Erik Swarts makes really nice charts and in this article he draws a parallel between silver’s QE2 blow off and what the S&P 500 is doing now at the behest of QE3. I have noted this staggered correlation before but Mr. Swarts’ charts are just excellent. I noticed his article at Safehaven. Here it is at his blog:
Recall that I thought something was fishy at the time of QE2. Specifically the beautiful inverted H&S that wasn’t in the gold-silver ratio. The GSR was supposed to go up I tell you! Well back then silver got the QE bid, culminating in 2011’s blow off. The GSR got hammered as silver outperformed. Today the US stock market gets the bid and conspicuously, the GSR has risen and broken out of the post-2008 downtrend.
In fact, is that a more massive inverted H&S than the little one that failed in 2010? Is Erik Swarts correct in comparing the SPX with the silver blow off? Yes, but the stock market’s PE is historically moderate and all that cash is on the sidelines! That cash is being beckoned to come join the party; the water’s fine.
This is not likely to prove to have been a healthy time to jump in, in my opinion. Just give it some time and this should prove to be true.