Nothing Is Safe


Correlations be damned, these days, no asset class is a guaranteed win.

Equities continue to fall with the Dow Jones Industrial Average dropping 100 points on Monday to rest at 11,766 – well below the comfortable 12,000 level from earlier in the month. The S&P 500 fell 14 points to 1205. In the coming days, the index will test the key 1201 support level. If broken, there is a lot of potential downside to U.S. equity markets.

Traditionally, the bearish overtones surrounding the global marketplace would signal a rally in gold. Instead, gold continues to fall lower and lower by the day, currently hovering slightly below $1600 an ounce.

As the dollar continues to appreciate and the euro falls lower and lower, commodities have shot up in price with everything from softs to agricultural products to meats climbing higher each day. Commodities saw a sharp jump in price early this week. Oil above the $100 level is expected to be a key trend in 2012.

And yet, as everything appears to be falling apart and rational fear setting in, the CBOE Volatility Index (VIX) remains well below the “fear factor” level of 30 at 25. The low volatility and also low volume environment has been frustrating to traders who have experienced choppy markets with equities generally trading within a thin range.

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