Seeking Alpha

Kirk Lindstrom's  Instablog

Kirk Lindstrom
496 Followers
15 Following
Send Message
Kirk Lindstrom has an engineering degree from the University of California, Berkeley. Following 20 years of research and development as a scientist and engineer at Hewlett Packard, Kirk turned his attention to investments where he edits "Kirk Lindstrom's Investment Letter," that... More
My company:
Kirk Lindstrom's Investment Newsletter
My blog:
Kirk's Market Thoughts
My book:
Subscribe to "Kirk Lindstrom's Investment Letter"
View Kirk Lindstrom's Instablogs on:
  • DJIA Gold Ratio Near Upper Resistance Despite Gold at Record Hights
    This article was originally posted at "Kirk's Market Thoughts as DOW Gold Ratio with Gold at All Time High

    Despite gold at an all time high over $1,230 per ounce, the current Dow to Gold Ratio is closer to its resistance level than its support level shown on my graph below.

    At 8.72, the Dow Jones Industrial Average measured in how many ounces of gold it takes to buy the 30 stock DOW is up 24% from its  March 6th low of 7.03. Despite that impressive gain, the DOW-Gold ratio is currently 80.5% below its 1999 peak of 44.77.
    Here is a chart showing the current Dow to Gold Ratio, the ratio of the price of the Dow Jones Industrial Average to the price of gold. When measured in ounces of Gold, the DOW has been in a secular bear market since peaking in late 1999 at nearly 45.

    chart courtesy of stockcharts.com (Click for full size image)

    The markets, measured by the S&P500 (S&P500 Charts) and DIJA, may have recovered to new highs in 2007, but the DOW:Gold ratio told a different, truer story of just how unhealthy the US economy was.
    • Back in 1999, it took nearly 45 ounces of gold to buy the DJIA.
    • On Friday March 6 of 2009 the DOW-Gold ratio hit a low of 7.03
    • As of today (May 11, 2010) it only takes 8.72 ounces of gold to buy the DOW
    • Gold quote and charts
    One way to get inflation protection without buying gold is with Series I-Bonds.   Currently new iBonds pay 1.74% which combines their 0.2% base rate plus 1.54% for annualized inflation.   For details, see:

    CDs have been a "safe haven" for those wishing to preserve assets and get a small inflation adjusted return. See "Very Best CD Rates with FDIC" for a list of the best rates and terms.
    Disclosure: I own a very small amount of gold hidden in the house for bribes if we see Armageddon. For income plus inflation protection, I own and recommend in my newsletters TIPS, TIPS mutual funds and Series iBonds.

    For more information, see:
    Question: Which way do you think the DOW-Gold ratio is headed?


    Disclosure: Long iBonds, TIPS and CDs
    Tags: GLD, gold, inflation, treasuries, CDs
    May 12 2:03 PM | Link | Comment!
  • Surprising Info in 52 Week MA of AAII Bulls Minus Bears Survey Data
    This article was originally posted today at Kirk's Market Thoughts as AAII Bulls Minus Bears vs DJIA Survey Data and Graph for 4/29/2010

    The AAII Investor Sentiment Survey measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market for the next six months . AAII is the "American Association of Individual Investors." For the survey, Individual members of the AAII are polled on a weekly basis. Only one vote per member is accepted in each weekly voting period. The AAII reports the weekly results at www.aaii.com/sentimentsurvey/.
    As of 04/28/2010, the AAII members are:
    • Bullish: 41.36%
    • Neutral: 30.00%
    • Bearish: 28.64%
    The 52 wk MA of Weekly sentiment is about as low as it was in 1994 before the market put on a great 5 year advance. Will this repeat? Post your answer in the comments section below.

    This chart shows the 52-week moving average of the AAII bull/bear index (American Association of Individual Investors). 52 weeks removes seasonality from the number and gives startling results.
     Click chart for full size image
     
    Charts of the AAII (American Association of Individual Investors) Bulls minus Bears Index versus the market are key sentiment indicators for stock market technical analysis.  Contrarian theory states the time to buy is when fear and pessimism are at a maximum since this usually occurs near market bottoms.

    More Information
    • A contrarian is a person with a preference for taking a position opposed to that of the majority view prevalent in the group of which they are a part.
    • More about Technical Analysis & Sentiment Indicators






    Disclosure: Long SPY
    Tags: Market Sentiment
    Apr 29 11:25 AM | Link | Comment!
  • DJIA Gold Ratio at 9.17 Remains In Downtrend
    This article was originally posted yesterday at Kirk's Market Thoughts as  DOW Gold Ratio Remains in Downtrend

    At 9.17, the Dow Jones Industrial Average measured in how many ounces of gold it takes to buy the 30 stock DOW is up 30.4% from its 17-year March 6th low of 7.03. Despite that impressive gain, the DOW-Gold ratio remains 79.5% below its 1999 peak of 44.77.
    Here is a chart showing the current Dow to Gold Ratio, the ratio of the price of the Dow Jones Industrial Average to the price of gold. When measured in ounces of Gold, the DOW has been in a secular bear market since peaking in late 1999 at nearly 45.


    Click for full size image courtesy of stockcharts.com

    The markets, measured by the S&P500 (S&P500 Charts) and DIJA (DJIA Charts), may have recovered to new highs in 2007, but the DOW:Gold ratio told a different, truer story of just how unhealthy the US economy was.
    • Back in 1999, it took nearly 45 ounces of gold to buy the DJIA.
    • On Friday March 6 of 2009 the DOW-Gold ratio hit a low of 7.03
    • As of today (March 2, 2010) it only takes 9.17 ounces of gold to buy the DOW
    • Gold quote and charts
    The scary part is the DJIA-to-Gold ratio got down near 1 in the early 1980s and was just under 0.2 in the early 1800s.

    This 200 Year Dow/Gold Chart shows the DOW/Gold ratio from 1800 through August 2008.
    chart courtesy of sharelynx.com (Click for full size image)
     
    With the DOW:Gold ratio now at 9.17, it is trading below the green zone in the second chart. The ratio is oversold, but nothing says it can't get more "oversold."

    For income plus inflation protection, I own and recommend in my newsletters TIPS, TIPS mutual funds and Series iBonds.  I also own equities for inflation protection.  For example, Finisar is up over 500% in the last year and I bought shares a year ago today. 
    CDs have been a "safe haven" for those wishing to preserve assets and get a small inflation adjusted return. See "Very Best CD Rates with FDIC" for a list of the best rates and terms.

    US Treasury rates are so low, that they are paying less than long term inflation. See:
    Disclosure: I own a very small amount of gold hidden in the house for bribes if we see Armageddon.   If I see a really fat pitch for Gold and I don't have another stock like Finisar to buy instead, then I might buy gold.

    Question: Which way do you think the DOW-Gold ratio is headed?

    Disclosure: Long Finisar, individual TIPS and TIPS mutual funds, ibonds and a small amount of gold.
    Tags: GLD, FNSR, TIP, Gold
    Mar 03 2:11 PM | Link | 1 Comment
Full index of posts »
Latest Followers

StockTalks

  • $GOLD Dow:Gold ratio http://bit.ly/Yv7HLL Jeff Saut on CNBC said pullback on the DOW is to raise cash to cover $GLD margin calls
    Apr 17, 2013
  • $GLD DOW:Gold ratio touched my upper resistance trend line on this new chart: http://bit.ly/Yv7HLL
    Apr 17, 2013
  • $SPY New Chart showing S&P500 actual and real prices adjusted for CPI inflation from 1870 through today at http://bit.ly/Z76VHm
    Mar 5, 2013
More »

Latest Comments


Most Commented
Posts by Themes
Economy, 10-year US Treasury Bond, 30-Yr U.S. Treasury Bond, AAII, Abby Joseph Cohen, American Association of Individual Investors, Banking, Banking Sector, biotech, Biotechnology, bond market, Bonds, bonds, Cash, CD Rates, CDs, chart patterns, dollar, Dollar/Currencies, DOW:Gold Ratio, drillers, Earnings, Economy, economy, Economy , ecri, ECRI, ECRI , ECRI WLI, energy, etf-analysis, etf-long-short-ideas, Fiber Optics, Financial, FINPX, Fixed Income, fixed income, George Soros, GLD, Gold, gold, gold and preciouis metals, gold-and-precious-metals, GOOG, Green Technology, Hedge Funds, HSBC, i Bonds, iBonds, income,
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.