Risk-On, Risk-Off Markets to Dominate Trading


Author Larry Berman

Posted: 10 July 2012 re-posted from etfcm

We continue to expect the risk-on, risk-off markets to dominate trading until further notice—global economies are slowing and stimulus is expected. Last week’s response to the trifecta of an ECB rate cut, a Chinese rate cut, and a material increase in QE from the BoE was poorly received. We expect the trading ranges of the past year to generally contain the market for the next few quarters.

The rally in WTI was stopped dead in its tracks last week and our call to take some money off the table in the sector was right on the money. For now, we do not see WTI dropping back below recent lows around $78, but we do not see it getting back above $90 unless there is an escalation of tensions in the Strait of Hormuz and a real supply squeeze, we do not see a demand pull for a while—these things are hard to forecast with any certainty.

The gold sector has had the biggest volatility of all as investors await QE or not QE, that is the question. Seasonality for gold stocks begins to look really good over the next few months, so buying dips in the sector is back on the front burner.

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