No positions today......

I didn't end up taking a short position in ARO today, good thing, as the market rallied into the close. This is what I have been wanting though. I need for some of my indicators to get overbought and give me sell signals again before the risk/reward of going short favors me and not the bulls.

Anyway, I've got to study tonight for a test tomorrow, but I will leave you with something that is interesting. That is the Gold/Stocks ratio. Gold and stocks, representing real assets and financial assets repectively, always have predictable patterns. It is the nature of modern capitalism for either real assets to outperform financial assets or for the inverse. The Gold/Stocks ratio shows this extremely well dating all the way back to the 1800's. What is noticable is that when you use Gold compared to the Dow Jones Industrial average, and gold is outperforming, the ratio normally bottoms at around one. The ratio peaked in 2000 at 44 and since then gold has been outperforming the Dow Jones. Right now the ratio is sitting at 8.52. This means that if we are to fall to our historical turn around point we have a ways to go. Now I am not saying to buy gold. But I am saying that gold is going to outperform the Dow for a while longer. This could mean that gold rises and the Dow rises slower, or it could mean that gold falls but the Dow falls faster. The way to play this is to use a pairs trade. One would short the Dow Jones Industrial Average and go long Gold with an equal amount of money. That way you are just playing the ratio, rather than either of the two parts seperately. Here is a chart showing the ratio dating back to 1982.