Tuesday, November 22, 2011

Making Lower Lows

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There are a few global stock market indices that have broken below the recent early October fall lows. This is not a good sign. The most important of these is Japan, which I wrote about a few days ago. Here is a 6 month daily candlestick chart of the $NIKK Japanese stock market index thru today's close:

And here's Austria ($ATX), Europe's latest entry into the crisis competition, using the same chart format:

Next up, Portugal ($PSI):

Finally, everyone's favorite basket case, Greece ($ATG):

Will the rest of the world's stock markets, which are above their recent fall lows, hold up or will they follow these countries to new lower lows? Only Mr. Market knows for sure, but I am not optimistic on common equities here. When sovereigns are falling/failing, it is best to get out of the way and stay liquid. Gold is the best form of cash to hold through an international monetary crisis, as it has no counterparty risk and cannot have its value successfully inflated away by desperate governments and bankstaz (unlike paper currencies). Until the Dow to Gold ratio hits 2 (and we may well go below 1 this cycle), Gold will continue to outperform stocks, bonds, real estate, other commodities and cash on a secular basis.

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