Time To Shift Out Of Equities And Into Gold?

The market has survived pi, top (what?) the last 3 days with a minor pullback in the broad indexes. One more day to make it through to the weekend, but it happens to be March Options Expiration. Options open interest sets up for a possible pin at 275 on the SPY or 2750 on the S&P 500. Right where they sit coming into the day. It raises the question of whether or not to shift out of equities. And with Bitcoin crashing and St. Patrick’s Day coming Saturday, whether to buy into the pot of Gold.

A look at the ratio chart between the S&P 500 and Gold suggests that it may make more sense to stay the course though. The chart below gives the details. After a period of under performance to end 2015 the two classes of assets moved in parallel for much of 2016. Equities outperformed at the end of the year, the Trump Bump, and then 2017 was another long period of relative stability. That ended in October with a break out in equities relative to Gold.

The ratio quickly made a top in December and has come back to retest the break out area in February. Since then it has moved back to a top that has been resistance 3 times so far. Will it break through and continue higher this time? Maybe. Will it fall back for a retest of the breakout area a second time? That could happen too. But what is clear at this time is that Gold is not surging against equities. And equities are not losing ground to Gold. Time to stay the course and have some green beer and Irish soda bread Saturday.

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