The CDNX/TSX ratio was first and the Silver/Gold ratio was second.
Today CDNX/TSX ratio is getting clobbered. A reaction always was going to come about, but this is a severe pullback on a day that markets are celebrating a jobs report that was probably in the bag the whole time (it was bound to partially recover as some point but it is still dreadful). Let’s remember that CDNX/TSX led the whole party over a month ago when it gapped above the SMA 200. Now it’s gapping down and begs caution across the bull spectrum (in my opinion).
The Silver/Gold ratio is thus far in an orderly retreat from the target zone doing what it was going to do anyway, pause at the initial firm resistance area. Let’s be aware however that CDNX/TSX gapped up on May 12, before Silver/Gold did so on the 15th. May mean nothing, but it may also mean tight leadership of the chart above to the chart below. By extension, if Silver/Gold were to decline again a risk ‘off’ signal would be in effect across the relation-sensitive markets like commodities, banks, long-term interest rates, materials, industrials, EM, etc.
I don’t want to cause alarm, but for the same reason we noted the CDNX/TSX gap up on the day it happened as a positive, we note what it is doing today as a negative. If this does go negative, our longer-term healthy view of the gold mining sector would likely benefit (once the correction ends).