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I'm starting a series of posts that look at snapshots of asset classes that are correlated with stocks owing to intermarket themes of growth/risk/reflation vs. recession/risk aversion/deflation.
Note how crude oil (top chart) has retraced only a fraction of its massive decline and, recently, has been struggling to stay above its June highs. Crude is an important asset class in that it is sensitive to global demand and growth, especially from emerging markets. A topping crude market would have me questioning the upside in stocks for that reason.
Gold (middle chart) is a bit more complicated in that it is both a commodity and a surrogate currency. Observe how it, like crude, bottomed ahead of the March low in stocks and how it also has been struggling to make new highs. A strong gold market is partially reflective of weakness in the U.S. dollar, which makes the inability of gold to make new highs lately all the more troubling, given recent dollar weakness. One interpretation: markets are not buying the inflation theme, making gold less attractive as a dollar/currency hedge.
The U.S. dollar (bottom chart) displayed clear strength during the late 2008 and early 2009 stock market weakness, acting as a currency safe haven. With equity markets righting themselves, we've seen the dollar move lower versus the euro and versus emerging market currencies. Recently, the dollar moved below its June lows, only to bounce back in the June range. A bottoming dollar would correlate well with toppiness in commodities and both would weigh against the upside for stocks.