Many trader friends of mine get so tied up in so many different things, that they cannot make any decisions. Historically, stock market crashes have not caused Gold rallies, just look at the charts.
The primary mover for stocks historically have been interest rates and earnings, one causes the other. We have rising interest rates on a relative basis, which is a problem for stocks. We are roaring higher, but the SP500 is lagging the Dow alot. This has been a problem historically. Commercials are currently heavily short the SP500, a very bearish sign. Large rallies in the past have not launched from this type of setup.
Inflation is the primary mover for Gold from my studies, and we clearly have inflation issues. Whether this translates into the levels you mention, I have no idea. My view on investing is as follows. Those who hold positions a long time, take the most risk. Why? They have to be right for a much longer period of time.
Taking a long position in Gold right here is very risky, where would the stop be carried? We have a parabolic move at hand which will not last. After it calms down, if I get a good solid setup with the commercials heavily long on a drop, I might be a player on the long side. However, barring that, I am looking for a short sale setup to develop. It is not here yet.
I have found it much easier to predict short term moves with higher reliability, so that is where I live mostly. I do not share the 3000 Dow prediction. I think over time stock prices will eventually be much higher than where they are now for many reasons.
I think history is the best indicator of what is likely to happen in the future. There is nothing that I have seen that indicates over a long period of time, stocks will not move ever upward, just like real estate. Bumps will be there along the way. They may be big ones at times.
Congrats on the shift in your assets, that was a great call. One friend of mine, I call Chicken Little, was so afraid the sky was falling that he leveraged all of his assets on oil more than a year ago, and hit a home run.
At that time I have to admit I did not think Oil was going this high, but I do not trade on my opinion. Thankfully!!!!!!!
