Principal Asset Development: 1/3/10

Friday, January 8, 2010

GLD/MO)

Currently there is a downward weekly trend which began in early 2009 in the GLD/MO ratio meaning MO is increasing in price and GLD is decreasing relative to eachother. The last two weeks have seen a reversal of this trend coincidentally at the midpoint of the range indicating some consolodation. Based on this chart I would expect GLD to rise and MO to fall in price over the next quarter until this ratio reaches the top of the range or 6. This would relate to a April GLD price of $120 and a MO price of $20 or GLD topping out at 110 and MO consolodating to 18.50.

Either way for the next quarter you could pair trade as long GLD and short MO on May contracts and reverse the trade as the ratio reaches 6 getting long MO and short GLD. This should be fun to track as the FED begins reigning in the monetary policy punch bowl and the Dollar sways investments in commodoties and dividned yielding stocks.

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GLD MO & S&P 500

And here is a 5 year daily percentage view of GLD, MO, & the S&P 500 which shows how far GLD has run up compariatively.

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(GLD/MO)

Very interesting chart of the relationship of GLD and MO over the last 5 years. By dividing MO price into GLD price we see that there is a definitive correalation to the two equities which are both affected by the US dollar trade. It is however curious how the channels and the fibonacci's of a such a ratio could provide trade trigger points. In this relationship the higher GLD and the lower MO is the higher the graph point and conversely the lower GLD is and the higher MO is the lower the graph point.

For the Web's best interactive charts, please visit http://www.Prophet.Net