Is this Speculative Convergence?

In recent months, a number of "hot" markets, including U.S. large cap technology shares, emerging market stocks, gold, and the euro, have moved increasingly in synch.

While it is possible this convergence is either coincidental, or reflects a series of overlapping fundamentals, another explanation is that there is a growing rush by trend-chasing traders into a core group of speculative favorites being fueled by their own momentum.

If that's the case, then things could get pretty ugly when the music finally stops.

click to enlarge

Comments

[Greg Pinelli]

The Euro led all these sectors higher...though I don't hold gold to be a sector, but rather a form of anti-currency. Markets may move coincidentally...but never accidentally. A Euro rise means a US$ fall...gold can, and does, react to currencies as a whole..but its recent move is speaking volumes about confidence in the buck. The other two sectors...tech and emerging market are riding their own tailwinds..one of which..large cap tech is cruising for a MAJOR bruising.

2007 Oct 14 11:24 AM