What Is Gold Telling Us?

1) RATES – Rates are just responding to the Fed generating more, not less, uncertainty. Political? Maybe. Markets don’t care. The US 2YR yield is up at 3.9% and signaling overbought and sell. The same is true for longer-dated yields too. Is that a signal rates should back off soon? Yes. Is it a guarantee? No. Is this the “end of the world”? Nope. Why? Gold is down over 5% this morning. If markets were really worried about an end of the world due to Iran or whatever, gold would be sky high. Gold is also just responding to the current rates movement. Once rates break back down, gold likely rallies. That said, the intermediate-term trend for gold is now broken. Any rally toward $4800 should be watched carefully. If it fails there, gold would enter a bearish (downward) bias. Our Tiger model cut gold exposure down to just 1% on Monday.

2) BETI – Since gold isn’t flying higher, and the end of the world isn’t likely here, what might stocks be setting up for? What are some “under the surface” of price indicators suggesting? Barclays has an indicator called the Barclays’ Equity Timing Indicator, or BETI. This indicator dropped to negative 8.3 overnight, its lowest level since President Donald Trump's tariff turmoil last April. It has now reached a threshold that has historically marked a pretty good entry point for stocks. Our flow models seem to suggest the same.

3) EPS – Ok, so if there are some indications that it might be getting close to a pretty good entry point for stocks, what is happening on the earnings front? Well, pre-shock (Iran) fundamental signals were firm and improving. Even now, earnings revisions remain net positive, with both the Nasdaq 100 and the S&P 500 staying in upgrade territory since last May. The US continues to outperform the world on the broadening of the EPS cycle. Could an oil spike that lasts create recessionary conditions by causing people to redirect spending due to increased energy costs? Sure. Is that showing up right now? No…not yet anyway. Oil is overbought, but I’m not getting a sell signal on it just yet.