Well, Jerome Powell did as the market hoped and wiggled his way through the noise, biasing toward a dovish stance. Now that that is behind us, we can get back to work.
The reaction is bullish across the board, including Treasury bonds. But let’s update the particular situation that we began tracking back in the spring; the combo of the Silver/Gold ratio and the TSX-V/TSX ratio. Indicators to the wider commodity/resources trades.
Silver/Gold (SGR) is again attacking the upside. As such, it has held intact above the moving averages and is now on the cusp of breaking bullish again. A nice tailwind for many markets, including precious metals if/as it keeps going.
The TSX-V/TSX ratio has not yet broken its pullback trend, but it did register a valid point of potential reversal with a solid pullback to a higher low.
The situation biases bullish. One negative to watch for, improbable though I think it is in the short-term, is for continued weakness in TSX-V/TSX, which could lead the SGR and its currently positive indications for markets in a negative way. TSX-V/TSX did, after all, get started to the upside long before the SGR got going.
Just food for thought at this point, that may come in handy one day if we see a breakdown (lower low) and negative divergence by the leader to the follower.
For now, the interpretation is positive across markets in the short-term as the markets celebrate the bad news of a weakening economy and the weakening Fed. Classic.
Side note: if the USD continues to weaken under the dovish pressure, global stocks are a consideration as well. I’ve got a couple of ’em in the portfolio (BABA & TM) and have an eye out for more.
