I am presenting the difference between SPX (top pane) and SPX/major safe heavens (middle pane; spread graph). The pane below portrays the correlation coefficient (CC) in rsi values between the main spread graph and traditional safe heavens.
Skip to the last paragraph for my forecast speculation if you are familiar with advanced spread graphs!
This graph aims to measure the true nominal & intrinsic value of the U.S.'s largest equity indices (Nasdaq and S&P 500) by pinning their value against historic prices of safer alternative investment instruments, to account for capital outflows to other assets (not just USD or other fiat).
CC - peaks in correlation imply trend reversals, specifically indicating the beginning of capital outflow from safe heavens to equities (and vice versa). Combining this indicator with the RSI (white line) of the spread graph may suggest the potential direction of capital flows.
Forecast:
Bearish signs: break-out of the current interest rate trend (figure below), last decade's heavy use of Quantitative Easing (QE), wars, repetitive waves of Covid, new world order (progressive decline in the importance of western currencies and stock exchanges)
Bullish signs: recent unexpected strength from bulls, successful monetary policies against inflation, persistent adaptation of green & sustainability functioning (in comparison to the world), overall extremely oversold technical indicators
Figure 1:
The CC of interest rates movements with safe heavens indicates a potential direction for equities in general, which matches with the main spread graph (all shown by arrow paths). These predictions align with the outcome of the spread graph's 2004 aggressive interest rate hikes.
In case you would like to utilise the spread graph formula: SP:SPX*TVC:IXIC/(TVC:DXY*10000000000000/FRED:M2SL*NASDAQ:XAU*(SP:SPGSCI-NASDAQ:XAU)/10/(TVC:US10Y-TVC:US02Y+TVC:US30Y-TVC:US10Y+2))
@rezmeplx non-significantly in my opinion. Due to the changing world order I see flow of capital towards commodities and potentially Asian fiats. Check my DXY post.
InvestingScope
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